Most businesses are drastically underutilizing and are not tracking key contracting data. That’s a shame, because when done right, this data can make your future contract processes run more quickly and more smoothly. This is critical to scaling growth. This data can also help you to trim your budget and build stronger relationships with colleagues and customers.
Legal is a partner. It’s true.
I have been in situations where after the introduction of an in-house legal team, the conversion rates for enterprise segment sales deals improved by double digits compared to the prior fiscal year when there was no in-house legal team. And there were no new features introduced to drive this improved conversion.
We are living in a period where data is king. Many legal teams still struggle to pull together and maintain spreadsheets about contract statuses and key obligations. Today, there are simple tools that enable you to collect and report on these contract data points.
Read on for some effective ways to capture the data about your contracting process and put it to good use.
Capture the Right Contract Metrics
In order to speed up your contract process, you’ll need to assess your existing process to figure out which stage is causing bottlenecks.
There are a few different ways you can go about this. You can create your own spreadsheet tracker to record and measure the data you want to examine. This has the benefit of being free of course, but it is a time-consuming process. Carrying out this process manually can also leave you open to human error and ends up being costly.
A great alternative to manual data tracking would be using a Contract Lifecycle Management solution, like Lexion. A solution like Lexion is flexible and automates reporting on key metrics, making it easy to keep getting the most out of your data.
What kind of data should you be collecting in order to speed up your contracting process? Here are data sets to consider tracking and measuring:
- The number of contracts that have been through your legal department. It’s a good idea to break these contracts down according to type or segment.
- The number of third party paper deals your legal department handles (as opposed to the number of deals that use your business’ own template)
- The length of time required to complete your entire contract review process, from beginning to end.
- The average annual contract value of the contracts negotiated by your legal department
- The total revenue your legal department assisted with closing based on tracking which closed deals were touched by legal (yes, legal contributes to revenue growth)
- The total length of time required to finalize the negotiation of third-party paper deals, as opposed to the length of time needed to finalize contracts using your own template
- The average length of time required for counterparty review when using third-party paper, as opposed to the average length of time required when using your own template
- The average length of time required for internal legal review when using third-party paper, as opposed to the average length of time required when using your own template
- The average time required for the legal review of a particular type of contract
- The average time under the counterparty review stage for a particular contract type
Analyze the Relevant Data
The first step is data collection. The second step, just as crucial as the first, is analysis of the data collected.
With this step, you may not yet be able to effect change, but you will gain a thorough understanding of how long various processes take in your business. You will be able to use the data to set realistic expectations for your company and your clients, improve the accuracy of your forecasting revenue, and create strategies to improve your contract templates, policies, and process.
Typically, the inefficiencies in the contract process occur at the “handoff” points, when the contract is moving between the submitter of a request and the legal department. These handoffs often include minimal necessary context and there’s randomization because they can occur at a number of different points, either in the course of an email exchange or even over Slack.
In addition, a poor intake process leads to lack of visibility on deal status and the lack of reporting on deal stage at a granular level. In other words, there is no meta-reporting on the stages of a contract as it shifts from one department to another or as it shifts from the legal department to the counterparty. Instead of detail, most businesses simply have a vague “under review” stage, which provides no actionable information as to where a contract actually stands and where the bottlenecks are located. As a result, deals can fall through the cracks, and problems can go undetected.
In general, when a business sees that a deal is in the “under review” stage, it’s assumed that the legal department is the cause of the delay. This may not actually be the case; it might in fact mean the contract is lost. Or, it’s perceived that the legal department slows down deal velocity.
Without the data, perception is reality.
Put Data Insights to Work to Speed up the Contracting Process
Once you’ve carried out a thorough analysis of your contracting process, you’ll have a far better understanding of the areas which are slowing down your deal velocity and lengthening sales cycles. You’ll be able to see whether the counterparty review periods or the extended review time when negotiating on third-party paper are creating bottlenecks in your process. Spoiler: They often are the culprits and the data will validate your anecdotal stories.
These data insights will give you the opportunity to proactively collaborate with other departments to create detailed plans to speed up the process, whether that means finding ways to create a sense of urgency with your counterparty's legal department or to facilitate the adoption of your own contract templates for low-value transactions.
It’s also a good idea to experiment with new tools so that you can streamline and automate more of your contracting processes, as well as your processes for capturing usable data and reporting on it. The secret to successfully adopting new tools is to take a “minimal change management” approach. It also means acquiring and keeping a realistic sense of your business’ capabilities. In short, meet your business where it is to the extent possible.
The most common reason new technology rollouts fail is not because the technology is bad; it’s because no one is using it.
Mine Contracts for Other Data
Your business contracts also hold other actionable data that can make a difference to your business. Contract analysis enables all departments even when it feels like the legal department is incredibly busy just supporting the sales organization with one fire after the other.
For example, you can use contract analytic systems like Lexion to partner with Customer Success to analyze which contracts do not have auto-renewal or have any limits on fee increases. Or, you can partner with Finance and Accounting to better manage cash flow by analyzing the average payment period you agree to with customers and vendors and which of your customer and vendor contracts have termination for convenience.
Solutions like Lexion make the process of conducting this analysis and generating these types of reports fast and easy. You don’t have to be tech-savvy to figure it out.
Contract Analysis with Lexion
Minimal change management is a pillar of Lexion. Access a demo of all the Lexion features that will help your business to speed up its contracting process as well as stay on top of your contractual obligations.
Here’s a glimpse of a few impactful Lexion features:
You’ll be able to get a 360-degree view of all of your tasks, whether contract or other legal questions. The Lexion dashboard provides an instant overview of those tasks and their respective stages so that you’ll always be able to find out your progress at a glance. You’ll be able to easily jump to actionable items, and you won’t have to waste your time digging through a patchwork of emails to find deal status or the current draft of a contract.
Email-Based Task Submission and Approvals
Lexion’s solution uses an email — email@example.com, for example — to jumpstart any contract review request and engage with legal. It’s all done over email, making the whole process streamlined and simple. Lexion also automatically sends the approver an email and receives their approval or their rejection, so that the whole process is handled over email.
Automated Reports About Contracts
Lexion’s flexible and easy-to-use reporting features allow you to run and create customized reports, such as vendor contracts that have renewal cancellation deadlines during the next calendar quarter or customer contracts with custom service level terms, and then have those reports automatically emailed to designated individuals and departments at your select frequency. Just set and forget.
If you’d like to see more tips like these, you can read The General Counsel Playbook to get lots of additional tips to kickstart your new job on an in-house legal team.