How to Leverage Contract Data to Improve Your Bottom Line
For businesses where contract data represents a largely untapped resource, there’s a pressing need to make data-driven decisions to gain long-term success. When you leverage contract data smartly, your company has a better chance to increase revenue and sales. Multiple software tools in the market can make the whole process simpler and faster.
Understanding contract data analytics
Contract data can be defined as a piece of information that helps you identify and mitigate risks and improve your workflow. Contract analysis can help you form effective business strategies, figure out where your business workflow is affected, and highlight your risks. Fundamentally, this results in long-term business benefits that will ultimately yield increased revenue.
Considering the disruptive effect that the COVID-19 pandemic has had on businesses, contract analysis can help to rapidly obtain an overview and a better understanding of critical hidden information that’s locked away in your contracts and documents. It allows you to predict risk and mitigate it across contract channels to secure long-term benefits. You can open all your contracts to searchability and figure out where they’re getting stuck, thereby improving workflows.
According to World Commerce & Contracting, a typical Fortune 1000 company handles between 20,000 and 40,000 active contracts at any given time. It could turn out to be very costly and time-consuming to change the clauses in thousands of contracts manually. Contract analytics tools can prove to be very effective in handling these changes.
Importance of contract data and how to leverage it
The information contained in the contracts is imperative to define your relationships with your clients and partners. This is why leveraging contract data is incredibly important for your organization.
Contract management inefficiencies can mean missed opportunities for your business. Contract analysis mitigates this risk and leverages the data by improving the overall contract process. So how can this data be leveraged?
For traditional contracts and agreement systems, contracts are considered legal documents to ensure safety and legality between two parties. However, the world today is highly mobile, extremely digitized, and remotely managed. Almost every department is automated and incorporated with technology such as artificial intelligence (AI).
Contract analysis also uses AI and machine learning to analyze data and predict risks and loopholes.
Ways to leverage contract data
Procurement experts state that “while leveraging contract management solutions, companies should ensure that audits are performed at regular intervals and alerts are sent for deadlines and renewals to avoid revenue losses.”
For effective contract analysis and leveraging of contract data, every organization needs to have a contract management system in place. This is a core legal operations function. Here are some ways to leverage contract data efficiently:
1. Learn to prioritize your contracts based on their value
Many companies deal with multitudes of contracts at the same time. Therefore, it’s necessary to know which ones to prioritize. If your legal teams spend their time keeping tabs on contracts that are low value, they may be wasting valuable time. Focusing more efforts on low-risk contractual data isn’t a wise practice, either.
The solution for this is to use an automated contract workflow designer to separate your high-value contracts from low-value ones. Automated workflows for smaller and low-risk contracts will enable your teams to focus more on the sticking points of the high-risk/high-value contracts. These sticking points can then be optimized to improve the business’s overall performance.
Automated tools enable you to frequently update your contractual data. This can lead to easier tracking of contract data metrics and key performance indicators. Thus, keeping an eye on your revenue metrics like conversion rates, annual contract value, and customer acquisition cost becomes easier. You can then strategize to boost your net revenue. Instead of sacrificing human resources for leveraging contract data, use automated tools to do the job for you.
2. Forecast pipelines by tracking sales and revenue metrics
It’s always useful for companies to forecast their pipelines to know what revenue outcomes to expect. This aspect focuses on sales data and revenue metrics like annual recurring revenue (ARR).
The annual recurring cost tells you how much revenue is being generated via subscription-based prices in a business. By leveraging your sales contract data and measuring the ARR, you can check your company’s health and performance.
You can also determine the cost of lost customers, known as churn. This helps your business maintain its resources and strategize to avoid the same mistakes in the future. Moreover, it can predict future growth and whether the goals set by the company are being met. Optimizing such metrics smartly can even give you the chance to exceed the quarterly quota set by the company.
3. Remember to update and renew your contract data on time
Leveraging contract data is possible only when you update it frequently. There are many key performance indicators that you have to track for increased revenue. Hence, all this information must be stored and updated on time. Digital contract management software enables you to update your contracts on time and keep track of the renewal dates. This way, your company won’t be forced into opting for autorenewals that cost extra money, including the subscription fee.
Instead, all your data will be stored and renewed on the same platform regularly. When you’re able to access all this information easily, you can work backward from revenue. This means that you should focus on tracking only those metrics that directly impact the revenue and sales pipeline. Your company can spend more time optimizing those metrics to generate higher revenues.
4. Maximize the use of automation
Automation in the contract management system helps to increase revenue by saving time and improving business efficiency. Automation helps to leverage contract data and enable users to promptly create contracts. It gives instant access to multiple contract data points and aids in capturing the relevant data in a short amount of time. Automation eliminates time-consuming and repetitive tasks, thereby decreasing the chances of human error.
Converting to an automated system from manual processing helps your company to grow and leverage your income. Ironclad’s contract lifecycle management software can help you bring much-needed innovation to your contract management system. Automated software allows you to make technology-driven contracts that are based on data analytics.
Leveraging contract data using CLM analytics
CLM software such as the Ironclad app presents you with a dashboard for your contract insights. This dashboard is an engaging screen with a visual representation of all the analytical results of your contract data. It helps you simplify the story that your data tells.
Companies and business teams can monitor their contract lifecycles and make decisions accordingly to increase their business revenue and grow their market value. Here are a few ways to leverage your contract data through the CLM dashboard:
Get tailored information regarding your contract data
Companies often receive documents from diverse departments such as Sales, Operations, and Finance. AI runs through your system and aggregates the relevant information related to the legal administration by extracting the contract-related data. Users can also customize dashboards to get tailored information by operating a legal profile.
The legal profile shown on your dashboard presents an insight into all the contract-related data. You can access top-down contract analysis and get contract requests. Negotiations can be figured out easily, and insights into contract matrices become possible. Filters can be searched and used to locate relevant data points and document language. Reports in the form of graphs, charts, and other visuals are available.
Get an insight into the sticking points in your contracts
Your CLM software will reveal the suitable needs your system has to adopt. You’ll get notifications and snapshots of your contract data insights. At this point, you can uncover valuable insights that’ll help you to strategize essential decisions for your company.
Whatever hurdles that your teams are facing can be detected. Therefore, you can provide them with additional resources and hire more employees to improve your sales process. You can also fine-tune the internal processes to increase the efficiency and revenue of your business.
Ask questions from data insights and set strategies
When analyzing your contract data, you should consider the following questions:
- How much time does it take to finalize a contract?
- Where does the process get slow?
- What type of contracts are negotiated easily?
- What terms are standardized for any contract?
- What types of contracts are likely to end or renew in the near future?
Asking such questions will help you identify risks and mitigate them. You’ll also come up with solutions that can benefit your business in the long term. You’ll save time and money, and you’ll have a solid foundation to analyze your business and set strategies for its growth and increased revenue.
Improve your contract management
Contract data analytics can give your business the opportunity to drive more revenue. In today’s technologically advanced world, it’s necessary to make use of software to help manage the process.
CLM software helps you to reach your treasure: the analysis of your contract data. It has become imperative to make necessary changes to the old processes and invest in new tools and technologies to stay ahead and maintain a competitive advantage.
A deep insight into this data will help you to find out the risks, make effective strategies, and define your short-term and long-term business goals. Leveraging contract data increases revenue and helps your business reach its true potential.