Although it is a relatively new process, contract lifecycle management is an extremely important process for all businesses, especially those who extensively use contracts with other businesses and contractors. What contract lifecycle management does is that is streamlines the contract creation, negotiation, and analyzing process in order to better understand how well a contract performs for a particular business. There is also a heavy amount of automation in this process as well, as contract lifecycle management can help companies manage many different contracts simultaneously.
When using contract lifecycle management, a business has the ability to track all stages of the contract lifecycle. This includes initiation, negotiation, execution, compliance and renewal. While contract lifecycle management might seem complex, it is actually not that difficult to comprehend. However, a business needs to thoroughly understand the process in order to best use it and apply it to make its contracts more effective and its contract lifecycle process more efficient.
Explaining Contract Lifecycle Management
A contract is initiated once two parties agree that they need an agreement to manage an ongoing business relationship between them. Once both parties decide that this is needed, the contract lifecycle management process begins. To start, a contract needs to be created. Ideally, a business should have contract templates in place to govern different types of business relationships. During this stage of the process, contract should be altered as needed to fit within the specifics of a particular business deals. While you do want standardization among your contracts, not all employment relationships are the same, and not all supplier, vendor, or strategic partnership relationships are the same either. However, you do want to make sure that you do have the templates in place and the ability to create new ones as needed.
However, keep in mind that contracts are rarely signed without any back and forth. During the negotiation stage of contract lifecycle management, you’ll need to keep track of any changes that are made to the initial version of the contract. This can include increases in compensation or a lengthening on payment terms or delivery times depending on the nature of the business deal. Keeping track of these changes will help you save on legal fees and will also make sure that both parties of the business deal have the final version of the contract.
To best store a contract during contract lifecycle management, you should use a contract management software. This software is a central database where both parties can access the latest version of the contract as needed. They can also interact with it, ask questions, and even track the key KPIs that govern the efficacy of the contract. By tracking the entirety of a contract’s lifecycle, you can make sure that the contract has been upheld by both parties and see where there is room for improvement. Then, when it comes to the renegotiation of the contract, you will have peace of mind that the contract is working for both parties. If there are any issues with the contract, these can then be hammered out during the renegotiation phase so that both parties are satisfied and they feel like the contract is equitably governing their relationship.