What is Contract Lifecycle Management (CLM)?
Every organization has different ways of keeping up with contracts, but there are two kinds of companies: those that keep up with their contracts and those that let them go to waste.
A modern business organization needs an efficient contract management system (CLM) to ensure that contracts are effectively managed, tracked, and protected. A sound CLM system should be introduced to help the company build a best-practice contract management system or to help an organization improve its existing contract management system.
Why is Contract Lifecycle Management (CLM) necessary for a company?
Contract lifecycle management is a common misconception in many industries, especially in the public and private sectors. CLM is not about tracking contracts on a computer or legally binding agreement. Instead, it is about taking action at the right time to ensure that your organization is compliant with the best practices and standards already in place.
- In essence, Contract Lifecycle Management (CLM) is a systematic approach for implementing contract management strategies that can help organizations improve their contract management process and ensure compliance with all applicable laws and regulations regarding Contractual Obligation Management.
- Contract Lifecycle Management (CLM) is a systematic approach to manage a business organization’s contracts that will help reduce and eliminate wasteful contract management activities and procedures.
- It is a structured process by which a business organization can efficiently store and manage its contracts, track deliverables, and optimize contract execution.
- CLM is a process for managing a business organization’s contracts that will help reduce and eliminate wasteful contract management activities and procedures.
- CLM is a systematic approach to the Management of contracts that will help an organization improve its contract management process and ensure compliance with all applicable laws and regulations regarding contractual obligation management.
The process for maintaining a business organization’s contracts is often a labor-intensive and manual one. Warranties are usually stored and managed differently in different departments, and no two organizations may have the same systems or processes for contracting. This may lead to non-compliance with current industry standards and regulations, as well as business risks. Resource costs are high, and time may be wasted due to a lack of structure and coordination in the contract lifecycle management process.
Contract Lifecycle Management is both a process and a framework. It is a process for managing a business organization’s contracts that will help reduce and eliminate wasteful contract management activities and procedures. It is a framework for understanding the contract lifecycle and for defining the contract lifecycle management strategy. Contract lifecycle management uses a structured process to create a best-practice contract management system that should help an organization build a best-practice contract management system or improve its existing contract management system. This allows organizations to implement contract lifecycle management to give them a better understanding of their contracts.
The Lifecycle of a Contract
- Template Authoring: It is exceptional for a contract to be completely original. That is why contracts are based on preexisting templates. The organizations use a template library that provides them with tags and modules.
- Contract Origination: The contracts are generated from templates after filling in the details, once ratified.
- A set of rules helps the companies to stay in compliance with process controls that guard their interest.
- Contract Finalization: The document is then ratified by all the involved parties. It gives birth to a new business engine. They are mutually defining the terms and conditions whereby the two organizations will cooperate.
- Contract Execution: The terms and conditions of the contract must be abided by on both sides. This is done through the project managers of both companies. The agreement then becomes a mandate authorizing full power of the company to advocate its terms.
- Contract Continuation or Termination: Sometimes, the parties can dismiss the contract, citing artificial reasons like breach or renegotiation. A contract can continue indefinitely, or it can be terminated when no longer needed.
- Contract Lifecycle Management: Handling the CLM is essential to manage the business, as legally mandatory agreements are the basis of proper business conduct.