Why Legal Teams Need Digital Contracting for Modern Business
Legal teams have always had the arduous task of analyzing legal documents, which is not only time-consuming but also requires close attention to detail and years of education and training. On top of that, because this is traditionally done manually, the critical data buried within contracts has remained lost.
While manually analyzing contracts might have worked in the past, it simply won’t cut it in the fast-paced reality of today. It’s time for legal teams to join the digital transformation. Over the last decade and a half, every other facet of business has undergone digitization…except contracts. And with digital transformation investments projected to hit a total of $7.8 trillion from 2020 to 2024, it’s legal’s turn to get on board.
Businesses rely on contracts to survive. Think sales contracts, employment and partnership agreements, NDAs, licensing agreements and more. But as they exist today, contracts are a workflow impediment and the data they hold isn’t being used to its full potential.
Data is currently trapped in contracts
There is all kinds of information-rich, operational data hidden in contracts critical to a company’s success. As much as 90% of company spend and investments are determined by contract terms. At the same time, suboptimal terms and inefficient contract management can result in a whopping 9% loss of annual revenue. While the specific information businesses choose to focus on will vary, some common points hidden in contracts include:
Total contract value - the total value of the contract once it’s active, its recurring revenue and charges.
Auto-renewal opt-out notification period - the amount of time auto-renewal can be opted out of.
Personally identifiable information (PII) exchange - data identifying an individual.
Counterparty address region - the party on the other end of the contract.
Ability to terminate for convenience - the power to terminate a contract if it becomes unsatisfactory.
Exclusivity - a type of agreement where one party agrees to work exclusively with the other.
This critical data isn’t readily available and there’s no good way of tracking it unless we adopt a new way of doing things. Once unearthed, contracts will help businesses become efficient, effective and more accurate.
Contract data allows legal teams to operationalize and reduce risk
Legal teams need to be able to keep up in a world that runs on increasingly larger numbers and more complex scenarios. To do so, they need to be equipped with resources enabling them to be data-driven. For example, today, legal teams may lack the answers to simple questions about the contract pipeline simply because these insights aren’t stored, compiled and updated in real time. Without this, legal teams are unable to operationalize their processes, making it impossible to put the systems in place that allow for more efficient work. After all, inefficient contracts can cause losses ranging from five to 40% of deal value. It also exposes the company to danger because, without tracking, contracts are ripe with risk.
Contracts hold the operational and substantive information legal teams need to operationalize, set goals, mitigate risk and prove their value to the company. Operational data includes the number of workflows launched and completed as well as turnaround and response times. Substantive data, such as governing tax law, contract amount, data protection and implementation obligations, exposes risk and obligation.
With the right tools and a centralized system, legal teams can have access to all the details they need to prove their team’s value, work more efficiently and protect their companies.
A new standard: digital contracting
A new standard for companies and legal teams to keep up with a fast-paced, data-driven world: digital contracting, a standardized system for business contracting to connect people to systems and data. Once digitized, contracts will become living, collaborative documents to easily find and track the once-hidden goldmine of data within. The result is resilient teams.
Legal tech is leading the way in developing the software needed to support digital contracting. Next-generation contract management software makes metadata searchable and readily accessible. This will enable entire businesses to have the information they need to make well-informed decisions at their fingertips.
Soon, the days of in-house lawyers having to paper chase will be long gone. Instead, lawyers will be able to create agreements instantly, collaborate and get approval with ease, while having access to version history and the metadata needed to operationalize and reduce risk.
It’s time for legal teams to get the tools they need to thrive in today’s fast-paced work environment by getting on board with a better, faster, more sustainable way of work through digital contracting.