The 5 Stages of the Contract Management Process—and How to Master Each One
From drafting to signing, contracts navigate a predictable path through nearly every organization. However, without a clear understanding of the contract lifecycle management (CLM) process, many businesses have trouble identifying areas in their internal processes that can be improved—where time can be saved, errors avoided, and revenue captured.
Here is everything you need to know about the five stages of the contract management process, so that your organization can build an end-to-end contract management solution that drives enterprise-wide productivity.
The 5 Stages of the Contract Management Process
Needlessly complex or outdated document management processes are often a major source of productivity loss—which means your contracts are one of the first places you should look when searching for ways to promote efficiency within your organization.
But, like dealing with a car that refuses to start, you can’t effectively fine-tune your contract management process without first checking under the hood—which requires a certain familiarity with the mechanisms that keep the engine running.
Stage 1. Document generation
Contract generation is often a hands-on, time-consuming step in the contract management process, but it doesn’t have to be this way.
Legacy manual and paper-based drafting practices require strict oversight and frequent rewrites due to inefficiencies and inaccuracies introduced by the manual transfer of data (customer names, pricing information, contract values). In fact, approximately 62% of all organizations say errors—resulting from manual data transfers during the preparation stage of the agreement process—create significant issues for their business.
As your organization scales and your industry evolves, complex internal workflows (and possibly new regulations) will only add to the problems introduced by manual document generation processes. Digital document generation accelerates time to creation and eliminates errors.
Templated contracts and clause libraries also save businesses precious hours during the drafting stage and help generate documents with consistent language that can be easily replicated. For instance, the most productive enterprise sales teams use configure price quote (CPQ) software to automate critical administrative procedures in the quote-to-cash process—so their teams spend less time preparing contracts and more time closing deals.
Stage 2. Routing and negotiation
After you're done with an agreement's initial preparation, where does it go—and how does it get there? Routing and negotiation is where many contracts spend a significant portion of their life. Fortunately, there are easy ways to simplify even the most complex contract management workflows.
CLM improves your ability to track contracts by creating standardized pathways and providing 365-degree visibility for your contracts. As a result, it’s easy to track down contracts or identify the biggest pain points in your routing process.
Automating the routing process also improves contract security and quality. Rather than manually passing or emailing documents between sales and legal departments, an enterprise CLM solution streamlines every document’s journey and produces a secure, digital audit trail—giving your team precise control over the contract management process.
Stage 3. Document signing
From a time expenditure standpoint, document signing accounts for a small sliver of document management—but it’s arguably the most important step. The legality of every contract depends on a secure, verifiable signature.
For centuries, pen-to-paper signatures served as the sole document-signing solution. Today, since business is regularly conducted online, requiring manual signatures can create major bottlenecks in the contract management process. The introduction of the electronic signature, however, has made it easy to sign documents from anywhere in the world in an instant—creating a quick and seamless document management experience for both you and your counterparties.
In addition to simplifying and fast-tracking the document management process, electronic signatures add an extra layer of security and accuracy to every contract. Like document tracking—electronic signatures produce a court-admissible, digital audit trail that makes it easy to verify the identity and participation of all signees.
Stage 4. Integration with Systems of Record
From NDAs to one-page consent forms, contracts are continuously flowing through every organization. As a result, manually generating, negotiating and acting on contracts can easily drain the resources of your contract management professionals.
A crucial step in every successful contract management process requires integrating your CLM solution with your other systems of record. Automatically pre-fill contracts with information from existing data sources (like contact info or product pricing), and reduce the number of unnecessary administrative tasks that weigh your organization down.
An integrated CLM solution also makes it easier to act on completed agreements. For instance, an e-signature sent to HR from a new hire may automatically trigger the next step in the onboarding process—sharing materials like tax documents or training resources.
Stage 5. Search and analysis
After a contract is signed, the final stage in the contract management process involves storing it in a centralized, searchable location—where it can be easily accessed.
Existing contracts are one of your organization’s most important assets—but they can also be your greatest sources of risk. As a result, it’s important to keep close tabs on completed contracts. If your contracts are tied up in unsearchable PDFs, analyzing and amending your existing contracts as industry regulations evolve is next to impossible.
For instance, as businesses operating within the United Kingdom deal with the impact of Brexit on the agreement process, trillions of dollars worth of contracts will need renegotiating. Without the right system for searching and analyzing existing documents, identifying contracts that mention things like GDPR regulations, currency changes, or international trade laws will create a significant logistical problem for your organization.
Fortunately, modern CLM solutions have features like contract analytics and artificial intelligence (AI) to help instantly identify and mitigate potential risks that are embedded in the language of existing agreements.
The path to optimizing the contract management process
Developing a clear picture of the end-to-end contract management process is the first step toward building a more efficient practice. Once you articulate the specifics of each stage within your organization, you can speed toward implementing real change and eliminating pain points.
DocuSign CLM delivers an end-to-end document management solution that automates manual tasks, streamlines complex workflows and reduces risks at every stage of the contract management process. Learn more about DocuSign CLM today.