The 10 Steps You Must Take Before Implementing A Contract Lifecycle Management Solution In 2023

Feeling overwhelmed by the seemingly infinite options of evaluating and selecting a Contract Lifecycle Management solution?  You’re not alone.

This article doesn’t list every strategy under the sun.

Instead, it lists the tactics we use and pass on to our clients to make educated decisions before making the investment.

First off, forget the jargon; we’re keeping it simple. CLM systems are like the magical organizers for your contracts, making life a whole lot easier. But before you hit that ‘implement’ button, let’s chat about the basics. We’ve covered everything from defining your goals and assessing your current contract chaos to understanding your team’s needs and budget constraints.

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Assess Current Contract Management Processes:

This may seem simple, but documenting these processes will expose areas for improvement.  Understand your current contract management procedures, including how contracts are created, negotiated, approved, and stored. 

Define Objectives and Goals:

We call this the “get your house in order phase.”  Determine what you want to achieve with a CLM solution, such as reducing contract cycle times, minimizing risk, improving compliance, or enhancing vendor relationships.

Conduct a Needs Analysis:

One of our favorite exercises.  With a wealth of experience with over ten major CLM vendors, most of which are found in the Gartner Magic Quadrant and Forrester Wave reports, we can help you determine the specific features and functionalities required in a CLM solution to meet your company’s unique needs.

Set a Budget:

Establish a realistic budget for the CLM system, including the initial setup, ongoing maintenance, and potential training costs.  We recommend a license and implementation budgets for the first year at approximately 1 to 1.5X.

Consider User-Friendliness:

Assess the user interface and ease of use. A user-friendly system will lead to better adoption across your organization and minimize the cost of ongoing training.  Most, if not all, CLM vendors have short videos of their interfaces online.  It’s a great place to start.

Review Compliance and Security:

Verify that the CLM system complies with industry standards and legal regulations. Confirm the security measures in place to protect sensitive contract data.  This is critical, especially if you do business in different countries.  Knowing where data is stored, and the various certifications a CLM vendor has will allow you to conduct business seamlessly.

Request Demonstrations and Trials:

Request demos or trials from the vendors you like. This will help you understand how the system works and how well it aligns with your requirements.  Not all will provide trials, but it doesn’t hurt to ask.  Taking a car for a test drive should always be an option, even if the salesperson is in the car with you.

Check Customer Support and Training:

Inquire about the vendor’s customer support and training options. Making sure they can provide the necessary assistance and resources for implementation and ongoing use.  This is huge because this isn’t just another app we’re installing here.  It needs the internal know-how and support from the people that built it.  You pay for this service, so make sure it passes your sniff test.

Seek References and Case Studies:

Request references from the vendor and research case studies from other companies of similar size and industry that have successfully implemented the CLM system.  Most vendors say, “If you choose us, we’ll provide you with a reference.”  Unless they know they are head-to-head with a direct competitor.  These days, you can find out what people say about their experiences by doing some research.  We can help you.

Final Thoughts

Remember that the successful implementation of a CLM solution requires a well-thought-out strategy, collaboration among departments, and ongoing commitment to optimizing contract management processes.  Regardless of where you are in the process, we can help.

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FAQs

What is Contract Lifecycle Management?

CLM refers to the stages involved in the pre-execution, execution, and post-execution phases of a contract. These stages include but are not limited to:

• Request & Intake
• Drafting & Generating
• Collaboration & Redlining
• Reviews & Approval
• Signatures & Execution
• Obligations & Commitments
• Reporting & Auditing
• Amendments, Addendums & Termination

Should we invest the time and money into a CLM system?

Implementing a CLM solution can significantly improve contract management efficiency, accuracy, and compliance, but it comes with initial and ongoing costs. Not implementing a CLM solution might save upfront costs, but it can lead to inefficiencies, compliance issues, and increased risks in the long run.

Manual or pre-existing contract management is often time-consuming and prone to errors, which can result in inefficiencies and delays.

What are the Risks of Not Properly Managing Your Company’s Contracts?

A company that doesn’t manage some or all stages of the contract lifestyle is disadvantaged. The most common risks involved with poor contract management include:

• Deteriorating relationships with suppliers and customers
• Inability to successfully negotiate favorable contracts
• Delays in contract approval
• Missing contractual due dates and obligations
• Noncompliance with governmental and industry regulations
• Not properly updating contract terms
• Creating multiple inconsistent versions of contracts in multiple locations within your company
• Not being able to locate specific contracts
• Unintentional contract renewals 
• Allowing access to contracts by unauthorized individuals

What are the Benefits of Effective Contract Management?

Effective contract management helps a company gain better control over the entire contract lifecycle. This can result in the following benefits:

• Greater efficiency
• Shorter negotiation and execution times
• More accurate contracts
• Enhanced legal, regulatory, business process, and contractual compliance
• Greater consistency between contracts
• Faster time to revenue
• Reduced legal, brand, financial, and security risk
• Lower costs