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The Contract Lifecycle Management Journey

Contracts can be difficult to stay on top of but with a contract lifecycle management solution, you can become more efficient with your contracts.

Have you ever read a six-word novel about a business contract? Here’s one for you: “A hero goes on a journey.” Yes, that’s the plot of most books — but it also holds true for business contracts.

Who’s the hero? What’s the journey?

The hero, dear reader, is you: the in-house attorney or legal team charged with drafting, executing, and managing contracts. You’re on two contract journeys. First, you take each contract from start to finish. Very likely, you’re also on a journey to modernize your organization’s approach to contract lifecycle management (CLM).

Contracts make business and commerce possible. They formalize obligations and commitments between people and organizations. They create trust and confidence and usually provide clear termination or renewal terms. They protect you from confusion, bad behavior, and bad luck. Contracts are the lifeblood of your organization.

Contracts are filled with exciting possibilities, but they also have the potential for trouble. Let’s look at the contract journey and see how you can create a better contract lifecycle management process.

Defining the destination: Contract initiation

When you receive a contract request, you need to move quickly. It’s up to you to clarify where the contract is taking your organization and what you need to get there.

You might ask questions of internal stakeholders in meetings and over email. You might ask your team if they remember a similar contract and look for old examples.

A CLM solution can benefit you by automating this initiation process. It gathers critical information and engages the right people to start planning.

Some contract journeys can start and end with initiation if you have the proper support and a powerful document automation engine. With a CLM solution, you can provide a self-service portal for colleagues to create routine contracts. For example, a business leader can complete a template for a nondisclosure agreement (NDA) without involving the legal department. You set up the template, so no one can add unsuitable terms or miss a key provision.

Setting off: Drafting the agreement

You know where you are going and have the information you need to get there. Now it’s time to draft the contract. You can start from scratch or reuse earlier work products as a template and review each clause meticulously. This approach is time consuming and prone to errors. You have to hunt for model documents, and you risk using outdated language or a version that doesn’t reflect current practices.

A CLM solution provides document automation driven by artificial intelligence (AI) to quickly create the best version of the contract based on past work and guidelines. It generates an agreement from the information you collected. This draft incorporates all the required terms and conditions based on preapproved templates that your department set up. From there, you can review it based on your legal and situational knowledge to ensure it meets the business needs.

CLM systems make the drafting process more efficient and deliver a stronger draft to the other party.

Ports of call: Negotiation and approval

You and your contract are on your way! With a solid draft in hand, you work through review, negotiation, and approval. Traditionally, legal professionals document negotiations and approvals by tracking changes in word-processing documents. They email the documents back and forth and consolidate changes from multiple parties manually.

With a CLM solution, you have a portal to review comments and changes. You can also track the status of the contract, and anyone viewing the negotiation thread can see the reasoning behind each change. Ideally, the system will have a workflow tool that you configure to send reminders as needed. You won’t have to hunt through old emails and document versions to communicate rationales.  

Arrival: Execution

It’s the big day! You’ve arrived at the time for signing the contract and putting the terms into action. Congratulations!

The printer is out of paper. The scanner is on the fritz. All the pens are red or pastel. This last step can hold a lot of friction that might slow execution or create frustration in a new relationship.

Instead of collecting signatures on paper, consider using a system with mobile-enabled digital signature functions. By choosing a CLM solution that automatically follows up with missing signatories, you can simplify the effort for everyone.  

Getting settled: Obligations and compliance

The contract journey didn’t end with the signature.

Your completed agreement is just one of many. Now, you need to stay on top of business, legal, or regulatory changes that could affect the terms of your agreement. Like many in-house lawyers, you may be manually reviewing your contracts and taking steps to resolve any breaches you find.

For most organizations, this is an ineffective approach. A CLM solution provides complete portfolio visibility to monitor your performance and resourcing. It can track contract obligations and notify you when you may be in breach. It can also monitor counterparty obligations, so you know if the other party is out of compliance with the contract. This clarity across your contract portfolio can help you deliver tremendous value to your organization and simplify your team’s workload.

Lessons learned: Amendment and renewal

Your contract may not have been perfect or evergreen from the start. How do you keep track of renewal and expiration dates? Sales data goes into business systems to manage billing and account management processes. There may be less process for vendor agreements, though. How do you make universal contract amendments when laws and regulations change?

Providing continuous manual tracking of these terms is impossible for a legal department. If that’s how your system works, you could be sitting on outdated terms and expired contracts. With a modern CLM system, you can easily see critical dates or regulatory changes that affect your terms. This level of visibility ensures your company retains contractual rights, reduces risk exposure, and protects revenue.

What’s next: Evolving your CLM process over time

Your contract journey started with the initiation of an agreement and has wound up here, with your contract living in a business-as-usual state. But there’s still an opportunity to grow; corporate legal departments can keep improving their CLM system over time.

Best-in-class CLM tools can mature along with your business. First, the system serves as a central repository, then gets smarter and offers more insight. Eventually, your CLM solution helps you provide rich, proactive insights to help the business make better decisions. Your contracts will get better as your approach evolves. Eventually, you can integrate with other business systems to enable better collaboration and efficiency.

So, are you ready to be the hero of your department's contract lifecycle management journey? Are you ready to start making your process more efficient? With the right CLM solution, you can move from manual contract management to a sophisticated approach that enables you to provide even better business partnerships.

You’ve set your sights on a better destination, but the journey can be fraught with peril. Your company’s time, reputation, and money are at risk. Do you want to take that journey alone? Or will you choose a CLM solution to guide you and greatly speed up your travel time?

The right CLM solution helps your company complete its entire contract journey. No matter where you are in this journey, Thomson Reuters can help you improve and optimize. Learn more about the Thomson Reuters CLM solution.

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