The corporate relationships among the companies help build trust and create more business for the included parties. Business contracts are the means of strengthening these relationships. These lifecycle management bind multiple stakeholders together, and each of them has to respect the terms in contracts for smooth business transactions.
Business contracts have numerous essential clauses and terms and need an expert to manage them. Hence, dealing with these contracts can be challenging for businesses, especially when fewer resources are available to deal with business contracts. In such cases, companies hire external CLM Services to review, analyze, and negotiate business contracts.
Before you hire a contract lifecycle management service, it’s essential to understand various phases of the contract lifecycle. Here are eight critical steps of contract lifecycle management (CLM) that you need to understand.
This first phase of CLM demands business stakeholders to collect essential information related to the new contract, renewal, or amendment. The concerned parties put forward various terms and clauses to put in the contract.
It is a crucial step for the concerned parties as it sets the tone for the agreement. It determines whether the contract will be processed smoothly or delayed indefinitely.
The authoring phase is also known as the contract writing phase. At this stage, contract parties put the terms and conditions of the contract into writing. Writing the contract consolidates the critical information in the contract, such as all the clauses and terms, key dates, and information about the contract counterparty.
The contract parties negotiate the contract terms discussed in the previous phase of the contract lifecycle. After back and forth negotiations of the parameters, both parties agree upon mutually beneficial terms and proceed to the next stage of the contract. Negotiations determine the expectations of all the concerned parties in the contract.
4. Approval of the Contract
Once all the concerned parties are satisfied with the contract, it is reviewed for confirmation. The authorized individual sets various parameters to fulfill compliance standards, milestones, contract obligations, and any special clauses.
It is crucial to keep an up-to-date record of all the changes made in the agreement for smooth and quick contract approval. The contract management software provided by your CLM Services helps to record an audit trail which is crucial for effective contract lifecycle management.
An authorized signatory signs a contract that ratifies the enactment. As manual signature can prolong contracts, digital signatures can help while signing bulk signatures of any agreement. Many major CLM software allow one to sign the contract digitally.
Once the contracts are signed, all the concerned parties acknowledge their roles, responsibilities, timelines, deliverables, and payment schedules. The parties are obliged to accept these clauses to avoid the breach of contract.
If these obligations are not fulfilled, the concerned person or entity must face the consequences of breaching the contract mentioned in the agreement.
Compliances are the additional field-specific rules, guidelines, and standards that all the stakeholders have to follow while executing the contract. A compliance manager takes care of all the compliances to avoid any late fees, bottlenecks, and breaches in the agreement.
8. Contract Renewals
Once the contract duration ends, the parties have the chance to either renegotiate the terms and continue the contract or terminate it after a successful tenure. It’s essential to renew or terminate the contract after completing its duration, or else the contract becomes null and void.
These were the eight steps of the contract lifecycle. Suppose you are in charge of your company’s business contracts or plan to hire CLM services to manage business contracts; it’s essential to understand these steps for a successful contract.