Contract Lifecycle Management

Contract Lifecycle Management

Introduction

Contracts are an exchange of promise between two parties. They are essential for every business and they relate to the various functions including HR, legal, finance, purchase, marketing, sales, and most importantly customer service. They provide the terms of dealings and service levels of partners, customers, and the relationships with suppliers. However, the number of contracts every business encounters during its lifetime is huge. Contracts may be short term or long term. One major problem faced by organization is in keeping track of every contract and ensuring that they are all performed on time and no issues arises from them (Plunkett & Plunkett, 2009).

Issues in Contract Management

Managing several contracts at a time is a challenge for every organization big or small. The reason is that even small organizations have several contracts that need to be performed simultaneously. Since managing a single contract involves several aspects, managing several contracts at a time can prove to be a major hindrance towards the organizations profitability and growth. The best way to deal with this to implement a system whereby the contracts are automatically tracked and the stakeholders assisted in order to better perform them.

Contract Lifecycle Management

This issue faced by organizations with respect to the performance of contracts can be sorted out with the help of Contract Lifecycle Management (CLM). This system offers an enhanced visibility, performance, and control in managing the contracts. CLM's are automated systems that deliver operational performance and measurable improvement in financial performance (Saxena, 2008).

Several businesses lack the required system, processes, and corporate governance needed in order to manage contracts. In this aspect, most companies use manual processes to manage contracts. However, there are some that use a mixture of manual and automated systems. Managing contracts is a major challenge and faced difficulties in complying them to their transaction systems. This limits the visibility of contracts which in turn expose the organization to regulatory backlash, poor compliance, missed revenue opportunities, diminishing negotiation leverage, and inflated costs.

With every business function going digital, there is a need for making the management of contracts digital so that they can be performed better and the issues associated with the non-performance or the under-performance of the contract can be minimized.

Benefits of Contract Lifecycle Management

The contract activity of an organization is an important aspect which cannot be ignored. Contracts require an extensive amount of paperwork and managing these files at the later stage of the contract becomes difficult because of the number of contracts managed by organizations at a single time. the efficient management of contracts leads to smooth transactions and profitable operations (Telesca & DigiBiz, 2010).

Contract Lifecycle Management (CLM) is a process where contracts are managed in a proactive and step-by step process that minimal human intervention. If implemented properly, it can lead to several benefits to the organization such as efficiency and cost savings. Automating and understanding CLM can increase the compliance with legal systems, and limit the liability of the organization.

The lifecycle of a contract begins when the customer, ...