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What is contract lifecycle management Software (CLM)
According to Gartner, contract lifecycle management (CLM) software is an application that proactively manages contracts from the initiation stage through the award, compliance and renewal stages. The goal of CLM software is to provide legal and business teams with the tools to streamline the contract lifecycle, while enabling business users to self-serve and manage their contracts at scale in a centralized location. CLM software is also typically cloud-based, meaning that it is easily accessible by any business user throughout an organization, allowing all contract workflows such as drafting, negotiation, signing, renewing and analyzing to occur digitally.
Why contract lifecycle management?
The COVID-19 pandemic accelerated the growth of legal technology tools in the market, the largest growth coming from CLM software. According to MGI Research, the CLM market is continuing to grow at a rapid rate of 35% year over year, with no signs of slowing down. One of the largest contributing factors to this rapid growth is the role of CLM in the digital transformation of legal departments and teams. CLM presents a significant opportunity for legal to increase productivity, improve accuracy and speed up organizational processes through contract management. Leading organizations across the globe are actively investing in CLM tools for a variety of reasons that relate to elevating the status of legal within the business.
Why is contract management software important?
CLM is currently having its moment in the legal industry not only because it streamlines the contract management process, but it also maximizes a company’s potential and improves efficiency while reducing costs. CLM software helps to minimize contract risks, ensure organization-wide compliance, contract auditing and keeps contract generation organized from beginning to end. Poorly managed contracts, from enterprises to small businesses, lead to negative consequences that translate to a poor reputation and lower profits for an organization.
How does CLM streamline the contract lifecycle process?
The contract lifecycle is defined by six key stages. With the right tool, it becomes easier to track and manage all contracts within an organization from beginning to end. A contract lifecycle management process is necessary to ensure that contracts are compliant, accurate, easily retrievable and timely, and CLM software streamlines that process. The following is a closer examination of how the various stages of the contract lifecycle are affected by CLM software:
- Contract intake workflow: The contract lifecycle begins with the initial contract request and intake, and CLM software standardizes the contract intake process. CLM software enables users to submit their request via an electronic intake form, making it easier for business users to request a contract.
- Document generation process: Without CLM, legal teams must write each new contract manually from scratch. Instead, with CLM software, legal can access a library of preapproved contract templates with standardized terms and language that can be easily customizable depending on the content of the contract.
- Contract negotiation workflows & redlining: With CLM, contract routing is done automatically and electronically, ensuring that the document gets to the right individuals and departments while maintaining, capturing and tracking all changes and versions of the contract. The result is an easier negotiation and redlining process.
- Contract approval workflows: Automated electronic routing and approvals are done through CLM, making it easier for teams and departments to streamline their approval workflows.
- Contract signature & E-signatures: Instead of manually collecting signatures, which could be delayed for days or weeks, CLM software allows for the approved contracts to automatically route to the proper parties for signature electronically. After collecting the e-signature, the contract is automatically distributed to the right parties for not only contract fulfillment but reporting and archiving.
- Contract Reporting & Analytics: All successfully executed contracts and their supporting documents are then stored in a centralized, digital contract repository, where they can be retrieved at any time. Additionally, these repositories have robust reporting and analytics capabilities that can be viewed in a dashboard, displaying data and other necessary metrics to measure success.
How can a CLM system benefit my organization?
- Collaborative Workflows: CLM software promotes transparency by allowing multiple parties to have access to contracts and their workflows, where they can review and negotiate contracts in a centralized location. The transparent and collaborative nature of CLM systems means that there is less back and forth of getting approvals and signatures from the proper involved parties. As a result, negotiation periods also take significantly less time to resolve.
- Improved Efficiency: Since the role of a CLM system is to clearly outline and define the contract lifecycle, it makes it easier for business users to identify any issues within the templates or frameworks of the contract generation process. The implementation of successful CLM should help an organization to continually improve and accelerate its processes, and smooth out any kinks in the overall system, leading to a quicker initial contract cycle. Speeding up the process optimizes the time and value of each contract generated by the company.
- Enables Self-Service: With legal teams either shrinking or maintaining their size, lawyers are often tasked to do more with less, which can lead to a delay in generating a contract. CLM software enables business users to create new contracts through a self-service Q&A workflow to accelerate contract intake workflows. Since CLM leverages standardized templates with preapproved legal terms to generate contracts, the legal team is no longer a roadblock, but an enabler that allows anyone in the organization to create contracts.
- Integrations: A critical aspect of CLM software that highlights its key benefits is its ability to integrate with existing software that an organization uses in its day-to-day operations. Not only does system integration help eliminate manual data retrieval and entry, but it keeps contracts correct and up to date with automatic data exchange. Some popular integrations that CLM systems have are with Salesforce, Workday, Zapier, DocuSign and more, which ensure that legal teams can manage contracts without having to leave their CLM platform.
- Effective Risk & Compliance Management: With managing third-party data, having a system that ensures the security and privacy of that data is essential to any business. CLM offers improved capabilities for risk management and allows the business to quickly identify, access, understand and manage data for contracts. A huge advantage of CLM is that it helps businesses to stay abreast of any compliance policies or regulatory rules that might come up.
How does the contract creation process work with Checkbox?
Checkbox can serve as an all-in-one solution for all contract automation and contract lifecycle management needs through its no-code/low-code capabilities. Using workflow automation, legal teams can streamline contract generation, approvals, e-signature and contract obligations. Unlike CLM however, Checkbox’s platform has additional capabilities that extend beyond contract creation and elevate all services across the legal department by facilitating decision automation for stakeholder assignment, connection to other processes such as intake and triage and more. For example, Checkbox provides:
|Checkbox CLM Interface||Functionality|
Self Service Portal
Powerful Digital Forms
In-built Negotiation & Approval Workflows
In-built Analytics Dashboard
Data Reusability & Storage
Much like CLM software, Checkbox enables users to generate accurate documents consistently using standardized templates, eliminating the need to draft a new contract for every new request or agreement. Our platform also allows users to gain instant visibility into contracts and approval statuses, making it easy to stay up to date with automated alerts and enable data-driven decisions. Checkbox also serves a variety of different contract use cases across departments such as:
- NDA Contracts
- License Agreement Contracts
- Sales Agreement Contracts
- Financial Agreement Contracts
- Employee Agreement Contracts
Additionally, Checkbox not only provides no-code service automation for your contract needs, but also has the workflow automation capability in combining contracts with forms, decision automation, calculations, routing to other processes such as intake and triage and more.
Checkbox has more functionalities and capabilities than a CLM tool, it provides an all-in-one solution to workflow automation across an organization. While CLM is a point solution for contract management, Checkbox’s platform extends past contract management and helps build solutions for process improvement and automating manual work & service delivery.
How Checkbox and CLM Work Together
Not all legal work performed in legal departments is contract related, meaning that CLM cannot meet the need of all legal requests. For example, CLM cannot meet the need of legal intake and triage, and for this particular use case, it makes more sense to bring in an agnostic tool to meet the needs of the department. While CLM has many functionalities that suit the needs of contract lifecycle requirements, CLM tools tend to be weak when it comes to dash-boarding, data and analytics and workflows since they are designed to be a system of record. However, CLM and workflow tools can be used in tandem in a variety of scenarios to elevate an organization’s legal department.
How Smaller Legal Teams Can Use Checkbox
With the CLM market containing over 200 different providers, with more technologies still emerging in this space, it can be complex for smaller, early-stage legal teams to navigate. Instead, a lightweight version of CLM software, can easily be used to address the same primary benefits of improving efficiency, accelerating contract turnaround times and reducing administrative burden without the pressure of initial costs, long implementation times and change management. With workflow automation, the legal team can still perform the key functions of CLM like:
- Contract requests
Integrations with a Document Management System (DMS) can subsidize the other areas of CLM that a workflow tool cannot address like repository, renewals and amendments. DMS integrations like SharePoint, Google Drive or Box that are integrated with workflow tools complete the contract lifecycle without the need for CLM software, saving time and money for early-stage legal teams.
How Larger Legal Teams Can Use Both Checkbox and CLM
For larger, more mature legal teams that might already be implementing CLM software, it is imperative to address all the other legal requests that are not contract related. Since CLM only encapsulates contract-related requests, it only addresses about 60% of all legal work. According to Thomson Reuter’s 2022 Legal Department Operations Index, “using technology to simplify workflows and manual processes is a high priority for nearly 70% of corporate legal departments.” Combining the power of a platform like Checkbox and a CLM tool can be a significant help for legal teams. The biggest limitation with CLM is building dynamic workflows, like legal intake and triage. Checkbox can bridge that gap in both the contracting and non-contracting side, where a workflow tool like Checkbox can be used alongside CLM to accomplish much more than streamlining the contract lifecycle.
Having a tool like Checkbox can complement CLM or other software in an organization’s existing tech stack. CLM and a platform like Checkbox can work well together and help streamline legal teams’ work even further.
Frequently Asked Questions
What is a contract lifecycle management system?
A contract lifecycle management (CLM) system is a type of software that is often used by legal teams and other business users to help streamline the contract generation process. These systems are typically cloud-based, making it easy for users to retrieve archived contracts from a centralized repository. Additionally, these systems also have full-feature analytics capabilities that provide users insights on valuable contract data.
Why is CLM important?
CLM software helps to minimize contract risks, ensure organization-wide compliance, contract auditing and keeps contract generation organized from beginning to end. Poorly managed contracts, from enterprises to small businesses, lead to negative consequences that translate to a poor reputation and lower profits for an organization.
What are the stages of the contracting life cycle?
The stages of the contracting life cycle include: • Stage One: Contract intake • Stage Two: Document Generation • Stage Three: Contract negotiation & redlining • Stage Four: Contract approval • Stage Five: Contract signature & e-signatures • Stage Six: Contract Reporting & Analytics