A Deep Dive Into The 6 Stages of Contract Lifecycle Management

Contracts form the backbone of business operations, especially in today’s economy, where many organizations outsource a wide variety of their operations, from employees to IT services. Managing these contracts takes experience and a dedicated system that works universally for any type of contract an organization may create. This is why most successful organizations not only utilize a contract lifecycle management system but also make the effort to understand the stage of the lifecycle process fully. Understanding this is vital to seeing where your organization’s shortcomings are and to prepare for any change you will need to make. Continue reading the article below to learn more about the six stages of contract lifecycle management.

Contract Creation

The creation stage marks the starting point for every contract lifecycle, whether from scratch or preexisting templates. Contract creation requires careful thought, using tools like Microsoft Word or PDFs as necessary—although modern software solutions often streamline this process and enable tailored document generation that better fits specific needs. 

Contract Negotiation

Few contracts emerge fully formed; instead, they undergo an intensive negotiation process prior to being finalized. This stage typically includes exchanges among involved parties regarding concerns addressed, amendment proposals, and reaching mutually acceptable terms. Monitoring and documenting changes, comments, and versions throughout this exchange is crucial.

Contract Approval

As organizational structures change, so do their contract approval requirements. While smaller corporations might rely on individual approvals alone, more giant corporations require departmental and regional approval of contract documents before executing the agreement. CLM tools automate and track this approval progress more easily while adhering to regulatory compliance and internal protocols.

Contract Execution

Once negotiations and approvals have reached an endpoint, contract execution begins. Meaning parties formally accepting agreed-upon terms; unfortunately, managing this step often presents logistical and technical hurdles since many eSignature software come from third-party sources.

Contract Storage

After execution comes contract storage. At the most basic level storage solutions are important as they ensure data security. But there are also advanced functions that help make the contracts easy to navigate and find including metadata recording, relational database integration, and contextual history preservation. Investing in a contract lifecycle management solution can prevent many future headaches.

Contract Management and Analytics

CLM’s final stage encompasses contract management and analytics. Organizations can extract actionable insights for informed decision-making processes through the data collected by modern contract lifecycle management software. Contract management is an undervalued part of the lifecycle which presents an opportunity for those looking to separate themselves from the pack.

Understanding Contract Lifecycle Management Is Key To Success

Successful contract lifecycle management necessitates a complete approach and understanding of how it operates. Each of the six stages is essential in assuring efficacy, compliance, and optimization. CLM solutions help organizations overcome traditional restrictions in managing contracts by automating and organizing many of the hurdles organizations face. Furthermore, effective CLM practices mitigate risks often associated with contract mismanagement that can have long lasting repercussions. 

Interesting Related Article: “Effortless Contract Management: Maximizing Efficiency With Contract Management Software