Why organisations need contract lifecycle management
Contract lifecycle management is essential to the health of businesses and organisations. When you have accurate information and, using this information, update your contracts quickly, you can make life easier for your organisation and for your customers. Good CLM simplifies your needs and your customers’ needs, makes the contract process more straightforward and adds value to your organisation.
Contracts are crucial documents. They clarify the transfer of value between the supplier and the customer, reduce risks and guide the business relationship. Poor contract management can generate unexpected (and undesired) costs and subject the business to greater financial and legal risks. The business may also have problems collecting payment.
The different stages of contract lifecycle management
Contract lifecycle management is complex because it consists of several different stages. Optimising any stage of a contract management process manually is difficult, but optimising the whole lifecycle is nigh-on impossible without the help of software and/or a solid contract lifecycle management process. Although methods may vary between organisations, below is a look at the different stages a typical CLM process can consist of:
Contract creation and authoring
Often, a request from a business or organisation to form some working arrangement with a supplier of goods or services forms the basis of a contract. This stage could be a request to create a new contract, amend an existing one, renew an existing one or even terminate the agreement.
Ideally, you should use standard, internally agreed terminology and clauses when drafting a contract. Although drawing up contracts can take time, it’s possible to speed this early stage up with pre-agreed templates. This can improve the quality of the final documents.
Contract collaboration and negotiation
Contracts are likely to include commercial terms and financial ones. They’re also likely to include many people on both sides of the transaction. Before the negotiations begin, it’s good practice to decide upon a negotiation strategy. You should select your team members, and know what concessions you’re willing to make and when you’re willing to walk away. Negotiations, especially complex ones, will take time, and situations can change. Be sure to keep a detailed record of every discussion.
Contract award and execution
Whether on paper or digitally, each party must sign the agreement. Depending on the risk, value of the agreement and other factors, many businesses will have rules about who approves each contract. When an agreement is signed, the parties should communicate these commitments to all users to avoid any issues or conflicts arising.
Contract administration
Each party must comply with the terms and obligations of the agreement during the contract period. They must monitor the performance of the contract and manage any grievances or disputes that materialise. The company can miss renewal or expiry dates if a contract isn’t well managed. They can lose amendments. This can cause failures in supply, cost them customers and even damage the business’s reputation.
Contract close-out or renewal
When a contract is due to expire, the parties face various options: they can negotiate a new contract with new terms and conditions, renew the contract and keep the existing terms and conditions or terminate the agreement altogether. If the contract expires, the parties need to notify all the users.
Our approach to contract lifecycle management
At Barkers Procurement, we take an even more comprehensive approach. Our process consists of four main stages:
- Planning, selection and contract creation, in which we’ll identify your business’s needs, conduct market research, highlight any potential risks and mitigate them, help you to select suppliers, create a contract management plan and other activities in the build-up to creating an agreement;
- execution, in which we’ll appoint a contract management team, establish management and financial systems, confirm the contract and other activities contract execution may entail;
- administration and monitoring, in which we’ll monitor the implementation of the contract, monitor supplier performance, support you in managing the relationships with your suppliers, report the benefits of the contract and other activities relating to the monitoring and administration stage;
- analysis and exit/renewal, in which we carry out an overall analysis of the results, of the benefits achieved, whether the agreement has provided value for money and whether you should exit the agreement or renew it.
Contract lifecycle management is complex, but working with us can transform it into a much more straightforward process. We’ll help you to navigate the different stages and issues of the contract lifecycle so that managing your agreements runs much more smoothly and you can create and participate in agreements that achieve value for your organisation. To learn more about our contract lifecycle management service, visit our Contract Lifecycle Management page or contact us directly.
