Traditionally, legal departments have been seen as cost centers rather than sources of revenue generation, but today’s legal teams are changing the narrative.
In addition to protecting the organization from legal risks, serving as advisors to cross-functional teams, and helping set business strategy, corporate legal teams are also identifying opportunities to reduce expenses and increase revenue. How? It all starts with having insight into your contracts.
What avoidable costs and risks are lurking in your contracts?
Where are there areas of opportunity to get more value out of your existing agreements?
Which decision makers and stakeholders would benefit from having greater visibility into your company’s contracts?
What information should those stakeholders receive on a regular basis?
Unless you have a deep understanding of the contents of your contracts, and are using those insights to inform the rest of the organization, your business is likely to face unnecessary expenses (auto renewals), missed revenue opportunities (renegotiations), and even increased risk (missed deadlines) over time.
Fortunately, the legal department is in the best position to lead the rest of the business in this endeavor, based on a familiarity with the contract portfolio, knowledge of regulations and contract requirements, and reputation as a trusted advisor to enterprise employees.
Identifying Opportunities to Reduce Business Expenses
The first step to reducing costs using your agreements is to identify the greatest opportunities to make an impact based on things like contract value, the importance of the agreement, and how quickly you need to take action. To do this, you need to fully understand the granular details of every active agreement, including key dates and milestones, deliverables, specific contract terms, and more. Without this knowledge, your legal team is at risk of missing contract deadlines and wasting financial resources on non-essential or redundant services.
Here are some things to look for in your contract portfolio.
Dates, Deadlines, and Termination Windows
Taking Action to Reduce Expenses
Once you have a firm grasp on all of your contract details, you can use this information to optimize your agreements, make more informed business decisions, and ultimately reduce unnecessary expenses. By doing this, Legal can lead the organization’s efforts to reduce unnecessary spending and operate as efficiently as possible.
Here are a couple ways to get started reducing expenses.
Decide which agreements represent essential vs. non-essential costs
Look for flexibility to negotiate or terminate contracts
Impacting Revenue and Adding Value
The data found in your contracts offers potential to boost revenue by informing things like up-sell opportunities, renegotiation timelines, potential discounts, and more. Data and analytics can also help executives and department heads make more strategic decisions, which in turn can help the department evolve from a cost center to a more strategic value center.
Getting Started and Making an Immediate Impact
If you already have the systems and processes in place to efficiently review, search, and report on the details of your contracts, here are some steps you can take right away to add value to your organization.
Establish a single source of truth for your contracts
Set milestone alerts to give decision makers time to act
Set up custom reports to keep stakeholders informed
Give appropriate teams and individuals access to relevant contracts
Run reports to capture the low-hanging fruit for quick wins