Contract Lifecycle Management & Best Practices
Contract lifecycle management (CLM) covers contract creation, execution, and monitoring. A typical CLM process includes analysis to maximize cost savings, minimize risk, and increase revenue and efficiency. Supply chains have to perform those functions with a system capable enough to protect personnel from ambiguity and inaccuracy at all times.
With the global economy triggering more and more joint-venture projects, contract management has become a much-needed skill. Reducing risk and complexity forms a crucial part of organization conduct in supply chains. Enterprises need to ensure timeliness and accuracy, be aware of stage and implementation of contracts, make sure the rules are honored, define workflows, and assign personnel for monitoring and enforcing contracts.
Businesses need CLM to:
- Send alerts: Alerts for renewals, amendments, timely delivery, and quality checks are mandatory to avoid bad faith and trust issues within the value chain. Enterprises should have full control over them without having to rely on extensive manual work.
- Avoid litigation: Litigation may arise when contracts have vagueness or provide the scope for misuse. Organizations must record evidence of their compliance to stay protected from legal issues.
- Reduce cost: Supply chain companies must avoid penalties as well as overheads. Special discounts and missed opportunities from special benefits, penalties owing to payment errors, etc., should be avoided.
- Establish a centralized repository: Value chain partners should manage contract data and documents under a single repository with well-defined authentication. It helps increase visibility and point out specifics related to contracts.
- Rebate management: Organizations should be technologically adept at capturing and tracking real-time prices, discounts, and incentives to ensure their contract creation is on the right track.
CLM Best Practices
With multiple departments spread across the globe, establishing a CLM process in the organization can be difficult. But for a large organization, best practices of contract management can result in millions of dollars as annual savings.
What must a Company do for its CLM Process?
- Ensure accurate creation, review, approval and execution and accelerate contract cycles, thereby reducing operational cost.
- Capitalize on contract incentives and rebates, especially to meet key milestones. Knowledge about such opportunities should be developed through a notification system.
- Analyze how the contract is performing with respect to cost savings, market indices, and check if there is scope of improvement upon contract renewal.
- Audit transactions and interactions throughout a contract’s history to improve governance and compliance with organization/government rules and processes.
- Focus on automatic routing, integration of CRM and ERP, and electronic signatures so that contract lifecycle can be shortened significantly.
- Convey the commitments to be met across the organization without manual communication or complex assigning processes.
- Finally, appoint a contract manager who can implement the contract management process effectively.
CLM processes affect the whole company. With multiple departments and their contracts with external entities, the challenges can get increasingly difficult. Personnel might require ad-hoc information and better applications. As a resolution, automation and agile development practices have been making forays in the B2B technology world. Best practices of CLM become part of company cutlure when personnel are able to manage the contract lifecycle proactively, adapt to new agreements, and execute dynamic strategies.