Contract Discovery Helps Bring Clarity to Contract Data

Many organizations think they understand their portfolio of contracts. However, the confidence seems to fade when management tries to take a complete inventory of all their contracts.

Why Businesses Struggle to Track Their Contracts

Over time, contracts tend to accumulate behind the scenes across different business functions. Sales teams keep their contracts in CRM systems, procurement teams keep their contracts in shared drive locations, and legal teams keep their own set of contracts.

Some contracts are also stored in filing cabinets, others in archived emails, and others on employee laptops.

The result is a silent business risk, where key contracts outline business terms, pricing, obligations, renewal rights, and performance expectations.

This is where contract discovery comes in, where organizations can proactively understand their agreements rather than dealing with legal issues, audits, and other risks.

Contract discovery is like turning on the lights in a dark archive room, where once the documents become visible, they start to become valuable to the business.

Key Takeaways

• Contract discovery provides an understanding of contracts that are distributed throughout an organization’s drives, emails, and filing cabinets.
• Lack of contract visibility might cause an organization to miss renewal deadlines, accept poor contract terms, and lose potential revenue.
• Contract discovery helps an organization spot critical contract dates, such as renewal, renegotiation, and termination dates.
• Artificial Intelligence technology assists in extracting key contract information, such as contract parties, obligations, and financial commitments.

Why You Can’t Manage Contracts You Haven’t Discovered

Organizations have various departments that manage their contracts separately. The sales department manages customer contracts, while the procurement department manages vendor contracts, and legally manages compliance contracts.

Contract management is distributed among different platforms, folders, and email inboxes. This situation is known as a contract visibility gap.

Organizations lack contract management if they cannot see their entire contract portfolio. Organizations might miss renewal dates, overlook pricing negotiations, and lose termination rights if they lack contract visibility.

Businesses may also choose to stay in unfavorable contracts simply because no one remembers entering into them. Contract discovery addresses this problem of visibility. It identifies contracts in different systems and brings them all together in a familiar environment.

But contract discovery is not only about visibility. It also means being able to accurately pull information out of contracts.

Contract information plays a role in day-to-day business operations. Pricing models, service level agreements, payment structures, and compliance requirements all impact business performance.

But extracting this information can be a slow and inaccurate process. Large companies may have many contracts. Reviewing each contract individually would be a monumental task, not to mention the potential for human error.

There may also be discrepancies in human interpretation. This leads to what many call the manual trap. Organizations have processes that cannot keep up with the number of contracts.

Contract discovery eliminates this problem. It automatically identifies contracts and pulls out key information points. Once this happens, contract lifecycle management becomes effective.

The Three Revenue Leaks Contract Discovery Helps Close

Contracts impact revenue more directly than most executives think. They impact pricing, service, and monetary penalties. When businesses lose visibility into their contracts, revenue leaks start to occur.

The Milestone Oversight

Many contracts contain vital milestone dates embedded in their legal text. They might include renewal windows, pricing negotiations, or termination dates.

Oversights of contract dates might lead to substantial monetary losses. Some contracts automatically renew for a series of years if notice is not delivered in a timely manner. Others might include pricing negotiations that disappear if deadlines are not met.

Without contract visibility, businesses lose their ability to negotiate. Contract discovery software helps businesses identify contract milestones automatically. Important dates become visible months in advance of their expiration dates.

Contract dates offer businesses a chance to review vendor performance, negotiate pricing, or terminate a contract if it is unfavorable to them. Businesses that monitor contract dates maintain control over their supplier and partner relationships.

Untapped Provisions

There are provisions in contracts that organizations are not utilizing. They may be service credits, rebates, performance guarantees, and service-level penalties.

The problem is that no one is looking at the clauses to discover the provisions. Contract discovery systems are scanning contracts to find provisions that are linked to financial recovery opportunities.

There are instances when organizations are able to recover large amounts from service-level penalties and rebate clauses. They are hidden in contracts that are already executed.

The discovery is not creating the opportunities; it is helping organizations look at contracts as sources of business value.

The Non-Standard Language Tax

Most companies use standardized contract templates to mitigate risks and make the negotiation process easier. However, in real-world negotiations, many variations occur.

Sales teams may use third-party contracts to facilitate fast deal-making. In other cases, procurement teams may make changes to the contract to speed up vendor onboarding. However, this leads to many variations in the contract portfolio.

Non-standard language in contracts creates legal complexities and compliance risks. It also creates challenges in contract monitoring and enforcement. Contract discovery technology can scan contracts to detect non-standard language.

This enables legal teams to review the variations and identify potential risks. This eliminates the non-standard language tax, a term commonly used by many professionals.

From Legal Cost Center to Strategic Profit Driver

In the past, legal departments had a reputation for being a cost center, with their primary focus and responsibility being to avoid risk and ensure compliance with various regulations and laws.

Contract discovery, however, is changing this perception and story around legal teams and their roles in an organization. This is because, with contract discovery, legal teams get a comprehensive understanding of their contract portfolio, which provides them with valuable insights to inform their strategies in an organization.

Contract discovery provides legal teams with a comprehensive understanding of their contract portfolios, enabling them to avoid regulatory violations and reputational risks, such as personally identifiable information in their contracts.

Contract portfolios also provide valuable insights to legal teams, enabling them to negotiate better contracts in future and improving efficiency in their operations, enabling them to focus on strategic operations rather than administrative tasks.

Integrating Contract Discovery with the Work Process

One of the major reasons organizations are reluctant to begin their contract discovery project is because they are concerned that their business processes will be disrupted. However, the new contract discovery tools are designed to integrate with existing business processes.

The idea is not to replace existing systems. Rather, contract discovery tools integrate all existing systems into one platform. For instance, contracts may be stored in SharePoint libraries, email attachments, customer relationship management tools, and procurement systems.

The idea is to automate the discovery of contracts from these locations and then place them in one repository, which is then the single source for contracts. Modern discovery tools are built to integrate with cloud infrastructure like Microsoft Azure, which is highly secure and scalable.

They can also integrate with Microsoft 365, including Microsoft Outlook and SharePoint. Sales teams can view contract clauses from their customer relationship management tools, and procurement teams can view contracts from their purchasing systems.

The Competitive Advantage of Knowing Your Contracts

A contract establishes the rules that guide every significant business relationship. These rules include the price, performance, obligation, and termination rules.

However, many organizations today lack visibility into their contracts. This lack of awareness poses a significant financial and operational risk to the business.

Contract discovery eliminates the uncertainty that comes with not knowing the agreements that guide business operations. Instead, it reveals the agreements to create a strategic asset for the business.

Knowing the agreements, organizations can make better decisions because they understand the agreements that support the decisions being made.

Contract management platforms help businesses reach this level of visibility. Dock 365 CLM, a contract management platform built on Microsoft 365, enables businesses to manage their contracts, automate contract discovery, and track their contracts from a single platform.

Contract management teams, legal teams, and sales teams can collaborate from a Microsoft environment while still enjoying complete contract visibility. This is a smarter and more proactive way to manage contracts.

If your contracts are still living in various places such as folders, drives, and email inboxes, then contract discovery is where you should start.

Schedule a demo with Dock 365 today and learn about intelligent contract discovery and unlocking the hidden potential of your contracts.

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