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Effective and secure contract lifecycle management, known as Contract Lifecycle Management (CLM), is essential for any company that wants to optimise the administration of its agreements and reduce legal risks. To achieve effective management, it is essential to understand each of the phases that make up CLM and how your team can apply technology and artificial intelligence (AI) to optimise these processes. In this article, we'll explore the six phases of CLM that your team needs to control, from pre-signing to post-signing, and discuss the responsibilities of the departments involved, the impact of technology and the role of technology at each step. Here we go!
This article is also available in Spanish.
In this article you will find out:
- What is the lifecycle of a contract?
- The contract life cycle: pre-signature and post-signature
- The pre-signing phase of the contract lifecycle
- The post-signing phase of the contract lifecycle
- Optimise contract management and keep your company ahead of the game
What is the lifecycle of a contract?
Contract Lifecycle Management (CLM) refers to the set of stages that a legal document goes through from inception to completion, monitoring and eventual renewal. The aim of CLM technology is to optimise each of these stages to ensure that contracts are clear, agreed terms are met and associated risks are minimised. Efficient contract lifecycle management helps companies improve operational efficiency and reduce legal issues. But what phases make up this cycle? Let's take a look.
The contract lifecycle: pre-signing and post-signing
The contract lifecycle process covers all the stages a contract goes through, from its creation to its final fulfilment and archiving. It is divided into two main phases: pre-signing and post-signing, each with its own tasks, responsibilities and objectives.
The pre-signing phase covers all activities that occur before the contract is signed. From the request for the creation of the document with a specific need, the drafting of the document, the negotiations between the parties and the final validation to ensure that it complies with all regulations and company policies. The main objective at this stage is to ensure that the contract is clear, precise and beneficial to the parties involved, avoiding future conflicts or ambiguities.
On the other hand, the post-signing phase focuses on the execution and administration of the contract once it has been signed. At this stage, the focus shifts to monitoring compliance with obligations, managing risks, conducting periodic reviews and planning renewals if necessary.Here, the key is to ensure that all parties comply with the agreed terms and that the contract continues to deliver value over time.
The pre-signing phase of the contract lifecycle
1. Legal request
The legal request phase is the first step in the contract lifecycle, where the need to create a new agreement arises.
At this stage, a department (e.g. sales, purchasing or human resources) asks the legal team to initiate the contractual process. It is crucial that those responsible in the legal area receive the request with all the necessary information, including the objectives of the contract, the parties involved and the special conditions.
The departments involved may vary depending on the type of contract, but the legal team always plays a central role. Collaboration with other departments is essential to define requirements and ensure compliance with company policies. Here, the use of CLM technology including a request module that centralises requests and automates the generation of workflows can make a big difference, ensuring that all parties are aligned from the outset and work is as efficient as possible.
Access the ebook: The Request module can free you from chaos in your department
2. Creation of the contract
The next stage is the creation of the contract itself, where the legal team or the responsible department prepares the first draft of the document. Document automation plays a key role at this stage, as it allows companies to generate standardised and customised contracts quickly and accurately, reducing manual effort and ensuring security and compliance standards. Thanks to CLM technology, it is possible to create pre-approved templates that include standard clauses and specific legal conditions, all aimed at increasing security and efficiency.
3. Contract negotiation and collaboration
Once the first draft is created, the negotiation and collaboration phase begins, where the parties involved review and adjust the terms of the contract. This phase usually involves not only the legal team, but also other departments, such as purchasing or sales, as well as the counterpart (like customers, suppliers, business partners and all kinds of stakeholders).
CLM technology facilitates real-time collaboration, allowing multiple parties to edit and comment on a single document, keeping a record of contract modifications and versions centrally and in the cloud. In addition, AI can identify discrepancies or conflicts between clauses, alerting managers to areas that require special review or do not meet company standards. In this step, CLM not only streamlines negotiations, but also minimises legal risks.
Find out how Bigle CLM can help your department negotiate contracts.
4. Contract review and validation
The review and validation phase is crucial to ensure that the contract complies with all legal and corporate requirements before signing. The legal team reviews the document to ensure that it is complete, consistent and complies with company policies. And we won't be discovering a new world if we tell you that other areas often want to intervene in this process to add their approval, comments or corrections.
Here, legal AI is also a powerful tool, analysing the content of the contract to identify problematic terms, errors or potential risks. For example, AI can highlight clauses that are inconsistent with previous agreements or suggest improvements to strengthen the company's position.
The post-signing phase of the contract lifecycle
5. Signing the document
Once the contract has been validated, it is time to proceed with the signature. In the digital age, electronic signatures have become a standard, providing a secure, legally binding and efficient way of concluding agreements. It not only facilitates the signing of contracts remotely, but also automates the recording and storage of signed documents, improving traceability and regulatory compliance.
CLM technology integrates electronic signatures that allow the contract to be signed from the platform itself and automatically stored on a centralised platform, simplifying access and subsequent management.
6.Obligations, risks, revisions and renewals
The last phase of the CLM focuses on managing contractual obligations, identifying risks and planning revisions or renewals of the contract itself.Once signed, it is essential to monitor compliance with key terms and dates, such as payments, deliveries or renewal deadlines.
An AI assistant can play a key role in this phase, helping to automatically identify contractual obligations and associated risks, as discussed above. In addition, a CLM allows for automatic reminders of renewal dates, alerts on clauses that require special attention, or compliance analysis to detect potential non-compliance. The ability to automate these tasks reduces manual work and improves control over active contracts, enabling proactive management and avoiding unpleasant surprises.
Get to know Bigle CLM in-depth and raise the game of your legal department.
Optimise contract management and keep your company ahead of the game
Now you know the six phases of Contract Lifecycle Management that are essential for your department to optimise contract management and reduce risk. From legal solicitation to signing and monitoring post-signing obligations, the use of technology and AI helps legal teams automate repetitive tasks, improve efficiency and ensure compliance with agreements.
While each phase presents unique challenges, modern CLM tools offer comprehensive solutions for your team to manage contracts effectively. So it's time to implement a technological and automated approach to contract lifecycle management - ensuring your business stays competitive and meets the highest standards.
