By Eric Prugh, PactSafe
Despite vast advancements in technology, businesses have difficulty shaking the archaic understanding and uses of contracts. Contracts are still seen as one-dimensional — paper, words (with key agreements), squiggly lines. However, a contract should be a living, breathing, and connected cross-section of data that drives action in your business, not one that weighs you down with overhead or cost. The information within your business contracts is vital to defining the relationships you share with your customers, employees, partners, and others—and you need to have an easy way to decipher every single contract you sign and what’s inside.
Do you know what’s inside your contracts? For example, do you know when each expires? Do you know which have key provisions added in for specific vendors or partners? Do you use them to track your spend over time and ensure that the rates you've decided on are still fair?
Many of these data points can be tracked in Excel, a contract life cycle management platform, or another SaaS tools. Yet, outside of the executed contract, most companies don’t have a record of what was actually agreed to.
Rather than think of contracts as unwieldy obstacles to business, think of them as key data tools that if used effectively, can provide insight into key business activities. Service level agreements (SLAs), indemnification, limitation of liability, contract amount, start and end dates—all hold pieces of data that are important to various parts of your organization. The information inside your contracts needs to be easy for the right people in your organization to discover and unlock.
Centralize And Track Data Within Current Business Functions
Think about the information inside your contracts as data that has both inputs and outputs.
A good number of contracts in most B2B or B2C businesses are a standardized, non-negotiated (or lightly negotiated) agreements, a fact that provides a huge opportunity to make these kinds of contracts more data driven. These contracts include standard customer contracts, SLAs, Order Forms, Contractor Agreements, and Employment Agreements, vendor/supplier agreements, online terms, and other scalable agreements that may be executed as a clickwrap.
The only difference among these contracts is the inputs into the agreement: company name, job title, email address, amount, start date/end date, and the unique provisions to each contract, if any.
The outputs are what actually happens as a result of the contract being executed. For example, how much do you pay vendors? Do you know the renewal dates for your contracts? What are the different ways you collect payment from your vendors? How far reaching is the scope of the services being provided? By looking at your standardized contracts and taking note of any non-standard information, you can learn information that allows you to quantify the legal department's performance and overall value to the business. The more analytical you can be about breaking down the bits and bytes of these types of agreements, the more you can leverage the inputs to automate the outputs.
To improve your contracts' ability to provide useful data, consider doing the following:
- Integrate your contracts into a portal where your employees, vendors, and customers already go
- Use placeholders in standardized agreements for provisions that might be unique to each signer
- Post your NDA and other standardized agreements for acceptance online with an integration back to your CRM.
Take it to the next level by getting your contracts to “talk” to your internal systems. For example, as soon as a contract is executed, you can use technology to automatically create an invoice with the right payment terms and send automated links to the right shareholders to let them know the contract is done.
The power of treating contracts as data is in integrating the inputs and connecting in real-time to the outputs. Your task is to determine what KPI your business needs to track, and start designing your contracts to collect the necessary data.
How To Start Treating Contracts As Data To Improve Business Functions
Getting started is easy: Spend 45 minutes thinking about the standardized contracts within your business and answer the following questions:
- How are your standardized contracts executed today? Where would be the best place for them to be executed (in an app, in a portal, electronically on a phone)?
- How are the key data points that are negotiated (if any) populated in a contract? Is there a current technology or process that assists with that?
- How are those data points tracked once the contract is executed? Does the legal team have visibility into that? What about other teams that may need access to the important pieces of a contract relevant to them (e.g. finance, HR, operations)?
Having a framework for how these agreements flow within your business and having goals for the ideal workflow and documentation are a must if you want to really begin streamlining these types of processes inside your business. The best part? It makes your customers’, employees’, and partners’ lives easier when contracts are more native, digital, and mobile-first because they’re populated by data, not documents.
About The Author
Eric Prugh is CPO and cofounder of PactSafe.