What is Contract Lifecycle Management? A Comprehensive Guide for Legal Teams

Contracts are the foundation of business relationships. However, it’s not unusual for organizations to manage hundreds or thousands of contracts across different departments and geographies. From onboarding a food vendor for the office cafeteria to a costly tool procurement, contracts are everywhere. Yet, for many companies, contracts are rushed and are visited only when a crisis strikes.

Remember how Carillion, the construction and facilities management giant, collapsed after years of taking on poorly managed, underpriced public contracts? Carillion’s weak contract oversight led to massive cost overruns, delays, and unaccounted liabilities, ultimately causing insolvency and leaving the UK government, hospitals, schools, and suppliers exposed to billions in losses.

However, Carillion could have avoided such costly disputes by managing its contracts better. And it’s not just a one-off case. Companies worldwide can mitigate the risk of contract oversight and the subsequent losses caused by poor contract management by having a system in place to manage their contracts more effectively.

This is where a contract lifecycle management system (CLM) comes into action. A contract lifecycle management system enables more proactive contract management and helps avoid costly disputes.

What is contract management lifecycle?

The contract management lifecycle is a process that underlies contracting at every organization. It offers a structured framework to streamline and automate contract management at every stage, from contract drafting to compliance management.

Different stages of contract management lifecycle and the role of each stage

Contract lifecycle management typically involves six stages. Each stage needs careful consideration to ensure obligations are met and risks are minimized. Let’s take a look at the step-by-step breakdown of the flow.

1. Contract authoring

The first stage of contract lifecycle management is contract authoring, where team members identify the requirements of a contract and raise a request to create one.

It can either happen through the company’s legal ticketing system, where any department can put in a request for the legal team to draft the contract.

Contract authoring can also occur as a self-serve process, where team members fill in the key details in a pre-approved template.

2. Negotiation and collaboration

Once the initial draft is made, internal teams review and negotiate the terms of the contract. As the contract goes through multiple rounds of iterations, each change has to be tracked carefully. Legal team collaborates to ensure no ‘problematic’ clause or vague commitments are made that can cause problems later.

“Once we came up with fallback positions and enabled sellers with them, the number of contracts coming to legal for negotiation reduced further. Obviously, we were very, very careful about what changes the sellers were allowed to make, and anything beyond that still comes to us.”

— Sue So, Head of Legal, Hopin

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3. Approval and execution

The contract then moves up the ladder and goes through the final round of approval and execution. The legal team, finance, and leadership team come into play depending on the complexity of the contract and the company policy. Once the contract is approved by all the stakeholders, it needs to be signed. With eSignature tools, this process can be faster.

4. Storage and retrieval

After execution, contracts must be securely stored in a centralized repository. A centralized storage facility makes the retrieval of required documents quick and ensures that stakeholders can easily find the right version when needed. A searchable archive also supports audits and helps maintain compliance.

5. Compliance and performance monitoring

Signing a contract is not the end of it. Teams need to monitor if both sides are fulfilling their responsibilities. Regular monitoring ensures compliance with terms, deadlines, and legal and regulatory compliance requirements. Performance tracking also helps identify vendors or partners who consistently underdeliver.

6. Renewal/termination

Finally, contracts reach their renewal or termination stage. Automated reminders help ensure renewals aren’t missed, avoiding revenue loss or service interruptions. If a contract needs to be terminated, a structured process ensures obligations are closed out and risks are minimized.

Key challenges to contract lifecycle management and how to overcome them with AI

Managing contracts across departments and geographies can often be challenging. Legal teams may find themselves juggling high volumes of requests, endless revisions, and compliance requirements. This makes contract lifecycle management (CLM) prone to inefficiencies and requires a lot of resources.

However, AI-powered CLM tools are changing the game by automating repetitive tasks, offering real-time visibility, and reducing risks. Let’s look at some common challenges in contract management and how AI can help solve them.

“I'm a strong supporter of AI. Although AI still needs human oversight, one way or another, it brings great efficiency and productivity that we didn’t have back in the day when, for example, we were doing a lot of mundane tasks or processes.”

—Mine Ekim, Managing Director, Legal & Compliance, Golden Gate Global

High legal costs

Manual contract review consumes significant legal resources, especially when lawyers must read through lengthy documents to spot risks. The result? Legal costs spiral as teams spend hours on repetitive tasks.

AI reduces this burden by flagging problematic clauses instantly. Machine learning models are trained to detect risky terms, non-standard language, or deviations from playbooks. Instead of scanning entire contracts, legal teams can focus on clauses that truly need their expertise. This saves time and lowers external counsel spend.

Poor visibility

Many organizations still store contracts in shared drives or email inboxes. So it becomes difficult for teams to locate the latest version of a document. Lack of visibility increases the chances of missed deadlines, forgotten obligations, or duplicated work.

AI-driven CLM platforms provide a centralized, searchable repository. Every contract is tagged, indexed, and easy to retrieve. Smart search functions help teams locate specific clauses or obligations in seconds. It ensures no contract falls through the cracks.

Slow process

Without automation, contracts can get stuck in back-and-forth cycles between business units and legal. Manual reviews, physical signatures, and lengthy approvals all delay execution, affecting deal velocity.

AI speeds up these workflows by automating contract routing and approvals. For example, simple vendor agreements can be auto-approved based on predefined rules, while more complex contracts are escalated to legal. Built-in eSignature integrations further streamline execution, ensuring contracts move quickly from draft to signed.

No standardization

When every department drafts contracts differently, inconsistencies creep in. Non-standard language not only creates confusion but also exposes the company to compliance and liability risks.

AI-powered CLM platforms promote standardization through pre-approved templates and clause libraries. Business teams can self-serve routine contracts using these templates, while legal retains control over high-risk agreements. This ensures consistency without overwhelming the legal function.

Lack of insights

Most organizations struggle to extract insights from their contract data. Questions like “How many contracts are up for renewal next quarter?” or “Which clauses cause the most negotiation delays?” often go unanswered.

AI solves this by offering real-time dashboards and analytics. These dashboards track key metrics such as cycle time, renewal rates, and risk exposure. Legal teams gain actionable insights to improve negotiation strategies, optimise workloads, and demonstrate their value to the business.

What to look for in your contract lifecycle management software?

Not every contract lifecycle management solution is created equal. The right tool should reduce manual effort, improve compliance, and give your legal team more control over contracts. When evaluating CLM software, here are the must-have features you should look for:

Template library

With a strong template library, one can ensure contracts are consistent, compliant, and quick to draft. Pre-approved templates and clause libraries allow business teams to self-serve standard agreements without waiting for legal. This reduces turnaround time and keeps contracts aligned with organizational policies.

“The absence of contract templates leads to non-standardisation and makes contracts prone to errors. The legal team, therefore, is required to delve deep into contracts and proofread all clauses with a fine-tooth comb to identify and rectify the simplest of human errors.”

~Igor Poroger, Director of Legal, EMEA, Vectra AI

Risk analysis module

A risk analysis module helps identify and flag risky language, missing clauses, or deviations from playbooks. Instead of manually combing through every agreement, legal teams get instant alerts on terms that could create liabilities. This keeps risk under control and reduces costly surprises down the road.

eSignatures

Modern legal and regulatory compliance demands speed. eSignature capabilities make it easy to sign and execute contracts digitally, from anywhere. This not only enhances the speed of deal closures but also eliminates the delays of physical paperwork. A good CLM tool integrates with trusted eSignature providers to ensure security and compliance.

Secure storage

Contracts hold sensitive business information and must be stored securely. Therefore, a centralized, encrypted repository is essential to ensure documents are safe, organized, and easy to retrieve when needed. With role-based access, only the right people can view or edit specific contracts, reducing the risk of data breaches.

Contract analytics

Contracts are a goldmine of insights. Advanced analytics give you visibility into contract performance, renewal timelines, and bottlenecks in the approval process. Dashboards make it easier to track obligations and measure KPIs, helping legal teams demonstrate their impact on business outcomes.

Easy integration

Contract lifecycle management software should fit seamlessly into your existing tech stack. Look for solutions that integrate with tools like Salesforce, Slack, DocuSign, or Microsoft 365. Smooth integrations reduce context switching, ensure data flows across systems, and keep contracting workflows efficient.

“Leveraging a CLM has been key because it has reduced a lot of friction from handoffs between legal and business. Rather than going back and forth over email, Slack, Word, Zoom, DocuSign, and a whole tech stack, the CLM acts as a single source of truth.”

~ Jonathan Franz, Head of Legal, Crunchbase

Key metrics to understand for contract lifecycle management

To understand contract lifecycle management, you need to measure how well contracts perform at each stage. Metrics help legal teams and business leaders spot delays, risks, and areas to improve. By tracking the correct numbers, you can ensure compliance, speed up deals, and keep contracts aligned with business goals.

Here are the key metrics every legal team should track in their contract lifecycle:

Contract cycle time

This metric measures how long it takes for a contract to move from initiation to execution. A shorter cycle time means contracts are being reviewed, negotiated, and signed faster. Tracking this helps you identify where delays happen, like in legal review, stakeholder approval, or negotiation rounds.

Contract value

Contract value measures the financial worth of each agreement. Monitoring this metric ensures high-value contracts get the right level of legal oversight and risk management. It also gives leadership a clear picture of revenue streams tied to contractual obligations.

Contract renewal rate

Renewal rate tracks the percentage of contracts successfully renewed before expiration. A high renewal rate shows that relationships with vendors, customers, or partners are strong. On the other hand, low renewal rates may indicate pricing issues, service concerns, or missed deadlines.

Contract dispute resolution time

When disputes arise, the time it takes to resolve them can have a major financial and reputational impact. Tracking dispute resolution time helps teams understand the effectiveness of negotiation strategies, escalation processes, and overall contract quality.

Contract termination rate

It indicates the number of contracts terminated before their natural end date. A high termination rate can signal deeper issues such as unclear terms, misaligned expectations, or poor vendor performance. Legal teams can use this data to strengthen future agreements.

Contract compliance rate

The compliance rate shows how well contracts adhere to legal and regulatory compliance requirements and internal policies. A strong compliance rate means fewer risks, penalties, and liabilities. Automated CLM systems make compliance tracking easier by alerting teams to missed obligations or regulatory changes.

Why every legal team should use a contract lifecycle management tool

Contracts sit at the core of business operations, but without the right system, they create risks, delays, and compliance gaps. A contract lifecycle management tool streamlines the entire contract lifecycle and helps legal teams work smarter.

“Although a CLM solution might seem costly in the early stages, companies should have it in place and build workflows within the tool to process contracts better. By doing so, they can keep legal costs low in the growth stages and close deals faster. Moreover, they will have clear visibility into the contract pipeline and use their legal resources to optimise workflows better for yielding maximum results.”

— Igor Poroger, the Director of Legal (EMEA) at Vectra AI

Better risk mitigation and adhering to compliance

CLM tools enforce legal and regulatory compliance by flagging risky language, tracking obligations, and using standardized templates. This minimizes errors and protects organizations from penalties or disputes.

Improved efficiency and productivity

By automating drafting, approvals, and renewals, CLM software reduces manual work. This shortens cycle times and frees legal teams to focus on strategic tasks instead of routine admin.

Better control and visibility

A centralized repository gives legal teams instant access to contract data. Dashboards make it easy to track renewal dates, total contract value, and obligations in real time.

Collaboration

CLM solutions enable seamless collaboration across legal, sales, finance, and procurement. It allows everyone to work on a single version, reducing confusion and back-and-forth.

“Another problem we face in contract management is version control - different departments may be using old templates and rolling contracts out manually. We want to implement a CLM solution to have better visibility into our contract pipeline, especially when our business is scaling in different countries.”

• Juliette Thirsk, the Head of Legal at Peach Payments

Cost-saving

Faster cycles, fewer disputes, and lower legal spend translate into clear cost savings. A strong CLM tool pays for itself by preventing revenue leakage and optimizing contract performance.

Implementing contract lifecycle management software: A step-by-step guide

Rolling out a contract lifecycle management tool doesn’t have to be overwhelming. A structured approach ensures smooth adoption and measurable results.

Analyze your present process

Start by mapping your current contract lifecycle to see how contracts are drafted, reviewed, and stored.

Identify the pain points

Identify problem areas, such as delays in approvals, missed legal and regulatory compliance requirements, or lost revenue due to poor contract tracking. These are the issues your CLM tool should be designed to solve.

Assign roles and responsibilities

Clearly define who is responsible for drafting, approving, storing, and monitoring contracts. Having clear ownership prevents duplication and ensures accountability at every stage.

Choose the right CLM

Select a tool that fits your organization’s needs. Look for features like a template library, secure storage, analytics, and easy integrations with your existing systems.

Automate workflows

Use automation to remove manual steps. For example, auto-route contracts for approval, set reminders for renewals, and track compliance obligations without human intervention.

Invest in adoption

Even the best CLM tool won’t deliver results if teams don’t use it. So arrange training sessions, enable self-serve contracting, and encourage collaboration across departments.

Monitor performance

Track key metrics like contract cycle time, renewal rates, and compliance levels. Regular monitoring ensures your CLM continues to deliver value and highlights areas for improvement.

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Best practices to follow in contract lifecycle management

A successful contract lifecycle management strategy requires more than just the right software. Following best practices ensures long-term success and stronger compliance.

Have a plan

Define clear goals for your CLM before starting. Decide what you want to improve, like faster cycle times, better compliance, or reduced costs, and plan accordingly.

Shortlist the best CLM provider.

Evaluate multiple providers based on features, security, scalability, and integration options. Choose one that aligns with your organization’s contract needs.

Stakeholder buy-ins are a must

Involve legal, finance, sales, and procurement early. Their support ensures smooth adoption and fewer roadblocks during implementation.

Prioritize phased roll-out

Don’t try to digitize everything at once. Start with small steps. You may start with high-impact contracts or processes, then expand gradually across the organization.

Review regularly

Track key metrics, gather feedback, and make adjustments. Regular reviews help optimize workflows and keep your contract lifecycle strategy effective.

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FAQs

1. What is the difference between contract management and contract lifecycle management?
Contract management focuses on maintaining existing agreements. Contract lifecycle management is broader; it covers the entire journey of contracts from request to renewal.

2. Is CLM only for large enterprises?
No. Even small and mid-sized businesses benefit by cutting legal costs, improving compliance, and saving time.

3. How does AI improve CLM?
AI can review contracts faster, flag risks, suggest alternative clauses, and generate insights. It helps to reduce manual effort.

4. How long does it take to implement CLM software?
Depending on the size of the organization and integrations required, implementation may take from a few weeks to several months.

5. What types of contracts can be managed through CLM?
From simple NDAs and vendor agreements to complex procurement contracts, employment agreements, and M&As, all contracts can be managed in a CLM.

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