Contract Collection: Laying the Groundwork for Successful CDM – Part I

In previous posts we’ve explored the power of Contract Data Management (CDM) to introduce transparency across your contract portfolio. Organizing contracts and converting them to structured data in a true contracts database (as opposed to simply a document repository with minimal or no structured contract data) enables everything from improved risk and obligation management to ensuring compliance to better negotiation outcomes to increased revenue capture.

But to start this journey, first you must find all your existing contracts. Cue record scratch sound effect. This is no small feat for enterprises without a comprehensive contract repository already in place. For most companies, contracts are scattered across multiple environments – in SharePoints, VDRs, and CRMs, and within individual email accounts and OneDrives. And although increasingly less common, some contracts may even be stored only in hard copy, squirreled away in file cabinets or storage units somewhere. Meanwhile, new contracts are being added to the portfolio all the time, with many companies executing thousands of additional contracts every year.

Why It Matters  

Getting collections right is critically important to the accuracy of structured contract data. My colleague Mike Hagemann recently wrote in this space about the high cost of bad data and how it can proliferate from inconsistent interpretation of contract language, poorly defined data models or interpretive guidance, and lack of robust quality control. All of that said, a deficient collections effort means the battle is lost before it begins, even if you’re doing all those things right.

Missing an amendment to a vendor contract that changed your payment terms from N-30 to N-60? If the data will feed your AP processing system, you may be sending working capital out the door early. Missing a non-renewal notice to an MSA that auto-renews unless cancelled? That contract will appear as active, despite being expired. Missing the executed version of that MSA with the final negotiated IP terms? The resulting data based on the non-final draft version will have a gap. Missing the GDPR Addendum to a key services agreement? That contract may incorrectly get pulled into a data privacy remediation project. 

At best, this missing data creates confusion, wastes time, and erodes confidence in the data. At worst, it can create legal or financial exposure.

Measure Twice, Cut Once

So how do you ensure a successful collections effort – one that is both complete and cost-effective? Success starts with careful due diligence to identify the types of documents in scope for the CDM solution and all possible storage location(s), including sources of any new contracts that will be executed during the collections process. Or in other words, before you can decide how, you need to determine what and where:

  • What documents are relevant? Defining what types of documents belong in a contracts database is not always obvious or intuitive, and poor planning can lead to critical gaps.
    • This includes – but goes well beyond – broad agreement categories such as vendor contracts vs. customer contracts.
    • Consideration should also be given to the data model being used for the CDM solution, and the types of documentation that are likely relevant to that data model. For example, do any of your contracts allow exercise of renewal, non-renewal, termination, assignment, or other rights by unilateral notice? Are there cases where notice by email is sufficient? Do your contracts incorporate online terms? Are there POs that contain relevant substantive terms and conditions? If the answer to any of these questions is yes, that documentation could be critical to creating complete and accurate structured data.
  • Where are those documents located? This includes examining all possible sources and custodians of relevant contracts.
    • If an existing contracts repository is already in place, the collections job is likely easier. But any existing system should be evaluated on at least three fronts before treating it as a one-stop-shop for your CDM solution:
      • The sufficiency of the collections effort that preceded the existing repository;
      • Compliance with uploading newly executed contracts to the existing repository;
      • Scope overlap between the existing repository and the CDM solution. For example, a repository of vendor contracts is not helpful if the CDM solution will be used for customer contracts. Likewise, if the repository doesn’t include contractual notices, it may be lacking in documents needed to create reliable structured data on certain key sub-concepts like contract expiration date.
    • If there is no existing repository, or if that repository is lacking in one or more ways, then additional sources need to be examined. These could include (but certainly aren’t limited to) SharePoints, VDRs, billing and invoicing systems, OneDrives, emails, hard drives, and possibly even paper document storage.

Once we know the what and where, we can explore the how. In part two of this post, we’ll examine some of the tools and methods that can be deployed to execute the collections plan.

Matt Jaksa Head of Customer Onboarding Knowable

Matt oversees the launch of Knowable’s contract data management solutions for new clients. Matt has over a decade of experience in the Alt Legal Services industry and is experienced at delivering global legal-process outsourcing solutions and transforming legal processes for Fortune 500 clients. Prior to that, Matt was a commercial litigator focusing on copyright infringement, press access, public records, employment law, and alcoholic beverage regulation. He is a graduate of the University of Oregon School of Law, and is admitted to the California and Illinois state bars.​