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Contract management lifecycle (CLM) software organizes the complex and detailed contractual negotiation process between buyers and suppliers. These solutions typically manage the entire lifecycle of contracts, from initial request for proposal (RFP) to eventual re-negotiations. Gaining full control of the contractual process allows users to not only reduce supplier risk, but also gain increased insight into contracts—creating strategic negotiation opportunities and improved cash flow.
These software systems range from applications that exclusively manage vendor contracts to robust suites that also include sourcing, bidding and procurement functionality. Many of these solutions often integrate with other supply chain, accounting and enterprise resourcing planning (ERP) systems.
By automating and simplifying contract acquisition and maintenance, users can ensure consistent contractual language, regularly maintained buy-cycles and sound financial planning. Users can also take advantage of notification systems that help identify opportunities to improve contract alignment. The result is a smoother acquisition process, higher supplier retention and reduced contractual risk that can lead to better cash managing practices.
Specific features of CLM solutions include the following:
|Compliance assurance||Automation assures users that contractual negotiations meet compliance regulations. Additional company and industry-specific compliance protocols can be added as necessary.|
|Contract creation and automation||These systems often include new contract templates that can easily be exported to Microsoft Word or other document programs. Additionally, future contracts can be automatically generated and flow through the user’s pre-defined workflow.|
|Approval management||The approval process goes through many hands. These solutions enable the next-in-line to receive automated notifications that the contract is ready for their approval—speeding up the process greatly.|
|Notifications and alerts||These systems allow users to construct both broad and long-tail notification parameters for renewal dates, expiration dates and other renegotiation opportunities. Alerts can be delivered within the system or sent directly to users’ email accounts.|
|Ad-hoc reporting||Reporting features allow users to find additional opportunities to improve contractual terms. Reports can be generated based on search queries or specific contracts.|
|Accounting and ERP integration||Oftentimes, these systems integrate directly with accounting and ERP solutions to keep cash flow data accurate, as well as aid in financial forecasting.|
Analyst firms have consistently found that streamlined CLM is a best practice of companies looking to reduce supplier risk. Regulation of the contract lifecycle allows users to gain increased visibility and reduce this risk, as well as discover contract improvement opportunities.
When evaluating CLM systems, these questions can help determine if the solution fits your needs:
CLM software is generally available in two separate deployment models, which tend to have different pricing structures:
Web-based. Web-based CLM software is hosted on the vendor’s servers and is typically priced as a “Software-as-a-Service” (SaaS) model, meaning that users pay a monthly or annual subscription fee that is generally based on the number of users.
On-premise. On-premise CLM software is hosted on the user’s own servers. On-premise deployment costs a flat, upfront fee to use the software indefinitely, though there may be recurring support and maintenance fees involved on an annual basis. The upfront fee is also generally based on the number of users on the system.
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