The key to cost-effective collaboration within an enterprise is efficient contract management (CM).

Here are Procurement magazine’s best practices, to use to build up a durable contract lifecycle management practice:

10. Harness contract intelligence

In a study by the National Contract Management Association (NCMA), 54% of those questioned admitted they struggled to access specific terms and clauses, without wasting time sorting through their contract portfolio. 

CLM software offers a useful solution to this, with in-depth contract analytics to transform contract data into actionable insights through AI-powered extraction.

9. Create a contract repository 

Normally, once contracts are signed, they are saved in IT systems which usually comprise an enterprise tech stack, which can make it difficult to manage or interrogate for insights.

This can increase costs, cause business disruptions and even third-party breachess.

By migrating the contract portfolio onto a centralised, cloud-based contract repository, users can access contracts anytime-anywhere.

8. Automate the legal review process

AI-powered solutions will reduce manual contract review effort by up to 50% in 2024, according to Gartner.

However, businesses can leverage artificial intelligence today through the implementation of contract lifecycle management software to improve productivity within their legal department, limit the need for manual corrections and expedite the contract review and redlining process.

7. Establish contract management KPIs

Defining KPIs and tracking them with the right CLM tool will help businesses take the required action to make sure the effectiveness of their contract management programme is safeguarded.

Things to consider here include, among others, contract initiation, creation cycle times and of course, process compliance.

6. Configure contract approval workflows

During the execution phase, drafted contracts must be evaluated and approved by multiple stakeholders. This process can be delayed by unnecessary back-and-forth emails and even errors.

Businesses can simplify the contract approval process, by relying on one digital contracting workspace to maintain a track of approvals, changes, and sign-offs.

5.Standardise the contract creation process

Contracts are usually created in silos by discrete business units without any insights into existing contractual relationships or risk factors. Because of this, enterprises are likely to face major problems later on. 

A contract management solution can simplify this, by helping enterprises create and implement a library of templates and standard clauses. 

4. Enable better collaboration

Collaboration is essential in an effective contract management process, but collaboration with the counterparty is equally as important for relationship management. Businesses must ensure the intended business outcomes of the contract are realised.

Next-gen CLM platforms can help businesses to break functional silos and bring all stakeholders together on a single platform. 

3. Holistic & integrated risk management

In today’s uncertain environment, a holistic approach to risk management can address all sources of enterprise risk in commercial engagements.

Next-gen contract management software offers to help enterprises manage different kinds of risk. For example, using AI to find missing clauses and clause deviations in contracts can reduce exposure​ from non-compliant contracting.

2. Conduct regular performance and compliance audits

Setting up best-in-class contract management processes will not have the desired impact unless businesses ensure compliance. 

During the contract creation phase, contract managers need to ensure compliance of the approved process. After signing, they must ensure the delivered performance is as per the obligations and service levels agreed in the contract.

Contract management systems can simplify the process, by enabling businesses to align their performance to what’s promised in the contract by measuring compliance to contractual obligations.

1. Optimise vendor and supplier management

Effective vendor management is essential to building long-standing relationships with both suppliers and customers. This helps to achieve business goals and also minimise the risk of supply chain disruption and revenue disruption on the sell-side.

Contract management is a useful tool to align commercial relationships and outcomes to the contract. CLM platforms provide supplier management functionality which allows them to monitor supplier performance.