Contract Management

What Is CLM? The Ultimate Guide to Contract Lifecycle Management

Let’s start with the basics. Contract lifecycle management (CLM) allows organizations to detect and reduce costly inefficiencies in their operations. Contracts are more than the terms that define your connections with suppliers and other businesses — contracts align your daily operations with vendors and other partners in ways that profoundly impact how you plan for the future. Their importance can’t really be overstated.

But what is CLM, and how can it help your company? Below, we define contract lifecycle management, explain why it matters, and discuss the problems it helps you resolve.

What Is Contract Lifecycle Management?

A contract lifecycle management system is a modernization of the series of processes involved in negotiating, drafting, maintaining, and abiding by contracts. We say “modernization,” because a lot of contract management strategy is archaic at best (and ineffective at worst.) CLM uses specialized software on a single platform to automate and streamline these processes.

CLMs facilitate the entire process of document origination, generation, processing, signing, and archiving. In addition, they connect the terms of a contract into rich data that can be used for analytics, alerts, and preparations for renewals.

Processes can be automated to ensure greater efficiency in contract creation and compliance, saving both time and money.

Why Is Contract Lifecycle Management Important?

Efficiency is a core requirement for any successful business. CLM platforms save on resources, capital, and time, but also allow you to connect your contract terms to the fundamentals of your business in the following ways:

Centralized Data

CLM brings every term of an agreement together into a single, secure repository. Every party has equal and immediate access to the terms of their agreements, making it easy to view, track, and create alerts to assist compliance.


With a CLM platform, you know everyone has the clarity they need to uphold their promises — and they can be easily held accountable when this doesn’t happen. 


Terms and conditions can be easily automated so legal departments don’t have to repeatedly originate the same data. 

What Are the 3 Main Stages of CLM?

CLM involves streamlining multiple stages of planning, negotiations, drafting, and synchronizing data. The following are the three main stages of CLM:

  1. Pre-Contract

    At the start of the contract lifecycle is a contract request. A party initiates the request to come to an agreement over business terms. This preparatory phase of CLM includes:

    • Request and Intake

    Requesting a contract requires gathering all the necessary details, such as obligations and commitments, dates for delivery, and terms for renewal and termination.

    • Creation and Drafting

    With all terms agreed upon, the contract can be carefully drafted. Authoring the contract’s first draft places the proper legal format and terminology into final wording for approval.

    • Negotiation, Collaboration, and Approval

    With a proper contract drafted, all parties agree to terms, collaborate on alterations to be made, and negotiate for preferred conditions. A final draft can now be approved.

  2. Contract Execution

    Now things are starting to really take shape. With all contract terms agreed upon, it’s time for all parties to sign the contract so it can be executed and placed into effect. Parties can sign by hand or electronically using eSignatures.

    • Storage and Retrieval

    Each party stores their contract data while maintaining direct access to the terms they are responsible for upholding.

    • Synchronization and Analysis

    CLM contract execution includes linking responsibilities to business databases, managing actions and terms, and reviewing resulting analytics.

  3. Post-Contract

    The remaining phase of CLM involves the ongoing business practices resulting from the contractual agreement, through to the conclusion of the contract. Think of it like regular car maintenance to ensure the engine keeps running smoothly. 

    • Obligations and Commitments

    Obligations and commitments are upheld and tracked. Parties can provide reports and request audits to verify terms are being met. 

    • Contract Auditing

    CLM digital storage provides easy access for audits. Auditing can be an ongoing process to make sure all parties are conducting business according to the terms of the contract.

    • Contract Reporting

    Reporting on the terms of a contract is a valuable part of the CLM’s feature set. Parties can track performance and evaluate the resulting metrics. (If you’re not sure what those metrics should look like, check out our eBook on that very subject.) 

    • Contract Renewal and Expiration

    The CLM will alert stakeholders when it’s time for parties to consider a contract renewal — along with any negotiations, changes, or amendments — so a new contract can be approved.

Benefits of Contract Lifecycle Management

Before CLM platforms existed, the process took months, was much more costly, and needed even more resources to verify each party was living up to their respective responsibilities. Overall, it was a headache for everyone involved. With CLM, every organization benefits from:

Improved Compliance

The robust features of a central CLM platform enable each organization’s legal counsel to connect to every department. This means everyone understands their roles and responsibilities in an agreement. 

Enhanced Visibility, Security, and Control

Contracts are visible to all parties — without compromising data security. Important goals, terms, and responsibilities can be searched, easily identified, and attached to alerts. Parties can directly align their business intelligence to their agreements with others, and every user has their dashboard to quickly navigate the data.

Centralized Data

With a CLM solution in place, siloed departments of organizations all have the same access to data. This means compartmentalized workers are equally aware of their roles and responsibilities, even when direct teamwork/communication is lacking within departments.

Better Analytics

Everyone’s roles in a contract can be connected directly to other metrics platforms, providing data that organizations can use to make accurate projections (and even identify the best terms for future contracts).

Richer Data

Users can receive notifications for milestones and dates for supplier contract events, and validate every contractual term is being managed and fulfilled.

Using cloud-based CLM platforms like Terzo means you can:

  • Instantly search any part of your contract

  • Centralize important data for siloed departments

  • Mitigate the risk of violating contract terms

  • Automate and track renewals

  • Analyze spend from different systems like finance, enterprise resource planning (ERP), and procurement platforms

  • Identify wasted spending 

Common Challenges Without Contract Lifecycle Management

Without a CLM platform, parties are left to their own methods to design, discuss, and draft the terms of their agreements. Below are just a few of the challenges CLMs overcome:

Poor Contract Visibility

Contracts can involve numerous terms and obligations, so it’s important that every party is clear on their roles and can retrieve any relevant data point at any time. Otherwise, contracts simply cannot be trusted.

Inefficient Processes

Without a centralized platform, contract stages are slow, requiring inconvenient communication in person, by phone, and by email — often taking months to finalize. Most organizations just don’t have that kind of time to waste.

Lack of Standardization

Without a CLM platform, contract terms have to be established from scratch. There are no templates and no predetermined standards to use — so things get missed easily, and contracts end up being drafted suboptimally.

Inadequate Technology Infrastructure

CLMs overcome the need to use dozens, if not hundreds, of independent software platforms to pull together the features required in today’s complex business agreements. 

Improper Balance Between Speed and Control

Businesses can’t operate without agreements between workers, suppliers, and other connected roles. Similarly, speed is meaningless if documents are riddled with errors or invalid terms.

Inability to Make Revisions

Without shared, centralized data, it is just as slow and costly to make amendments and change contract terms as it was to originate them. If revisions are being made time and time again, that’s a pretty good sign that the current contract management process isn’t working.

6 Best Practices for Contract Lifecycle Management

You know the importance of CLM, but what can you do to ensure your organization deploys a strategy or CLM platform correctly? The following are six of the more important best practices to follow in the CLM process:

  1. Develop a Standardized Contracting Process

    CLMs can provide standardized, pre-approved terms and language for contracts through templates and saved qualifications. This saves time and ensures that nothing gets overlooked in the negotiation phase.

  2. Leverage Technology Solutions

    Modern CLM solutions allow you to improve efficiency at every stage while increasing visibility, accessibility, and search functionality with every detail of your contracts. 

  3. Establish Clear Roles and Responsibilities

    Every party knows their responsibilities and obligations provided directly in their dashboard.

  4. Monitor and Evaluate Contract Adherence

    Track results and better communicate expectations using alerts and other features your CLM provides.

  5. Use Key Performance Indicators (KPIs)

    Leverage KPIs to make use of your ability to track metrics that are connected to fulfilling the terms of your contract. Your CLM software doesn’t just manage the terms of your contract — it allows you to connect the functions of your business to those same conditions. You can learn to optimize processes and project more accurate future outcomes with KPIs.

  6. Automate and Centralize Contract Communications

    You no longer need to facilitate some discussions via email while managing others in spreadsheets (huzzah). Track every activity inside your CLM platform, including eSignatures.

Final Thoughts

Armed with the knowledge of what CLM is, you can see why it’s necessary for bringing together the complex operational agreements between multiple organizations. CLM platforms like those we offer at Terzo optimize every stage of your contractual needs for better compliance, security, and metrics.

Why Terzo? 

Remove the limitations of siloed data between departments. Our CLM platform gives you instant access to all of your contract’s finer details — so all of your daily operations remain connected to your contract terms, obligations, and expectations.

Terzo’s CLM 2.0 platform helps you:

  • Import data from storage like Sharepoint or direct document uploads

  • Track compliance standards and reduce risk

  • Increase productivity

  • Discover cost savings

  • Utilize inventory intelligence

  • Forecast commitments and budget requirements

With Terzo’s Supplier 360°, you can visualize how your business connects to every stakeholder and every aspect of your internal operations. View your historical data, prioritize contract terms and renewals, and turn all of your vendor data into actionable intelligence — all in one place. 

Get in touch with Terzo to learn how we can optimize your contracts today!

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