KEY TAKEAWAYS:
- Contracts contain a treasure trove of value that can be unlocked with just a few small adjustments involving strategic data tracking and greater accessibility.
- Identifying contract authorship, renewal dates, new clause uptakes, and key business terms can help your company save time and demonstrate the impact of in-house legal.
- Thoughtful contract organization increases transparency and helps your colleagues find the information they’re looking for without having to waste your time.
Contracts – they make the world go round, don’t they?
Well, kind of. They are a critical part of closing deals, so they attract a lot of attention and energy in negotiations. And then, what? Contracts just sit in a drawer or maybe even a digital folder, gathering metaphorical dust, never to see the light of day unless a dispute comes up.
Contracting doesn’t have to be this way. In fact, it shouldn’t be this way, as contracts contain huge amounts of data that hold significant value for the business. Contracts that lean into this value can not only make Legal and your colleagues look good, but also save your firm money.
Contracts contain so much value that you can begin to unlock as soon as today. You don’t need a fancy contract management system–you just need organisation and consistency in handling contract data so that you can begin reaping the many rewards.
Not only can you save your firm money with just a few small steps, you can also make your team more efficient and demonstrate added value to your colleagues.
Let’s look at how you can unlock the full value of your contracts.
Track Your Key Data Points
The data you can find in your contracts is where the value really starts to pay dividends.
So, what contract data should you be tracking? Here are some examples:
1. Expiry and Renewal Dates
When a contract nears its end, your colleagues will want to either get out of it, renew, or even renegotiate the terms. If they’re not even aware of the end date, then they aren’t empowered to do any of the above in a timely fashion.
Tracking those expiry or renewal dates and scheduling reminders, say 3 months prior, allows Legal to flag colleagues when action needs to be taken. This enables continuity of service, the chance to escape a costly renewal, or the opportunity to switch providers.
2. Where Your Work is Coming From
Sounds simple, but who asked you to review the contract? You might remember today, but in larger teams or in 3 years, you’ll have an easier time referring back to the contract data than asking around your company to determine who handles the expiration or renewal terms.
3. Uptake on New Clauses
Has your Executive Team asked you to add new clauses into your contracts? Maybe you need a price escalator for high-inflationary times or a termination clause for when supply chains delay or fail.
If you keep track of all the agreements where you execute the new clause, you could then report your results back to the business. You can deliver a powerful message by showing that you provided this concrete benefit to the company in X% of contracts in a quarter, for example.
You don’t need to track each data point forever. For example, if you accomplish your goals after 6 months, then you can simply stop tracking that particular data point.
4. Understand the Quality of Your Contracts
Every company has its own key positions. Perhaps yours involves liability caps, assigning responsibility for certain situations, or choice of governing law. But how do you know when you’re achieving the desired outcome on these points?
By tracking the contract items that are important to your business, like governing law or liability limits, you can:
- Explain how well your team perform at managing risk – e.g., “We obtain our preferred governing law in over 80% of our contracts.”
- Challenge counterparties in negotiations using concrete data – e.g., “The majority of our customers are comfortable with capping our liability at the value of the contract.”
- Describe the risk profile of your agreements – e.g., “50% of our contracts contain liability caps at the value of the contract and no contracts exceed 3x the value of the contract.”
Make Your Contracts Accessible
If your contracts can only be found by the Legal team–or worse, only by you–then you’re creating unnecessary barriers for your colleagues, which are costing your business money.
In most companies, in-house counsel is lucky to be at the better end of the pay scale. So why waste your expensive time locating a contract? The much better alternative is to have a system where others can access the contracts they need themselves.
This could be a well-organised file structure on your local network, a SharePoint repository, a Dropbox or Google Drive folder, or part of a more sophisticated contracts management system.
Whichever route you take, giving access to contracts is the first step to realizing their full value.
