There are many steps that businesses have to go through when creating and executing contracts. From negotiating key elements to finalization and renewal, contract management is a central part of dealing with clients, employees, and partners.
10 Important Contract Management Terms
Understanding contract management is essential for businesses of all sizes. Successfully managing contracts means understanding important words and phrases associated with specific terms, conditions, and obligations. There are many important terms associated with contract management that will help business leaders when dealing with their stipulated obligations:
CLM stands for Contract Lifecycle Management and refers to the people, process, and technology that take a contract from initiation and authoring all the way through to e-signature and managing contract deliverables. When managing contracts, each stage of the lifecycle should be carried out according to specific predetermined criteria. With the right CLM software solution organizations can empower teams to effectively and seamlessly manage their contracts from start to finish.
A playbook, as I defined previously, is a document or set of documents that outlines a company’s standard contractual terms, what each one means, and what fallback clauses can be used in the event that your counter-party pushes back against one of the standard terms. It can also include the definition of deal breakers for the company, like which terms or conditions a company simply cannot accept due to strategic, economic, or a combination of the two reasons.
Organizations that want to make sure their contracts stay on track can create a playbook as a centralized source of information and guidance. A contract playbook offers a practical tool for improving negotiations and ensuring all points of the agreement are actualized without delay. It also ensures that future team members have access to these documented plans and strategies, avoiding the issue of such information exiting the company when a team member leaves.
3. Clause library
It is important to avoid introducing vague language that can create risk in a deal or contract. Ambiguous and unfavorable language – often done totally accidentally – can have far-reaching consequences.
A clause library provides pre-established legal language that can be used to create robust contracts with clearly defined expectations for everyone involved. The clause library simplifies and expedites the contract creation and approval process, while mitigating compliance risk from rogue contract terms.
4. E-Signature (E-SIGN)
Traditionally, getting all parties together to physically sign a contract took considerable time and energy for all parties. This requirement could limit the potential for large-scale operations and leave smaller businesses unable to build strong partnerships.
The availability of e-signatures changed all that, eliminating the need for printing, scanning, and resending wet-signature contracts. Contract management provides digital documents that can be accessed remotely by authorized users. This setup makes it easier than ever to execute contracts. Read more here.
5. Artificial Intelligence (AI)
As contracts become more complex or increase in volume, it can become difficult for legal professionals to make informed decisions and build strategies that work for them. And since Legal is often told to do more with less, the growing number of contracts can be an issue. That's where AI comes in!
The most mature contract management tools provide AI functionality for real-time analysis of important data. By surfacing vital information in the contract lifecycle, AI makes it easier for decision-makers to assess risk, allocate responsibilities, speed up negotiations, and so much more.
6. Third-Party Paper
Third-party paper are legal agreements that have been defined by parties outside of your company. In other words, the contract comes to you using your counter-party's template. These agreements may contain terms and conditions that are non-preferred, which can open up areas of contract risk for your organization if not properly managed.
A CLM solution makes third-party paper easier for businesses to intake contracts and review their terms. This is essential for any team using third-party paper, such as Procurement, who wants to refine their contract negotiations and mitigate unnecessary risk and expense.
Businesses need to be aware of how well their contracts are performing and the ways they may be a drain on organizational resources. By looking at key performance indicators (KPIs), decision-makers can track goals and drive progress to ensure the success of their contracts throughout their lifecycle.
Important data points such as operating costs, sales targets, return on investment, and gross margins help businesses reinforce their contract obligations, as well as those of their partners.
8. User Adoption
One of the most essential metrics when tracking KPIs is the amount of user adoption that has been generated. Within contract management, user adoption is an essential metric that gives decision-makers insight into the level of success for the CLM solution. This insight is essential when deciding whether to continue with the existing solution or find a new one.
9. Contract Automation
A slow sales cycle can prevent a business from reaching its sales targets for that month or quarter, impacting time to revenue. When agreeing to contracts, businesses need to keep track of a variety of important pieces of information, individuals, and documents. By automating these tasks, sales teams can free up time and energy, so they can reach their sales targets more easily. This automation can be done through workflows and/or using AI.
10. Change MANAGEMENT
Businesses that are unable to innovate and find new revenue streams are less effective at challenging their competition. For business users, it is critical to manage change and encourage the adoption of new technologies, resources, and ecosystems. Change management ensures successful project outcomes with lower implementation costs and improved employee workflows.
Malbek Knows CLM
The process of looking at comparative data associated with contracts, defining the stipulations of the agreement, and carrying out actions to deliver on stated terms can be frustrating. That’s why, at Malbek, we offer clients better contract lifecycle management and support.
With Malbek’s streamlined contract lifecycle management, leaders and working professionals can maximize the potential of their workloads and ensure legal compliance is maintained. Request a demo today!