It is said that contracts make up the “relationship DNA” between organizations. They provide instructions for contracting parties, determining the parameters of performance and risk within their particular relationship.
On a more micro level, the data that lies within agreements helps with identifying and mitigating risks, and improving workflows. Contract data analysis serves to highlight individual risks, determine how business workflows are affected, and shape effective business strategies. To make more intelligent, data-driven business decisions, then, modern organizations simply need the most accurate contract data available to them. In fact, insightful data analytics is now crucial for companies’ growth and competitiveness, as well as long-term success.
Data Legal Operations Value Most
In the Blickstein Group’s 2021 Law Department Operations (LDO) Survey, respondents revealed the contract lifecycle management (CLM) data that they track and value most of all. Legal operations professionals said that they leveraged this contractual data for a number of departments, driving overall enterprise impact, like quicker times to signatures and total annual revenues.
Here is the CLM data that is seen as the most valuable by legal ops nowadays.
Contract Turnaround Time
Today’s agreements are invariably complicated. They are arguably more complex than ever before, which means that they tend to take longer to process. As a result, 48 percent of legal ops professionals view contract turnaround time as the most valuable data. This is the average total number of days in a contract lifecycle. Naturally, not all agreements are the same. However, when this particular data is benchmarked, opportunities to improve contract turnaround time can be identified. An NDA, for example, could be discovered to slow down the entire contracting process because it takes too long to execute early on in a contractual relationship.
Deviation of Contract Terms from Standard Clauses
Because it alerts legal professionals to increasing contract risks — and the corrective action needed — deviation of contract terms is considered to be another important piece of data (32 percent). The use of standard clauses in the contract management process allows for contract terms and language to be formulated very carefully, and for clauses to be standardized across the enterprise. It ensures compliance with regulations and governance requirements, while keeping companies totally aligned with their own values.
Value of Active Contracts
The value of the active contracts being managed is seen as another great datapoint metric or KPI (24 percent). In fact, the value of agreements is one of the biggest factors determining financial growth. Therefore, it helps legal op monitor the effectiveness of their CLM process and the business, as a whole. Annualized contract value (ACV), for example, can be used as a metric or KPI to measure the total value of recurring contracts. It is especially useful when it comes to agreements that are high-volume, long-term, and set for autorenewal. With ACV, the revenues of new contracts can be compared to those of recurring contracts, and the amount of revenue lost by agreements that are not renewed can be scrutinized.
(Additionally, the performance of contractual obligations can be tracked, so that important milestone and deadlines are not missed, and fines and penalties are not paid. And historical contract trends can be reviewed, so that a sound strategy around agreements can be formed.)
Contract Data Analytics
But at the end of the day, it is not easy to track the critical business data that contracts hold — without the right contract management tools. And without accurate contract data, legal operations and the business can grind to a proverbial halt. Fortunately, the latest CLM systems can help with this all too important task. They not only help speed up contracting and reduce contracting errors, but also provide a ‘single source of truth’ for agreements.
The contract data analytics that CLM systems provide enable companies to look at their library of agreements — and access key contract data like contract turnaround time, deviation from standard clauses, and agreement value — and better understand their contractual relationships. They help discover risks liked missed deliverables, determine overall contract performance, define short- and long-term business goals, and come up with more effective strategies. They therefore provide a chance to drive far more revenue — and stay well ahead of the competition.
In other words, real-time insights into contractual data go a long way in helping organizations reach their highest potential!