Analyzing contract lifecycle management workflows (CLM) is important. This involves breaking down the lifecycle into easily recognizable steps. The entire process must be broken down into distinct stages. These stages should start with the generation stage and continue through the completion phase. After these steps are identified, each can be broken down to examine for improvement.
According to a large contracting professional survey, data was collected for the State of Contract Management Report. The key takeaway from this research was a clear understanding of the five critical stages of a contract's lifecycle. This includes the people, processes, and tools involved. This post will provide a quick overview of the contract management process, data on how contracts are managed today, and a look into the future to see how technology can improve contracts.
Wait, what is a Contract Management System?
Your company's solution to store and manage contracts is called a contract management system.
You may use one of three options: a specific contract management process tool, an all-purpose document management system like Sharepoint, or a shared file management solution such as Dropbox or OneDrive. You might still rely on personal computers or email inboxes; a sign you need to up your game.
The Future of Contract Management
Digital transformation, like in every other industry, has pervaded contract administration, opening up many new possibilities. However, as businesses grow, contract management challenges appear to change.
Research estimates indicate that:
- Nearly 60 to 80% of business transactions are based on written contracts.
- An average Fortune 1000 company has between 20,000 and 40,000 active contracts.
- Global businesses will employ 90% of the contract lifecycle management solutions by 2023.
- WorldCat shows that 9% of companies' annual revenue is lost due to poor contract management.
- IACCM estimates that companies would lose between 5% and 40% of deal value, depending on the circumstances.
Businesses should not consider contract management an option. Research strongly supports CLM implementation and its effect on overall business revenue. These challenges will only get worse due to rapid digital transformation. CLM solutions must be more robust.
The Big Picture of Contract Management
Stakeholders need to have better visibility into contracts due to digitalization and remote collaboration. CLM is vital in meeting these needs and helping businesses form large-scale partnerships.
Fact. MR conducted extensive research about contract management trends and the future. These are the key findings.
- Global CLM market value at US$ 845Mn in 2022 will reach US$ 3 Bn in 2032, at a CAGR of 13.5%.
- With a 10% CAGR, the USA would be the largest CLM implementation market by 2032. China may be the dominant market in the East Asian region.
- China and India are experiencing economic growth due to affordable corporate apps and CLM software availability.
- Sector-wise, the top CLM consumers would be government, healthcare, pharmaceuticals, information technology, and telecommunications.
- The BFSI industry is expected to have the highest Y-o-Y growth.
Industry Challenges of Contract Management
According to current estimates, 55% to 70% of organizations do not have effective contract management systems. This is in addition to many companies having thousands of active contracts. Without a system that can help, how do you manage so many contracts and agreements? Companies can be prepared for every stage of their development with good CLM technology.
Surprisingly many companies only have a basic process for recording and storing contracts. This often includes paper copies kept in filing cabinets. To track them, this can be combined with a spreadsheet. Some don't have a process. This means agreements are printed on file folders at employee desks, USB sticks, network servers, Sharepoint portals, and on cloud storage (DropBox), among other things.
"Contract disputes account for 64% of all cases in US state courts. It is therefore imperative that organizations know where they are located" (Gartner 2019, Gartner). Are you confident that you have the right document to locate in case of a contract dispute? Are the terms and conditions of the contract reasonable and consistent with your company's expectations and goals? Are you prepared to argue the case, even if the agreement is not found?
Trends Shaping the Future of Contract Management
Businesses can overcome the challenges of contracting by leveraging contract management technology. Businesses will need to be able to manage their contracts efficiently and effectively soon. According to Gartner's 2019 Report on Contract Management Software, manual labor for contract review will decrease by 50% by 2024 due to the adoption of AI-based contract analytics solutions. By 2023, ninety percent will have implemented contract management solutions for multinational enterprises.
CLM (Contract Lifecycle Management), was a solution that many organizations have used to automate their contracting processes. This CLM solution was only applicable to the respective departments (procurement, legal, and sales). Users are frustrated by the fragmented approach that results in inefficient workflows and multiple Contract Lifecycle Management tools being deployed.
ECM software technology, which helps to manage all contracts using a single technology, solved this problem.
Enterprise - Level CLM Software deployment
Enterprise contract management allows companies to consolidate all their contracts into one system that can be used for holistic development. This includes sales, procurement, legal, corporate and HR. Automated systems can replace inefficient manual contract management systems and speed up the process. Different teams can view all contracts in one contract management technology to gain better analytics and workflows and reduce risk.
Businesses can significantly improve their contract management processes by implementing enterprise-level cloud-based contract management software. This software automates workflows, speeding up cycle times and alerts to ensure that milestones and commitments are met.
CLM tools for enterprise-level use gained popularity because they helped reduce costs, generate significant revenues, and minimize business risk.
AI (Artificial Intelligence), in CLM
AI is expected to be the dominant technology in contract management technology. Automation could greatly improve security, reduce risk, streamline workflows, and reduce risk. ECM software that uses AI will evolve from a repository to one that is active and ensures that contracts are properly created, executed, and managed.
The report 'Global Enterprise Contract Management Market Trends Analysis Product Usability Profiles and Forecasts to 2023' estimates that CLM will triple in value over the next six years. AI will play a key role in this growth. CLM systems powered by AI are revolutionizing the way businesses work.
The future of contract management is bright, with the help of technology and expert, it looks promising. Cloud-based contract management software is gradually but steadily taking center stage. These contract management software advances add value to an otherwise laborious and costly process. We can soon expect a world where tech-aided contract administration processes are common, cost-effective, and beneficial for companies.
Prospects for AI and machine automatization in CLM are bright. Businesses need to understand the value of optimizing processes throughout the contract lifecycle. They should also be better prepared to take advantage of emerging AI capabilities.
5 Stages of Contact Management 2023
A "contract" can be described as a legally binding agreement between two parties that involves the exchange of money or goods, or promises. Contracts will remain a crucial part of every industry as organizations strive to make their businesses more efficient and provide the best possible services to clients.
Contracting was simple in the past. A contract began with an agreement to exchange and ended when that exchange was completed. With many parties involved in the contracting process across multiple continents and contract amounts that can reach millions of dollars, it is becoming more difficult to manage the contract step-by-step. It would be foolish to handle a major contract without a clear contract management strategy, and the support tools like contract lifecycle management (CLM), which can help you automate and accelerate specific tasks.
We have compiled a guide to the stages of contract management. Although the steps of contract management may vary from company to company, they can generally be reduced to five main stages.
When a need arises, one party approaches the other to request a mutually beneficial arrangement. As more requirements arise, this process will be repeated. The goal is to create a system that meets your company's needs on an ongoing basis. It's best to do the following at this stage:
- Use industry-specific terminology and clauses to draft contract documents
- Pre-agreed templates can be used to speed up the process.
- Consider recurring issues with contracts encountered in the past, and consider improvements.
Negotiations can take a lot of time and involve a lot of back and forth between all the parties involved in the transaction. Most of the issues will revolve around legal and financial terms. It will make things easier for everyone if you note down your "deal breakers." You should also decide how flexible you can make the terms without compromising the contract or violating any laws.
For later review, it is important to keep detailed records of all discussions. This is a great stage to ensure that all parties are clear on what they need, agree on deadlines, penalties, or incentives, and are familiar with any contract management software or tools they will be using.
Contract management can be moved to the next stage once everyone is on board.
Once all approvals have been received and confirmed, the terms and conditions of the contract are accepted. The parties sign the contract documents. The authorized representative of the organization signs the contract. It is now approved for execution.
Execution of Contracts
The previous stages were designed to ensure smooth contract execution. This stage is crucial for contract success. Regular monitoring and attention to detail are key. To ensure compliance, all terms, conditions, and negotiations are recorded.
Many reasons lead to major problems in the contract stage. With very small contracts, it is possible to monitor key milestones or performance metrics with simple spreadsheets or paper records. This is a very inefficient strategy for larger contracts. It's possible to face challenges if you apply the same strategy to a larger contract. Using the most advanced CLM available is best to avoid conflicts and large losses.
- All your contracts can be migrated to a central and secure repository.
- Get early warnings, so problems don't occur.
- Keep track of any changes.
- Generate comprehensive reports.
Contract Close-Out or Renewal
After a contract expires, both parties can decide what to do next like whether they want to close or renew it with the same conditions.
The Emergence of Electronic Signatures in Contract Management
The signature stage is one of the most difficult and frustrating but essential parts of any contract management process. It doesn't matter if the contract is a buy-side, sell-side, or any combination thereof. Now it's time for the signature stage.
Perhaps you are currently using a cover sheet and folder to collect signatures from everyone in the office. You could also email the agreement back and forth to have it printed, signed, scanned, and sent to the next person. If you find any of these sounds familiar, it is time to embrace electronic signatures in contract management. They have been legally binding since 2000's E-SIGN Act.
Electronic signatures are a great way to speed up the execution of agreements in today's digital age. Electronic signatures are ideal for remote workers or mobile workers, as they can be signed anywhere, and you have Internet access. E-signatures can also improve your end user's experience with your contract management process. E-signatures have a lot more security and auditability than paper-based versions. They provide a digital audit trail that is legally binding and legally binding of all your approvals.
How do electronic signatures fit in with this continuous contract process flow? Contract managers have found that eSignatures are essential in optimizing this critical workflow. Here's how:
Electronic signature software makes it easy to create contracts in no time. They can also be sent and signed within seconds. This is a significant improvement over traditional paper signing software. Contract managers can close sales faster and get approvals quicker with eSignly's user-friendly software. They can send contracts to any signer anywhere in the world, so they are easier to use. In a matter of minutes, signers can approve and return contracts.
Electronic signatures in contract management make it easy to correct and prevent errors. Electronic signatures in contract management have features like mandatory fields that prevent the entry of missing information. It also allows quick corrections and resends to avoid costly and time-consuming errors.
Contract management is not complete without auditing. Contract managers can see exactly where a contract is at any time with dynamic auditing and reports like those offered by eSignly. This is especially useful when a contract needs to be signed by multiple parties. Managers can quickly see which parties depend on the contract for completion and remind them.
It is not difficult to lose, misplace, steal, duplicate, forge or forge traditional pen-and-ink contracts. Contract managers can have tighter control over security from A to Z by implementing electronic signatures and digital contracts. eSignly offers tools such as digital signatures and two-factor authentication that allow users to manage document security in a way that suits them best. However, eSignly also works hard on the backend to secure documents with SOC 2 Type 2 compliance, 256-bit encryption, and SOC 2 Type 2 compliance.
Electronic signatures are not only beneficial for signers but also benefit businesses as employees have a faster workflow. Workers and departments often need to work together on a contract. With digital documents and electronic signings, contracts can be easily shared securely and revised in minutes.
Contract Management from Beginning to End
Many business workflows are digitalized or heading in that direction. This includes paperwork and contracts. Although digital contracts are a crucial step in many companies' overall workflow, it is not enough to manage individual contracts.
It is important to clearly define your goals, expectations, risks, and needs during the preparation phase. There are always changes in business and life. Therefore, contract process must be able to clearly outline expectations and provide adequate protection for signers and businesses in all possible scenarios.
After planning and preparation, the contract must be drafted. It can be tedious to draft a contract. Many companies choose to have legal counsel assist them during this process.
The approval of a contract usually includes approval from management or higher-ranking officials. Having a second set look at a contract can be beneficial before it is given to clients or other parties.
Often, the first contract that is presented will not be the final. After the contract is presented to the signatory, it may be necessary to make changes or negotiate. At the same time, both sides work toward a compromise. Contract managers should be ready to revise and edit contracts as necessary during this stage.
The signing step can be the most straightforward part of contract management if the right tools and processes are used. All parties can sign legally binding contracts electronically using eSignature software, regardless of where they live.
Contracts will, in general, need to be revised at some point. Contract managers must be ready to deal with any changes made by the signing party, or to approve amendments.
It is crucial to managing a contract throughout its life. Contracts can expire, need revisions, need renewals, or require auditing. It is crucial to managing signed contracts properly by organizing, storing, and managing them.
Why Sign Contracts Digitally?
Why is it important for businesses to prioritize modernizing their processes using eSigning? People value efficiency and seamlessness in today's digital workplace.
It was normal to send out a contract and expect it to take some time to be read, signed, scanned, or returned. It was not uncommon for a job candidate with high priority to receive an offer letter in the mail. Businesses don't look prepared if they don’t have digital contract processes. Customers expect as little friction as possible when signing up for new products or services. Job seekers also expect to be able quickly to sign agreements.
Digital Contract Use Cases
Let's now look at examples of how eSignature solutions can be used in real-world situations.
Sellers require plenty of time to sell. Any tasks that distract from selling are unacceptable. Selling requires you to follow up on contracts or ensure that all signatures are captured. Spending time on repetitive tasks can lead to less time building relationships with clients and prospects.
Salespeople can be more productive by equipping them with eSignature capabilities. Salespeople can create reliable templates, automate contracts, and have more efficient workflows. Customers can sign contracts electronically from any device with a browser in just seconds.
Sales teams using eSigning software have one more advantage: direct integration with your CRM (or customer relationship software) such as Salesforce. eSignly is a great way to create and send contracts. You don't even need to leave Salesforce. You can pick the digital contact or the document template and then send it out all at once.
Human resources teams must stand out in competitive hiring environments. It is possible to impress candidates by presenting offer letters quickly and efficiently, allowing easy eSigning. Digital contracts are a must in today's tech-savvy business world.
Onboarding new employees are easier once they start their job. HR can use reusable templates to create document bundles that can be sent out and get signatures. Using reusable templates, employees can sign new hire documents faster than ever before. It was long past the days when onboarding materials were presented in a printed portfolio. eSigning, digital document automation, and digital document scanning have revolutionized the process.
Many documents must be approved and signed during the procurement process. Consider the many scenarios that require a signature: purchase orders and SOWs, master agreements, RFP sign-offs, supplier compliance, and so on.
Procurement professionals can streamline approvals, signing, and tracking status with eSignature solutions like eSignly.
The Key Takeaway
The signing process is an important step in traditional contract management. However, it can be one of the most tedious. You can speed up the signing process by using an e-signature provider and dedicated contract management software. The process that used to take several days can now be completed in minutes. This process is more secure with the e-signature option.
Worldwide, individuals and companies are switching to eSignature. Not only are there new working norms, but also the security and efficiency that e-signature offers. Your organization or you will greatly benefit from using an e-signature provider for contract management.