CLM 101: What is Contract Lifecycle Management?

As you may already know, a scattered, disconnected, disorganized way of handling contracts can easily lead to higher risks of information loss and errors. A manual or overly complicated system slows down the entire process, potentially costing you money in addition to time.

By connecting all necessary steps and teams through a unified CLM system, organizations can realize serious business value, for instance, significantly shortening sales cycles and closing deals faster. Eliminating the need for duplicative information across multiple systems also streamlines operations and reduces the chance of errors.

In addition, CLM systems are valuable not only for new sales and contracts, but also for renewals, ensuring that all contract details are easily accessible. 

Defining and Understanding Contract Lifecycle Management (CLM)

CLM software is an application that proactively manages contracts and agreements from initiation through award, compliance, and renewal stages. It also integrates with other business systems, like CRM software, ERP software, and financial systems software.

Traditionally, a contract management process has involved manual tasks like printing, signing, scanning, and sending documents. Today, advanced CLM solutions digitize these processes, increasing transparency and streamlining every stage. 

Here’s a brief look at the basic contract process stages:

1. Document Generation: The process starts with an initial contract request, followed by creating the contract from a template or an existing version.
2. Routing and Negotiation: This stage involves multiple internal and external stakeholders, with workflows for sending, editing, and negotiating the agreement.
3. Document Signing: Secure, verifiable signatures are critical. Electronic signatures enable instant, remote document execution, eliminating bottlenecks.
4. Integration with Systems of Record: Integrating CLM with existing systems pre-fills contracts with data, reducing administrative tasks and facilitating seamless operations.
5. Search and Analysis: Storing contracts in a centralized, searchable location is essential. Modern CLM solutions offer contract analytics and AI features for easy access and analysis.

CLM is a valuable tool for any business aiming to streamline operations and reduce risks associated with managing contracts and agreements. A unified CLM system connects all the necessary steps and teams, increases overall efficiency, shortens sales cycles, and helps bring deals across the finish line faster, to name only a few benefits. Additionally, CLM systems are highly customizable, giving companies the ability to craft a system that meets very specific business requirements. 

Why is CLM Important? 

Since we know that every organization has contracts and agreements to manage, it’s easy to see that whatever process that’s in place will either help drive business forward by creating efficiencies, or slow the business down, costing time and money. Having a process that delivers speed and accuracy is essential, and Contract Lifecycle Management software is built specifically for this task.

According to DocuSign’s research, it takes growing businesses an average of 39 minutes to find a completed contract, and more than 50% of these businesses are still using manual signature processes to approve contracts. This is time that could be better spent on pursuing new business and connecting with existing clients.

Using CLM software, organizations can store all contracts in one place, automate most steps of the contract lifecycle, and quickly access any contract. This digital approach also allows for deeper analysis of contract trends, highlighting potential risks and opportunities. 

Types of Contracts That Benefit from CLM

While CLM software can bring efficiency and improvement to any contract or agreement process, we will highlight a few specific contract types we encounter most often in our client work, and which are especially primed to benefit from the efficiencies that CLM software can deliver. 

1. Sales Contracts: The efficiency of your sales process is heavily influenced by how quickly contracts are approved. Manual drafting, negotiation, reviews, and utilizing email for signatures can add significant time to the process. Since CLM software automates all these tasks, this gives the sales team more time to move on to the next opportunity in the pipeline.
2. Procurement Contracts: Efficient procurement processes are vital for smooth business operations. Manual approvals and scattered contract storage can lead to delays and unnecessary expenses. CLM automates approval workflows, reduces excess spending, and helps combine vendor contracts for volume discounts. Fast contract renegotiation is possible when supply chain disruptions occur.
3. Retail and Service Contracts: Managing a large customer base with long-term contracts requires quick access to active contracts. Paper storage is not only cumbersome and impractical, it also adds cost and risk to businesses still using a hard copy system. CLM provides intelligent search and retrieval, acting as a sophisticated search engine for contracts. This digital process enhances customer guidance and transparency, improving the overall customer experience.

How Digitization Enhances the Contract Process

There are four key ways that CLM software delivers efficiency:

1. Automation: CLM automates contract lifecycle steps, generating contracts from pre-approved templates and clauses. Integration with CRM and other systems populates customer details automatically, reducing manual data entry and errors.
2. Collaboration: CLM stores contracts in a centralized location with built-in collaboration tools, allowing edits, comments, task assignments, change tracking, and version comparisons without duplicate copies. Finding the latest contract version becomes effortless, saving valuable time.
3. Electronic Signatures: Electronic signatures have become standard practice, speeding up the signature process. For contracts with multiple signers, CLM simplifies this process by providing each person with their own individual signature fields. No more routing copies via fax or mail to the other signatories. 
4. Contract Analytics: CLM software solutions use trained AI models to analyze contracts, extract information, and identify patterns, using this data to provide recommendations for the future. The trained AI models can also comb through contract terms to isolate, triage, and prioritize relevant information when unexpected events occur, giving you the information you need to make decisions quickly.

Through automation, collaboration, electronic signatures, and contract analytics, CLM software boosts productivity by providing immediate visibility into contract statuses and streamlines the workflow. These improvements translate into immediate business value, saving time and money, helping sales deals to close more quickly and reducing risk.

It’s not difficult to see why CLM software is such a helpful tool, but it is a tool your business needs? How do you know when it’s time to invest in CLM software?

When is CLM Needed?

As you examine your current contract management process, there are four specific signs – pain points – you can look for that indicate the need for CLM software.  

1. When Locating Completed Agreements is a Challenge: Reviewing completed contracts is, unfortunately, a frequent necessity. DocuSign research indicates that about two-thirds of respondents need to access finished contracts at least weekly, with nearly 20% looking daily. Teams without a centralized repository waste significant and valuable time that could be better spent on new business projects. Implementing a digital library of existing contracts in a central repository allows for the use of tags and metadata, greatly enhancing search and reporting capabilities. If your team spends more than a few minutes locating archived contracts, consider a cloud-based centralized storage solution that scales with growth.
2. When There is a Lack of Standardized and Efficient Contract Workflows: In a company’s early growth stages, managing contracts on an ad hoc basis is manageable. However, as businesses expand and agreements become more numerous and complex, a consistent series of steps is crucial to ensure proper review and approval. These steps quickly become intricate, involving the creation of new agreements from standardized templates, timely approvals by specific team members, and proper storage with permissions based on sensitivity. A checklist in one person’s inbox is insufficient; a consistent, repeatable process using contract management technology is essential. Many growing companies juggle multiple, disconnected tools that don’t integrate well, leading to inefficiencies. This fragmentation can lead to wasted personnel time, cost overruns, increased risk, and inefficiencies. If your process isn’t standardized on a single platform, costly mistakes are inevitable.  
3. When Generating Contracts Manually Using Generic Tools: Many businesses hesitate to adopt custom-built contracting tools, sticking to duplicating old documents and manually inserting new data by copy-pasting from other systems. While manual tools are technically functional, they require manual data entry and lack built-in routing tools, making them prone to version control problems and copy/paste errors. 

The absence of a shared central platform further complicates manual document transitions from generation to negotiation. Without starting as digital files, managing negotiations and signatures becomes challenging. When creating new sales contracts, does your team duplicate old documents and manually insert new data? Is there a system ensuring the correct template is used? Do you lose track of the most recent contract versions? Digital document generation on a purpose-built platform with standard templates and integrations for auto-population can streamline this process. As new technologies are added, these integrations can be seamlessly incorporated.

4. When There’s Reliance on Manual Signature Processes: Outdated contract processes often involve cumbersome ink-and-paper signatures. If contracts are still being printed, signed with a pen, and returned via scan or fax, an upgrade is overdue. E-signature technology offers a solution, allowing any document to be signed digitally with only a few clicks. Multiple signers can collaborate on the same document, increasing efficiency. 

How does your team currently collect signatures? The process typically moves at the speed of the slowest step, so reliance on pen and paper for any contracts can cause significant delays. Incorporating e-signature into your contract stack, ideally through a CLM with built-in e-signature, addresses problems across the contract lifecycle and provides additional benefits as your team’s contracting efforts scale.

If these pain points resonate with you, it may be time to consider a CLM software solution. An effective CLM system simplifies contract management, enhances operational efficiency across teams, and supports business growth. By adopting a modern CLM solution, organizations can streamline processes, reduce risks, and achieve greater visibility into their contractual obligations.

At Marshfield Consulting, we’ve built our entire business around designing and implementing these customized CLM systems for our clients, as illustrated in our Case Studies. We would welcome the opportunity to discuss your needs and help you identify ways that CLM can bring value to your business’s bottom line.