Contract Lifecycle Management Benefits and Best Practices

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Contract Lifecycle Management Benefits and Best Practices

An organization’s contract activity is an important business aspect. Contracts require proper oversight to ensure profitable operations and a smooth transaction.
Contract Lifecycle Management (CLM) is the proactive, methodical management of a contract from initiation through award, compliance and renewal.
It can lead to significant improvements in cost savings and efficiency. Understanding and automating CLM can also limit organizational liability and increase compliance with legal requirements.
A contract’s lifecycle begins when an organization’s management, department personnel, or customer requests a good or service; it ends when that good or service is received or delivered.
Between order and delivery there are numerous opportunities to save money, improve delivery, and obtain the best product at the best price.
Just as well, there are innumerable ways to lose money, waste time and end up with a subpar product. CLM can make the difference between these two scenarios.

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  1. Failure to enforce negotiated supplier terms: Organizations must be diligent about receiving everything agreed upon. Money “gained” through time-consuming negotiations can be quickly lost through poor contract management.

  2. Inadequate delivery to customers: Establishing a project timeline, production schedule and delivery process is crucial to meeting customer expectations.

  3. Time lost from disorganization: Without proper organization, looking for contracts, schedules, notes and data wastes staff time that would be better spent analyzing data and seeking new contract opportunities.

  4. Errors and additional work due to inefficient processes: Regulating processes with proper tools is crucial. Ad-hoc processes and tools are not designed to provide the necessary functionality, visibility, reporting capabilities and compliance necessary for efficient use of resources and reduced errors.

  5. Being reactive, rather than proactive: A reactionary approach to contract management leads to missed revenue opportunities, time waste and inflated costs.
  • Establish timelines for each step in the contract lifecycle
  • Properly allocate staff workload and additional resources
  • Create an accurate audit trail for approvals
  • Govern organizational rules and processes
  • Measure compliance, deliverables and performance on contracts and suppliers

Contract managers typically rate their jobs as “challenging.” CLM can alleviate some of the stress by creating an orderly process for each task, resulting in more efficiency and high productivity.
Additionally, contract lifecycle management results in reduced liability, increased cost savings as well as quality of delivery and enhanced business relationships.
The results are tangible, measurable and sustainable. Contract management costs continue to increase, along with demands for accountability, proper governance and transparency, making it clear that understanding and automating an organization’s CLM has become a must-do project.

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