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Contracts are the fuel that powers every business, and contract lifecycle management process is the engine that keeps it running smoothly. Working with a broken or faulty engine is a situation no business wants to be in — and no legal counsel wants to be responsible for.

So how can you go about streamlining this process at your organization? Or, if you’re walking into total chaos in a new company, how do you start to even set this up?

We consulted GCs and legal leaders who have been in these shoes, as well as experts from the legal industry, to create this comprehensive guide to contract lifecycle management. Keep reading to learn what goes into creating a thoughtful CLM (contract lifecycle management) process that actually creates impact.

“The present-day GC is expected to grow beyond conventional roles and responsibilities and wear multiple hats to eventually become a business enabler.” 

Gitanjali Pinto Faleiro
General Counsel, Company Secretary & CCO at Greenhill & Co.

What is contract lifecycle management or the CLM process?

Contract lifecycle management (CLM) is the process behind contracting at any organization. A proper CLM process provides a framework to streamline and automate the key stages of a contract, from contract planning and drafting to execution and compliance management.

What are the 7 stages of contract lifecycle management process?

7 stages of contract lifecycle management process

The contract lifecycle management process typically involves 7 stages:

  1. Contract creation or authoring
  2. Review and approval
  3. Contract negotiation
  4. Execution and e-signature
  5. Contract storage and archiving
  6. Obligations management and fulfillment
  7. Contract renewal or termination

Whether it’s a highly personalized contract management software or an assortment of different solutions mashed together to create a ticketing system, there’s likely some “largely accepted” process that governs the end-to-end contract lifecycle at every organization.

Here’s a look into what that process broadly looks like:

#1 Contract creation or authoring

The first stage of a contract’s lifecycle is when a team member identifies the requirement of a contract and puts in a request to create it. This could happen two ways:

  • Through a self-serve process where the sales rep, HR, or business team member fills in key details within pre-approved templates and pushes it to the next stage.
  • Through the company’s legal ticketing system where the business team member puts in a request for the legal team to draft the contract.

This stage could also be initiated by the counterparty, such as a vendor or customer, which would then require the owner of the contract within the internal team to process the third-party paper through the internal ticketing system or contract creation software.

Also Read: Everything You Need to Know About Contract Creation Software

#2 Contract review and approval

Once the contract is drafted and within the system, it’s time for the legal team and relevant stakeholders from finance, procurement, etc., to review and approve it. These teams will check the contract against established parameters and quality standards to ensure compliance and mitigate risks.

This usually involves either forwarding the request through the internal ticketing system (which may as well simply be a Slack message, email, or a project management board task) or using the chosen contract lifecycle management software to push the drafted contract for approval according to set hierarchies.

Also Read: Unlock Efficiency with Contract Collaboration Software

#3 Contract negotiation

Once the contract is approved internally, it’s time to negotiate it with the other party. This stage could be anything from just a few hours to stretching into days and weeks of back-and-forth. Usually, using standardized contracts makes this process more efficient, with pre-approved fallback language in place for commonly negotiated clauses.

“Once we came up with fallback positions and enabled sellers with them, the number of contracts coming to legal for negotiation reduced further. Obviously, we were very, very careful about what changes the sellers were allowed to make and anything beyond that still comes to us.”

Sue So
Head of Legal, Hopin

However, complex or highly individualized contracts sometimes require the legal team to draft a contract from scratch, which is when the team can use a word editor like MS Word or a digital redlining software to draft, redline, and collaborate on the contract internally and externally.

Also Read: Contract Negotiation Software: Why Do You Need One? 

#4 Contract execution and e-signature

Next comes the execution stage, where the contract is finally signed after gaining all necessary approvals. Today, this is usually done via e-signature software that can help streamline and centralize this process for easy communication and visibility.

Also Read: A Quick Introduction to eSignatures

#5 Contract storage and archiving

It’s important to maintain a record of historical contracts and track every active contract to ensure easy retrieval. Once a contract has been created or executed, it should be stored in a centralized repository alongside all relevant documents, data, and communication records.

This may look like a simple spreadsheet linked to a Google Drive folder or a project management dashboard. Many teams might also opt for a purpose-built repository for contracts to host all contract data and create a single source of truth.

Also Read: Contract Storage: Store Your Contracts Effectively

#6 Contract obligations management and fulfillment

Once a contract is executed, the obligations and requirements must be tracked for all parties involved. This includes deliverables, potential milestones, deadlines, compensation, and any other obligations outlined in the contract. This stage also includes tracking performance of executed contracts, performing analytics to create reports, and resolving any issues that may arise.

Also Read: Using Contract Analytics to Uncover Key Insights: A Guide 

#7 Contract renewal or termination

Towards the end of the contract lifecycle comes contract renewal or termination, according to the clauses laid out in the current agreement and the relationship between the parties. The organization tracks upcoming renewals or contract expirations, assesses their performance impact on the business, and determines whether to renew, renegotiate, or terminate them. This step also involves tracking auto-renewals to prevent unwanted financial liabilities.

Also Read: Contract Renewal Process: Strategy + Best Practices

Why is contract lifecycle management important?

Benefits of streamlining your contract lifecycle processes

The way your contracts advance through each stage of the contract lifecycle is critical in determining the impact and effectiveness of the legal team within your organization. Here’s why you should streamline your contract lifecycle management processes:

#1 Contracts get closed faster

First things first, a streamlined CLM process means improved turnaround times. By bringing consistency within the contract lifecycle, standardizing contracts, and easing contract collaboration, organizations can quickly generate contracts and track their status for greater visibility. This helps legal teams save time on manual work like creating high-volume contracts or tracking them down on various channels.

#2 Legal gets time for higher-value work

A bad process leaves the legal team buried under the manual, repetitive, and low-value work of simply generating contracts and putting out fires arising out of the chaos. A good process, however, streamlines contracting so that Legal can focus on strategic, high-value work to enable the business and prevent mistakes that cause those fires to happen.

”You can either be part of the cleanup crew or do stuff to avoid that cleanup situation altogether."

Gitanjali Pinto Faleiro
General Counsel, Company Secretary & CCO at Greenhill & Co.

#3 Managing risk and compliance is easier

An efficient contract management process requires efficient contract tracking and transparency. With greater visibility on both on-going and historical contracts, organizations are able to mitigate risks and manage compliance more effectively, protecting business interests.

#4 Costly mistakes and errors plummet

A burdened legal team and inefficient contract processes spell out trouble for any business. Not only do things take more time, risking time-sensitive projects and deals, there’s a high risk of human error and data management becomes a nightmare. Streamlining the CLM process ensures that everyone knows exactly where to find the answers they need. Moreover, by reducing the amount of repetitive manual work, chances of errors are greatly reduced — saving the business the time and money that could be lost due to such mistakes.

#5 Cross-functional teams don’t dread approaching Legal

“Sales takes precedence in commerce-driven companies.”

Ryan Nier
General Counsel, Pinwheel

Legal is often perceived as a bottleneck or a ‘department of no’ by business teams. By streamlining the contract lifecycle, legal teams can bridge the gap with other departments and improve cross-functional communication, improving turnaround times and ensuring that high-priority projects take precedence over low-priority contracts. An efficient process also allows for greater transparency into the contract lifecycle, allowing business teams visibility into what Legal is up to and reducing friction between the two.

“The legal team should not say ‘no, the transaction can’t happen.’ Rather, they should explore ways wherein the customer-facing team member could approach the transaction in a way that does not break any laws. Once the legal team makes the transaction happen by finding a workaround, the notion of them not being approachable will fundamentally change.”

Sandeep Chowdhury
Group GC, HCC Ltd.

#6 An efficient process scales with the business

As the business grows, inefficient contract processes that used to be something you could work around slowly become unsustainable. Legal teams find themselves dealing with higher contract volume, increased requests from other teams, and little visibility into historical contracts and data, and a high spend on internal headcount or outside counsel to keep up with all of this. That’s why it’s important to create an efficient contract lifecycle management process that scales with your business and allows room for growth and changing market conditions.

8 steps to creating an effective contract lifecycle management process

8 steps to creating an effective contract lifecycle management process

Once you’ve decided to take on the task of streamlining your contract lifecycle management into a scalable and repeatable process, it’s time to plan. It’s critical that you go about this methodically and involve all relevant stakeholders from the get-go.

Here’s how you can streamline your contract lifecycle management process in 8 steps:

#1 Analyze your current process and pain points

Before you begin laying down processes or buying tools, the first step is to get a thorough understanding of your current process. Answer questions like:

  1. Do you have a formal process in place for contract lifecycle management? How strictly is it followed?
  2. How are the various contract lifecycle stages usually carried out in your organization?
  3. What channels does communication generally take place, both internally and externally?
  4. Where are contracts stored?
  5. Which stakeholders are involved in creating, approving, and managing contract data? Which stakeholders are unnecessarily involved in some stages?
  6. What are the pain points and feedback from various stakeholders? What does the legal team struggle with?
  7. What are your turnaround times? Is there stratification between low-priority and high-priority work?
  8. Which contracts, clauses, approvals, etc. can be standardized? Which guardrails do you absolutely need?

Basically, you should thoroughly evaluate your current contract management process and understand where the pitfalls lie, before you can go ahead and solve these problems.

#2 Lay down the problems you want to solve

“Try to glean as much info about what causes friction as possible. Your biggest wins will come from addressing these knowledge gaps or hesitancies that are blocking/slowing deals.”

Sue So
Head of Legal, Hopin

Once you’ve evaluated your process, it’s time to pen down the bottlenecks or issues you want to resolve. For example:

  • Are there a lot of errors due to your legal team being overworked and having to work quickly? Are you always putting out small fires that could’ve been prevented?
  • Is there inconsistency between contracts of the same type or deal size, whether that’s in terms of pricing, product requirements, or clauses like liability, indemnity, etc.?
  • Is there a communication gap between your sales or business teams and the legal team? Is lack of visibility into the contract process causing friction?
  • Are your historical contracts mismanaged and do contract audits, analytics, reporting, and location take up a lot of time?

You should also consider possible solutions for these, such as onboarding a CLM solution, prioritizing the legal team’s time better, standardizing repetitive work or contracts, setting up automations within your sales team’s CRM, etc.

#3 Assign roles and responsibilities

One of the most important aspects of setting up a contract lifecycle management process is assigning the right roles and responsibilities to the right people — equitably. Make a list of everyone involved within the contract lifecycle in your organization, everyone who should be involved but isn’t, and everyone who’s involved too much but doesn’t need to be except in specific cases.

Within the legal team (if you’re working with multiple people), you should make sure that work is divided equally based on experience and skill level. Assign POCs for different legal work, so everyone involved has clarity on who to reach out to for specific requests or tasks.

Next, analyze the involvement of various stakeholders from other teams within the contract process.

  • Are you unnecessarily pulling the CEO/C-level executives into low-level deals and approvals?
  • What pre-approved terms can be set, whether on the finance, legal, or product side, to allow for quicker contract closures without compromising on risk management?
  • What should be the ideal hierarchy for approvals and reviews to ensure there is no duplicate work?
  • Which individuals should be involved in the pre-execution, execution, and post-execution processes?

Once you answer these questions, you will be better positioned to create a CLM process that works for you and not against.

#4 Selecting where to host your new CLM process

While CLM systems are quickly becoming a preferred choice sooner rather than later for most companies, you don’t necessarily need to begin with. There are simple automations that you can do yourself through project trackers, online collaboration tools, and spreadsheets.

Get a taste of automation with our Contract Tracking and Management Spreadsheet Template.

Ideally, your new process should live in as few places as possible to ensure you’re not constantly switching platforms, and should integrate with the tools the business teams use so they don’t have to leave the environment they know.

Some legal teams solve this by building the contracting process where the sales or business teams live. For example, setting it up in a CRM like Salesforce. Others solve this by creating a homegrown ticketing system through Slack or project management tools and spreadsheets. Others still solve this by adopting a dedicated CLM solution that can integrate with other tools like CRMs, eSignature platforms, etc., to allow for greater flexibility and organization.

“Our sellers live and die in Salesforce, so we built our legal ticketing system within Salesforce.”

Sue So
Head of Legal, Hopin

Depending on your headcount and contract volume, as well as the type and complexity of contracts you deal with, your ideal solution might look different than others. The most important thing to keep in mind is to create a process that is scalable and won’t have to be completely redone in the near future. Align your process to business goals and where you’re expecting you’ll be in a few years.

“By building a CLM tool, we brought added value. When you’re spending multiple hours a day on redundant tasks, it’s a good sign to see small improvements to that process yielding tremendous results. The CLM tool helped our legal team work more efficiently and the sales team to see what we were doing to enable them. Also, we got the bandwidth to prioritize commercial work and strategic thinking. It also helped us document the work and learn from it, and as a side benefit, it helped make a solid business case to scale the legal team at Pinwheel.”

Ryan Nier
General Counsel, Pinwheel

We’ll discuss more about whether getting a CLM tool is right for you or not in the next section.

#5 Involve stakeholders and executives right from the get-go

“Every stakeholder sought quick contract approvals, but they were unfamiliar with the review and risk assessment process associated with contract approvals. Now everybody knows no contract can be signed or executed without going through our CLM tool, and every stakeholder has clarity on where the contract is in the pipeline.”

Nadia Louis Hermez
Legal Ops Manager, Next Insurance, Inc.

Perhaps the most important thing to ensure your new process works out is to get early cross-functional buy-in. Whether you’re adopting a CLM tool or are building an internal CLM system through various tools, it’s critical to involve executives and stakeholders in the process of setting this up — to ensure it actually ends up adopted across the organization.

Usually, you should have buy-in from stakeholders from the following teams:

  1. Sales
  2. Procurement
  3. Revenue Ops
  4. Finance
  5. Teams like HR, IT, etc.

Take their feedback into consideration while making your decisions. Since legal exists largely to enable these teams, the new CLM process is likely to fail without their buy-in.

#6 Set up effective workflows

Once you’ve decided where your new process should live, whether that’s a CLM system or not, it’s time to set up workflows around important contract management tasks.

Some workflows you should define within your new contract lifecycle management process include:

Building a legal ticketing system

Instead of receiving legal requests through email or Slack, where communication tends to get lost in the sea of messages, it’s important to create a streamlined workflow for receiving, accepting, and tracking legal review requests. This could be built out in a project management dashboard or automated through your CLM.

Auto-reporting to stakeholders

There should be some way to automatically trigger a notification to stakeholders when there’s an update in a relevant contract. CLMs usually have an in-built audit trail and notification system, but you can also set this up manually through project management systems and Slack integrations.

Task tracking

Your CLM system should be set up in a way that every stakeholder has transparency into the status of the contract, so they don’t have to constantly follow up. And if they do have to follow up, they should be able to quickly find out who to reach out to.

Approval workflows

It’s critical to reduce as much friction around contract approvals as possible to ensure they happen in a timely manner and don’t end up becoming a blocker. For standard contracts, set a limit, such as a contract value limit, where contracts are automatically approved by busy executives. Only when those limits are crossed should contracts go for further approval to these individuals. (CLMs usually allow you to automate conditional approvals based on things like contract value, pricing, specific terms, contract type, etc.)

Furthermore, ensure you have a system in place to track contract status and approvals, not just for enhanced visibility but also to enable identification of blockers and opportunities for streamlining the process.

Also Read: How to Set Up an Efficient Contract Approval Process (+Template & Examples)

Reminders to stakeholders

Build out a system for automated follow-ups with stakeholders, whether that’s to remind them to approve or sign the contracts pending with them or to warn them of upcoming renewals and expiration dates.

This helps everyone stay in the loop and efficiently take action before it’s too late.

Also Read: Plug Revenue Leakages With A Contract Reminder Software

Alongside these, build workflows and standardize processes as much as possible to improve TAT and increase efficiency. Create contract templates and a clause library to standardize contract creation wherever possible, and allow business teams to independently generate and negotiate contracts based on pre-approved templates.

#7 Carry out contract reporting and governance

“You need to tell stakeholders what your team is up to. Otherwise, leverage tools such as CLMs to showcase how your team has contributed to closing deals effectively.”

Juliette Thirsk
Head of Legal, Peach Payments

The next critical piece to build is a process for reporting on contract data, performing analytics, and creating a single source of truth for tracking data and performance. The basics of this is to set up your contract repository in a centralized and easily accessible location that is also secure and allows flexibility in terms of access control. Typically, the answer to this is either a dedicated contract management software or a DIY solution through cloud-based storage options.

Once you have your contract data in order, you should set up a process for contract reporting and analytics. This helps you uncover insights on things like turnaround times, contract closure rates, bottlenecks in the process, etc. These will help you further streamline your process on an ongoing basis to keep your new CLM process dynamic and smooth-flowing.

Also Read: Using Contract Analytics to Uncover Key Insights: A Guide 

#8 Setting up renewal and termination processes

The last step in creating an efficient CLM process involves ongoing tracking of contracts and important dates such as renewals, expiry, etc. It’s important to track these for all your active contracts and set up processes for taking action in advance. This helps ensure that you don’t get caught off-guard when an important contract expires before you had the chance to renegotiate it, or auto-renews when you might have wanted to cancel it instead.

Besides setting reminders, as outlined in step #6, setting up a dashboard or a digest of these important dates can help you stay on top of your contracts, and initiate action early.

Also Read: Contract Management Dashboard: A Comprehensive Guide

Do you really need to bring in CLM software?

“Forward-looking GCs or commercial attorneys understand that automating processes via a CLM system is a step in the path to help the business reach a certain level of maturity. Onboarding a solution earlier than when it is strictly needed helps iron out an efficient process from the get-go and creates a foundation for future success — so they’re not building the plane while it’s trying to take off in a few years.”

— Tyler Finn
Community & Growth @ SpotDraft

Investing in a CLM solution is not something that should be done on a whim or on the basis of one person’s enthusiasm for technology. When that happens, CLM implementations usually fail due to lack of forethought and planning or end up getting barely adopted throughout the organization.

However, when done right, onboarding the right contract lifecycle management software can revolutionize your contract processes.

A CLM software helps legal teams:

  1. Automate manual tasks and create workflows that would’ve eaten up a ton of time and resources to set up otherwise.
  2. Create a single source of truth for all contracts and legal processes.
  3. Streamline communication in one place for easy search and contract discovery.
  4. Integrate with CRMs and tech that other teams in your organization may be using to allow for easy collaboration.
  5. Control access to contracts in a secure manner and provide visibility to every stakeholder.
  6. Instantly leverage contract data for analytics and KPI tracking, that otherwise would’ve been done manually.
Also Read: Is CLM a Good Investment to Overcome Legal Challenges?

When it comes to contract lifecycle management, the less human effort that has to be spent in keeping up with routine tasks, the better. CLM software enables this by automating all those tasks and creating a system of minimal manual interventions, allowing Legal to focus on high-value work while still having visibility into the entire process.

Check out our CLM buyer’s guide here.

Automating every aspect of the contract lifecycle management process

Whether you’re opting for a contract lifecycle management tool or building out processes manually across multiple platforms, you will sooner or later require systems to automate every single aspect of your contract lifecycle.

Below are 6 critical aspects of contract management that your CLM system should help you automate:

#1 Migrating historical contracts

The very first thing to do when implementing an efficient contract lifecycle management system is to update all your historical contracts and migrate them into your contract repository.

This ensures that there is only one source of truth for all your contracts and enables greater contract data management, transparency, and analytics.

Migrate contracts to your CLM dashboard on SpotDraft with one click.
Migrate contracts to your CLM dashboard on SpotDraft with one click.

Contract migration poses a big challenge for most organizations when they’re optimizing their contract lifecycle management process. For one, bringing the chaos of unorganized data stored across various channels into one centralized location can be a nightmare without proper planning. But don’t worry — we have a guide to help you out.

Read it here: A Deep Dive Into the Legacy Contract Migration Process

#2 Creating a contract repository and streamlining data management

Once you define a contract repository for all your contract data, it’s critical that you ensure it’s the ONLY source of truth for contracts at your organization.

An audit trail helps you maintain a centralized system of records on SpotDraft.
An audit trail helps you maintain a centralized system of records on SpotDraft.

Even if specific tasks happen off the platform, such as communicating with counterparties via email, there should be a culture of recording that information into your contract repository to enhance transparency and avoid having to switch platforms for context. Internally, all communication and collaboration should happen via your new designated system and there should be a culture of storing all relevant contract data on the repository.

Also Read: How to Amplify Legal's Impact via Effective Contract Data Management 

#3 Standardizing contracts

To allow Legal to transform from a team that just creates and negotiates contracts to a team that actively creates business value, standardizing inefficient processes and repetitive work becomes incredibly critical.

Create contracts instantly from pre-approved templates on SpotDraft.
Create contracts instantly from pre-approved templates on SpotDraft.

Standardizing contracts involves:

  1. Creating templates for high-volume contracts that you often find yourself duplicating from previous drafts.
  2. Standardizing contract language by creating a playbook or a contract library, and creating fallback language for highly-negotiated clauses.
  3. Setting up automated workflows via a CLM system for efficiency and ease of use.
Read more here: How to Standardize Contracts for Better Contract Management

#4 Simplifying contract approvals and collaboration

An efficient contract management system automates contract collaboration, review, and approvals and allows for greater efficiency for all stakeholders — enabling faster closure of contracts, consistency in deal terms, reduction in risks and costs, and freeing up legal bandwidth.

Request ad-hoc reviews and approvals on SpotDraft.
Set guardrails and request reviews and approvals on SpotDraft to streamline collaboration.

#5 Removing cross-functional friction

“If you’re in an advisory role like Legal, it is natural for you to have friction with business stakeholders. My advice is to understand which stakeholders you’ll have maximum friction with and then adjust and lean in. Try to align the legal roadmap with their goals. In case of conflicts, make sure you’re both seeing it as a partnership. Help them understand and navigate legal risks. Also, make sure they feel educated and comfortable in making decisions (or, if they’re not the decision maker, help them resolve and get to YES).”

Ryan Nier
General Counsel, Pinwheel

Perhaps the most important aspect of efficient contract lifecycle management is setting up the right channels of communications with cross-functional teams and aligning priorities to achieve business goals.

Collaborate with stakeholders on and set access controls on SpotDraft.
Collaborate with stakeholders in one place and set access controls for greater security.

By automating this communication and bringing it all together on one platform via a CLM system, legal teams can enable greater transparency into what they’re working on and ensure they’re not busying themselves with low-value work. This helps them work in harmony with teams like sales and finance, instead of being stuck in a silos.

More guides on streamlining contracts for different functions:

How Are CLMs Useful for CFOs & Finance Teams?
Why Your Procurement Team Will Find SpotDraft CLM Solution Useful
Your Guide to a Flawless Sales Contract Management Process

#6 Tracking success and optimizing the process for complete visibility

Once your CLM process is set up and operationalized, it’s important to keep track of its performance, identify issues and bottlenecks, and continually optimize it based on feedback, observations, and analytics.

While it’s possible to do this manually, it can become inefficient to keep up with performance tracking when operating on a larger scale. CLM software like SpotDraft can help automate this by providing insights and data visualizations on crucial contract data.

Access data visualizations and insights from your insights dashboard on SpotDraft.
Access data visualizations and insights from your insights dashboard on SpotDraft.

What success looks like when optimizing your contract lifecycle management process

Ultimately, an efficient contract lifecycle management process should translate to:

  1. A happier sales team.
  2. A happier, less overworked legal team.
  3. Smoother contract collaboration and negotiation process.
  4. And more revenue booked for the business.

SpotDraft helps organizations achieve that by automating their end-to-end contract lifecycle process for them, right from contract requests and creation to tracking contracts post-execution.

[Case Study] How Cactus Communications streamlined its contract lifecycle with SpotDraft

Cactus Communications saves over 40 hours a week (= an additional team member!) with SpotDraft, by automating their contract lifecycle process in three ways:

  1. Automating 80% of its contract work and freeing up 95% of the legal team’s time spent creating boilerplate contracts.
  2. Reducing time spent on generating monthly MIS reports by 90%.
  3. Importing 650 historical contracts and data to the repository, and extracting and keeping track of 28 key pieces of contract metadata with the help of AI.

With SpotDraft, they didn’t have to spend time fielding legal review requests on email, managing contract versions created on Google Docs, and manually extracting data or creating reports (which could take weeks). All of this was automated within the platform itself.

“After the very first demo, we were totally convinced that SpotDraft was the solution for us. Using SpotDraft has helped us reduce an immense amount of time spent on manually drafting contracts, creating monthly reports, creating a repository for all our agreements, setting expiry reminders and so much more.”

— Gabrielle Menezes
Cactus Communications

Choose SpotDraft as your contract lifecycle management solution

Want to see for yourself how you could revolutionize the contract lifecycle management process at your organization? Request a live demo and speak to our experts to understand how SpotDraft can help.

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