From Signature to Success: Operationalizing Your Contracts to Drive Business Value

Contracts are the backbone of business relationships, outlining rights, obligations, and expectations between parties. Often, our attention is fixated on the initial stages of contract formation, from drafting to negotiation and signature. However, the significance of what happens next—the life (and end) of the contract—are frequently underestimated. Here's why focusing on after you sign (AYS) is critical for business success.

Understanding the Contract Life Cycle

For any contract, the life cycle is made up of three stages:

Stage 1 - Formation of the Contract: This stage involves the creation, negotiation, and signing of the contract. It's where terms are established and agreed upon by both parties.

Stage 2 - Life of the Contract: Once executed, the contract enters its active or operational phase, governing the relationship between parties. This stage is where the real business impact unfolds.

Stage 3 - End of the Contract: Termination or expiration marks the conclusion of the contract, often overlooked after the initial negotiation phase.

Leveraging the Vital 'In-Between' of Contract Management

While much attention is given to contract formation, it's during the life of the contract that the bulk of business operations occur. According to a study by IACCM, companies lose 9.2% of the anticipated value of their contracts due to poor contract management during the life of the contract. Yet, this stage is frequently sidelined in favor of focusing on new deals (or simply because there are capacity restraints). Here's why what happens after you sign demands our attention.

1. Extracting Contract Value: Effective management during the life of the contract allows organizations to leverage negotiated terms fully. By having contract data readily available, businesses ensure compliance, and capitalize on opportunities embedded within agreements such as favorable payment terms or additional revenue for changes in scope.
   
   
2. Improving Operational Efficiency: Comprehensive contract data creates efficiencies for teams across the organization. From support to finance, having access to contract information streamlines processes, eliminates bottlenecks, and fosters autonomy. Tasks like financial reporting, compliance obligations, and customer support become more efficient when teams are equipped with accurate contract details.
   
   
3. Driving Consistency and Negotiation Power: With insights into existing contracts, legal teams can ensure consistency in agreements and negotiations. Analyzing past deals provides clarity on agreed-upon terms and positions, enabling informed decision-making and strengthening negotiation leverage.
   
   
4. Understanding, Managing, and Reducing Risk: Having a clear view of contractual obligations and risks allows for better risk management strategies. Whether it's insurance requirements or other obligations, organizations can assess their exposure and take proactive measures to mitigate potential liabilities.

Getting Clean and Accurate Data Out of Your Contracts

Managing contracts effectively requires time, expertise, and meticulous organization which often presents a headache for legal teams responsible for a large number of contracts.

The absence of clean and accurate contract data stored in a centralized repository can lead to significant challenges for legal teams and the broader organization. Errors and misunderstandings become more likely, leading to inefficiencies, delays, and poor decision-making. This disorder can result in compliance issues, legal penalties, and strained relationships with business partners. Moreover, managing the life-cycle of contracts becomes cumbersome, resulting in financial losses from unfavorable terms, missed renewal opportunities, and penalties for non-compliance.

The value of organized data in legal operations cannot be overstated, as it underpins the successful management and execution of contracts, which are key to any business's operations and growth. At LegalSifter, we recognize the critical role of stage 2 and 3 - after you sign -  in protecting and maximizing the value of contracts. Using AI-powered software combined with contract expertise and people, we've revolutionized our approach to contract operations.

Find out more about how our Contract Control Program helps companies perform contract operations tasks cheaper, faster, and better by scheduling a live demo today.