How do you maximize the value you get from your contracts?

With effective contract lifecycle management (CLM). However, good CLM doesn’t happen on its own.

Many businesses find themselves plagued by scattered contracts, disconnected processes, and inconsistent internal standards. Those issues lead to subpar contracts, unenforced contractual rights, and unrealized value – or worse, disputes that eat up valuable time and resources.

To prevent those negative outcomes, you need good CLM processes.

What are CLM processes?

CLM has many parts: contract creation, which includes drafting, review, negotiation, and signature; contract storage; and contract performance management, which includes obligation tracking and management, and analysis of each party’s fulfillment of its obligations.

By implementing good CLM processes, businesses can streamline contract creation, negotiation, execution, and compliance to maximize realized contract value. These are the key systems and processes a legal team should set up:

Centralized Contract Repository

A central repository enables the business to store all of its contracts in a secure, searchable system for easy access. Many businesses struggle with contracts scattered across email inboxes, separate hard drives and cloud drives, and even filing cabinets. This decentralization makes it difficult – and often impossible – to find important information about the business and its deals when business leaders need it.

These days, lots of legal teams use cloud-based platforms to make their legal operations framework scalable and provide shared, real-time access to the teams that need it. Key features to look for include metadata tagging, full-text search, version history, and document-specific access controls.

Standardized Templates
Standardized document and clause templates containing your business’s ideal language help ensure consistency, reduce drafting errors, and accelerate contract creation. You can develop templates for common contract types such as NDAs and MSAs, and you can create specific versions of agreements or clauses for different situations – for example, different jurisdiction clauses for counterparties in different regions.

Maintaining a library of clauses that have been pre-approved by the legal team enables negotiators to quickly create and customize agreements to accommodate counterparties without having to wait for the legal team to draft every document from scratch, or review every edit.

Contract Request and Intake Processes
Once you have your contracts centralized and templates standardized, the next step is facilitating the submission and approval of contract requests. One way to do this is with online intake forms for stakeholders on different business teams to submit contract requests to a company’s legal team.

With an automated workflow system in place, you can take it a step further by having the system automatically assign contract requests to the appropriate team members for generation and review. Better still, some systems enable contract requesters to instantly generate new contracts based on pre-approved templates, immensely speeding up the contract creation process.

The main goal in this phase is reducing bottlenecks and ensuring proper prioritization of requests.

Review and Negotiation Tools
Once the initial draft has been sent or received, the negotiation process begins. The receiving party’s legal team reviews the latest draft, soliciting feedback from stakeholders in teams such as procurement, sales, or finance. Based on that feedback, the legal team either accepts the current version of the contract or makes its own updates and sends them to the counterparty for review. This back-and-forth process continues until the parties either reach an agreement, or walk away from the negotiation without making a deal.

Clear, timely communication between the parties is essential to minimize friction and maximize the chances of reaching a deal that works for all involved. Helpful features during contract review and negotiation include automated proofreading and document formatting, identification of errors such as missing definitions, redline tracking, version control, and collaboration tools that keep everyone on the same page with real-time edits and comments.

Approval Workflows
Each time a party receives a revised contract draft, the updates need to go through the review and approval process. Standardized workflows can streamline these internal reviews and approvals, mitigating bottlenecks and minimizing the time it takes to close a deal.

Contracting teams can define approval hierarchies based on contract type, value, or risk. A system that automates reminders and escalations for pending approvals can help ensure that every contract promptly goes to the correct person for review, mitigating bottlenecks and making sure nothing drops through the cracks.

Once both parties have approved the agreement, it’s time to sign. Integrating e-signature tools into your contract systems enables fast, secure execution of contracts.

Performance Tracking and Obligation Management
Once the agreement is active, each party needs to monitor contract performance and ensure both sides are meeting their respective obligations. This includes tracking key deliverables, deadlines, and milestones.

It’s helpful to have a system that can quickly generate dashboards to visualize key data, and reports on compliance and performance metrics. These tools enable fast, accurate review of contract performance – and quick responses to missed obligations.

Compliance Monitoring and Risk Management
In addition to each party’s obligations toward the other party, there are generally external legal and regulatory requirements to satisfy. The legal team must monitor compliance by each party with any applicable rules and regulations, and communicate closely with responsible parties to ensure ongoing compliance and rectify any lapses.

General risk management is also an important factor to consider in CLM processes. Some contract tools automate risk assessment and reporting for high-value or high-risk contracts, leveraging AI and data analytics to help predict and prevent problems.

Renewal and Termination Management
At the end of every contract’s term, it either terminates or auto-renews, depending on the provisions of the agreement. Businesses must proactively manage contract renewals and terminations to ensure that they’re keeping the business relationships they want and timely ending those they don’t.

Automated notifications for upcoming renewal and termination dates help teams anticipate key deadlines and prioritize agreements for review and potential renegotiation. Teams should establish internal processes for renegotiation and termination decisions. It’s a good idea to maintain a checklist for contract closeouts to ensure that you’re following all of the necessary steps to close out or renew every agreement.

Operations Analytics and Reporting
A key part of improving your CLM processes involves gathering data on your contracting operations and using insights from that data to improve contract processes and mitigate risks on an ongoing basis. Key metrics to track include time to signature, approval cycle time, and compliance rates.

By implementing these processes and leveraging appropriate technology, businesses can manage contracts more effectively, enhance collaboration, and reduce risks.

To manage all of these different CLM processes effectively, many legal and legal ops teams turn to CLM software.

What is CLM software?

CLM software includes a range of specialized tools designed to streamline the creation and management of contracts across their entire lifecycle, including drafting, negotiation, execution, and performance management. Some platforms purport to offer one-stop solutions for all things contracting, but many businesses find that they’re better off using a combination of tools that are strongest in specific areas of CLM.

Modern CLM solutions often leverage artificial intelligence to analyze contracts and identify risks or errors, enhancing efficiency and reducing risk exposure. Cloud-based systems often integrate with systems such as customer relationship management or enterprise resource planning platforms, enabling legal teams to collaborate with sales and procurement teams.

There are also innovative tools available as lightweight plugins that work locally on the user’s device, facilitating tasks such as contract drafting and review without forcing businesses to use features they don’t want or need.

What’s the benefit of using CLM software?

These are three key benefits of using CLM software:

Increased Efficiency and Reduced Errors
By automating repetitive tasks including contract drafting, approvals, and reminders, CLM software saves time and minimizes errors. This enables faster contract processing and reduces bottlenecks, which can raise the likelihood of winning customer deals while reducing vendor onboarding time.

Enhanced Risk Mitigation and Compliance
CLM software can help businesses track obligations, ensure adherence to regulatory requirements, and flag risky clauses, helping organizations proactively manage legal and financial risks. This reduces the likelihood of disputes, penalties, and lost contract value.

Improved Visibility and Strategic Insights
Centralized contracting operations allow businesses to track contract performance, monitor key milestones, and derive actionable insights, supporting better decision-making and maximizing realized contract value going forward.

Choosing the right CLM software for your business entails assessing your current contracting operations to determine what you need to improve.

BoostDraft makes contract drafting and review more efficient, enabling businesses to focus on the substance of commercial agreements so you can negotiate better deals. Ready to see how you can get more time back in your day? Get a demo!