Mapping the End-to-End Contract Management Process
Contracts hold your business together. They are at the core of what you do, how you guide decisions, and how you build relationships. They hold more risk and reward than any other part of your business, which means they need proper management. Most companies use rigid and time-consuming methods that are unsophisticated and expensive. Contract lifecycle management helps your business realize its full potential in driving business value.
Contract management offers you and your business countless advantages. When you understand the end-to-end contract management process, you will have key insights on how to streamline your contracting processes. Each step is a necessary part of the whole. With these steps, you can evaluate, choose, and implement the system that will work best for your specific needs.
What is contract management?
Contract management is the process of handling agreements made with vendors, partners, customers, and employees. It is an opportunity to eliminate the inefficiencies that result in lost business. Older methods of contract management include email inboxes, filing cabinets, or even hard-to-navigate spreadsheets.
CLM software, on the other hand, helps reduce contracting time, limit external counsel spend, and decrease contract volume.
In-house Legal teams often spend their time and energy managing contracts instead of focusing on more productive tasks that create revenue for your business. Effective contract management frees up Legal’s time and unlocks the full potential of contracts. This gives your team benefits like:
- Reduce turnaround time
- Reduce time spent creating workflows
- Encourage collaboration
- Reduce risk
- Track and store signed agreements.
Step 1. Contract generation
The start of the contract management process begins with a contract request or contract creation. This is typically sent to the in-house Legal team by another department in the company. The contract request step is often overlooked but is a key part of creating an effective system. It sets the tone at the start of the contract’s lifecycle and ensures continuity and success all the way through.
This step in the process helps with your internal alignment of the contract’s purpose. It helps to:
- Determine stakeholders
- Confirm with the budget
- Decide whose paper the contract will be on.
At this point, it’s time to bring the contract to life. Traditionally, only Legal teams would handle this step. This created bottlenecks all across the company and significantly delayed contracting. Contract lifecycle management platforms empower your workers to self-service their own contracts using contract workflows. Designing a workflow is an easy process that includes:
- Uploading a template
- Tagging required fields
- Adding approvers
- Adding signers and signature lines
- Adding customized fields
- Including conditional contract clauses and approvers.
This step is no longer stuck with Legal. Contracts can be generated throughout your departments to streamline the contract management process.
Step 2: Contract negotiation
Before the rise of digital contracting, negotiating was one of the longest steps. It required waiting for counterparty responses, drafting new clauses, and sorting through many contract versions. Digital contracting lets you wave goodbye to this tedious process. Instead, you get full transparency into exactly where your contract stands and the most updated version of the agreement.
Unsophisticated contract management tools required users to choose between basic in-browser editing—which doesn’t allow you to work on DocX files—and desktop plugins, which limits you to Microsoft Word. Ironclad Editor gives you the best of both worlds, including a DocX-native experience that makes the negotiation process much easier.
Now, you can negotiate, redline, and edit contracts much faster, so it doesn’t have to take up your entire day. Instead, you can collaborate with others in your business and with your counterparts to the contract to more efficiently negotiate contracts.
Step 3: Contract approval
The approval stage is when you will run the contract by your stakeholders for review. The contract gets approved by your legal team, you make sure it is in line with the budget, and you align the terms with your needs. You can now come to an internal agreement so that you can proceed to sign the contract.
Before digital contracting, this step could take an unpredictable amount of time. There was little to no accountability for internal review and revisions were easily lost in the back and forth of emails or separate Word documents.
But digital contracting allows for internal review and approval to all happen within the same CLM platform, which keeps everyone up-to-date and on track. All you have to do is launch the workflow and the contract will automatically send to the right reviewers, ensuring that review and approval occur in the right order and at the right time.
Step 4: Contract acceptance
Once you have completed the necessary reviews and the contract is approved, it is time to accept the contract. This process often sounds straightforward, but the rise of digital contracting has improved this step significantly. With new and improved acceptance methods, you can design the contract approval process in the way that fits you best.
Many companies still assume that a wet signature is required for important contracts. Traditional pen-to-paper is not the only way to sign a contract anymore—in fact, it may not even be the right choice. There are several other options to create efficiencies in the contract approval process. Modes of acceptance include, but are not limited to:
- Traditional eSignature: A traditional eSignature requires typing, stamping, or drawing a signature on a digital contract. This is often used in contracts that require negotiation and personalization.
Clickwrap agreements: Clickwrap agreements are one of the most effective acceptance methods. It utilizes a one-click experience to sign and makes it easier to handle high-volume contract acceptance, such as with updates to terms and conditions.
Step 5: Contract fulfillment
Once the contract is accepted, both parties must now fulfill their obligations. This includes compliance with all of the contract terms like delivery, service, and payment. The contract keeps both parties accountable for their end of the bargain. It also outlines the consequences if either party fails to abide by the agreement.
The fulfillment stage is key to a successful business relationship, as well as avoiding potential litigation. CLM software lets you quickly pull up contracts and identify important terms. Teams both in and outside of Legal can better analyze a contract to determine:
- Important dates
- Fulfillment terms
- Payment amounts and dates
- Service requirements or limitations
- Contractual obligations unique to this agreement.
Step 6: Contract analysis
The contract management lifecycle does not end once the contract is fulfilled. Contacts are living documents that contain important data that must be analyzed. You can uncover this information and use it to improve your processes. The contract management lifecycle lets you learn more about your business and transforms the work you’ve already done into one of the strongest advantages you have.
The Contract Data Repository gives you a reliable place to store and secure all of your contracts. You can answer questions instantly and leverage contract data to reduce risk, automate your business, and discover new opportunities. You can use the metadata stored and analyzed here to make changes to your business model. You can now get real, tangible value from your institutional memory.
For example, you’ll be able to answer questions like:
- Who does what?
- For how long?
- What happens if they don’t?
- When’s the renewal date on x?
- What’s our liability on y?
- How many clients chose option x?
- How many contracts do we process in a month?
- Which stakeholders are becoming bottlenecks, and how can we prevent that?
Step 7: Contract optimization
Once you have fully analyzed the data in your contracts, you can start putting it to good use. This process is essential to improving your contract lifecycle and improving your overall business. You can optimize in a million different ways, including:
- Improving contract processes with turnaround time data
- Analyzing budget requirements
- Adjusting strategy for acceptance
- Using contracts to inform inventory
- Using contracts to adjust your quarterly or yearly budget.
The data repository system equips you with intelligent alerts, cross-system integrations, and process automation to help you optimize your contract lifecycle processes.
Step 8: Contract renewal
One of the biggest mistakes businesses make with contracts is archiving them and forgetting about them for future renewals. Many contracts are subject to autorenewals that may cause revenue leakage for your business, as well as the headache of being stuck in another contract term.
The contract renewal stage lets you decide whether or not to renew your contract based on the data the CLM platform has given you.
You can also create alerts for upcoming renewals and stay on top of them. Whether you are the vendor or the purchaser for a contract, you want to know:
- When the contract will renew
- How the contract can renew
- Whether it is worth it to renew the contract.
The digital age requires a digital management system that puts you in the driver’s seat. Ironclad can help your business map the end-to-end contract management process. Every stage of the contract management lifecycle can be improved and optimized to increase revenue, reduce risk, and save time.
Our contract lifecycle management platform gives you actionable information that enables you to make better contracts. Request a demo to get started.