What Is Contract Management Software?
Do you know what is contract management software – or contract lifecycle management (CLM) software? Contract management software gives sales, legal, financial, procurement, and contract administration teams an integrated set of tools for improved administration of their entire contract management approach.
Organizations benefit by automating and accelerating contract creation, from negotiation to approval. It offers users a secure contract repository to ensure the safety and security of all documents and contract-related data.
The goal of CLM software is to mitigate contract risks while enhancing efficiency and velocity that is secure and adheres to regulatory compliances.
- There are two key phases of contract management software, pre-execution or pre-award and post-execution or post-award.
- Post-execution is a common starting point when looking to deploy a CLM solution.
- Pre-execution includes contract drafts, assembly, governance, and workflow processes that cover the contract throughout its lifecycle.
- A CLM software solution simplifies the administration of pre- and post-execution phases of contract management.
The Phases of Contract Management
When managed effectively, contracts are critical elements to any organization for minimizing legal, financial, and brand risk. But when executed poorly, there is potential for adverse effects.
According to the World Commerce and Contracting group, poor contract management costs organizations over 9% of their total annual revenue.
That is why organizations today opt for contract management software. This software helps companies replace time-consuming manual contract management with a digital solution.
CLM software supports the complete contract lifecycle with an integrated program developed for contract-related situations, such as:
- Intellectual property
- Facilities management
These software solutions align with the two primary phases of CLM, the pre-execution and post-execution phases. Depending on your organizational needs, you can implement CLM software to support both phases or use it only for post-execution management.
|Key Phases and Functions of Contract Management Software
|1. Intake of contract requests and drafting documents using pre-approved language from clause and template libraries
|1. Centralize contracts, organizations, contacts, and documents in a single, secure repository
|2. Execute contracts including negotiation, redlining, approvals, and signatures
|2. Manage contracts, documents, organizations, contacts, and key dates and terms
|3. Workflow automation and governance of defined contract creation and execution processes
|3. Access and analyze contract data with search, reports, and dashboards
Post-Execution Phase of Contract Management
The post-execution phase represents the second half of the contract’s lifecycle. It’s the standard and most logical place for organizations to begin when looking to implement a CLM solution.
Here are the three core phases of post-execution contract management:
Centralize Contracts, Organizations, Contacts, and Documents in a Single, Secure Repository
Organizations using conventional, manual methods for contract management have a distributed approach when storing contracts. For instance, some contract documents may be on a staff member’s hard drive while others are in shared folders.
There are several innate risks associated with this approach. Contracts may get lost, crucial paperwork overlooked, or those without permissions might access confidential documents. Not to mention the time it takes to locate contract documents that are not in a centralized location.
CLM software allows you are your teams to establish an electronic repository for all contract and document storage. It is the first stage in the digital transformation of your contract management processes. This software enables you to implement a digital solution for data security and privacy that maintains the loftiest data safety standards.
Manage Contracts, Documents, Organizations, Contacts, and Key Dates and Terms
Once contracts are centralized and accessible, your next step is their ongoing management. Doing this process manually with tools like spreadsheets is arduous. It also poses a risk to your business, including:
- Contract terms non-compliance
- Missed deadlines and contract obligations
- Mismanaged auto-renewals
- Failed audits due to missing documents and audit trails
You can mitigate these risks using contract management software. The tools within CLM programs improve your post-execution compliance and management processes. It also maximizes the value of the contracts your organization manages.
Some examples include task and email alerts, tasks, and calendar reminders you can configure to initiate action before a deadline. You can also access an archived history of alerts and notifications. Use these for more effective contract management and audit purposes and to customize to-do lists.
Access and Analyze Contract Data with Search, Reports, and Dashboards
The average contract repository contains a lot of contract data, including names, dates, numbers, and other values. Unfortunately, conventional contract management practices utilizing spreadsheets and shared folders render that data incapable of accessing and presenting in a format that produces meaningful business insights.
Your contract management software should harness and structure contract data you can easily search for and place in useful reports and dashboards. Additionally, it’s vital that when adding existing records into your CLM system, it supports optical character recognition (OCR) technology.
OCR scans document content automatically to ensure parties can find all contract content easily for any search you perform.
Being able to search content, generate reports, and develop dashboards delivers visibility into:
- Potential contract risks for swift mitigation
- Opportunities to boost process efficiency and contract effectiveness
- Swift responses to contract-related inquiries
You can mitigate risks through contract data organization, including neglected renewal and expiration dates. It also includes the absence of governance, compliance, and broken contractual obligations.
Your contract management software should deliver an adaptable, role-based view of all organizational, contact, and contract information. It should also aggregate unrestricted information into a user-friendly format.
Pre-Execution Phase of Contract Management
Pre-execution covers a contract’s lifecycle from the first request for a contract to the agreement-binding final signature. It includes contract drafts, assembly, governance, and workflow processes.
Here are the three core phases of pre-execution contract management:
Intake of Contract Requests and Drafting Contracts Using Pre-Approved Language from Clause and Template Libraries
Contract creation within a contract management system begins in several ways, according to the nature of the agreement. It may include new contract requests from staff with limited or specialized access.
It may also consist of needing to add external contract documents or creating new contract records directly into the system. Those requesting access may include:
- Human resources
- New employees
- Agents of the courts/attorneys
- Law enforcement
- Legal teams
- Contract management team members
Requesting access within a contract management system is easy, and users can do this using a simple access request form. This process is more secure than using traditional methods of emailing documents and request forms.
Along with request forms, teams have access to pre-approved contract clauses and template libraries, enabling document and contract assembly faster while eliminating standard legal language deviations.
Apply your organization’s rules around which clauses to use based on specific situations. You can also use roles-based security to regulate permissions granted.
Execute Contracts, Including Negotiation, Redlining, Approvals, and Signatures
Now that you created a contract draft using a pre-approved template or clauses, the next phase is to execute the document. Two things must occur to execute a draft contract.
First, the involved parties must review the draft, which may or may not need negotiating. Second, those involved must then approve the document.
Reviewing and redlining contracts using contract management software simplified this process. Rather than emailing document revisions back and forth, internal teams granted permissions can simultaneously review and redline directly in the software portal.
When documents are ready, parties will receive alerts. Users can sign documents and forward them to the next stage of the contract lifecycle.
Workflow Automation and Governance of a Defined Process for Contract Creation and Execution
CLM software workflow capabilities focus on the processes that control and traffic contract requests through execution and governance throughout the contract lifecycle. Build automated workflows that eliminate manual tracking and facilitate every phase needed to manage a contract.
Contract workflows can vary by type, role, and contract record data. You get features like email notifications and automated calendar reminders to accelerate your organization’s workflows.
Build workflows at every stage of the contract lifecycle using business rules and processes for staff to follow. Doing this will ensure governance and compliance throughout a contract lifecycle.
Your team will have visibility into every workflow stage. Use this data to track key performance indicators (KPIs) based on the length of each step of your company’s workflows. Locate process improvements, optimize operations, and set expectation timelines based on specific benchmarks.
How Contract Logix Helps
At Contract Logix, we are the longtime innovator, developer, and provider of CLM software that leverages a security-first approach. We empower everyday business users across various industries to draft, negotiate, execute, approve and manage their legal agreements and contracts.
We have worked with numerous brands that have partnered with us to automate their contracting processes. Our software helps organizations like yours identify and qualify risks while maximizing regulatory and corporate compliance.
- Contract Logix Express™: This program manages the post-execution stage of CLM. It joins contract data and its supporting documents in a secure data repository. Create alerts and tasks to guarantee you meet project milestones and contractual deadlines.
- Contract Logix Premium™: This program manages the pre- and post-execution stages of CLM. It incorporates all the advantages of our Contract Logix Express™ but allows you to develop, review, and execute contracts.
With Contract Logix, you manage your contracts, run reports, and view dashboards using our user-friendly CLM solution. Search for a contact, company, contract, or document information with one CLM solution.
Now you know what is contract management software, learn how we can help. Request a demo today!
Looking for more articles about Contract Management? Check out our previous article “Information Security Management for Contracts & Documentation“.