Legacy Contract Migration and Contract Reviews: 9 Mistakes

When it comes to contract reviews, almost nobody is doing it well. Here are the 9 most common mistakes we see companies making.

Last week, I had a really interesting call with (yet another) company that had launched a project to review customer contracts and enter the resulting data into its CLM … and had been burned. They had spent millions of dollars on consultants—but ended up with nothing usable. 

This happens all the time. Companies usually embark on these projects for one of three reasons: 

  • To increase awareness of renewal dates so they can improve offers
  • To collect data from legacy contracts for CLM & CRM systems
  • Or to integrate an acquisition 

To do any of these things well, companies need to understand what each of its customers owns today, what that customer’s current pricing is, when it’s contract renews, under what terms, and (crucially) where there is hidden revenue risk or opportunity. 

And guess what. Nobody is doing it well. That means they’re wasting months and millions on a project that brings almost zero return. 

Fortunately, almost everyone makes the same common errors … and they’re all avoidable. Here are the 9 most common mistakes we see companies making (click on any to jump ahead):

  1. Thinking contract review is (only) about summarizing or digitizing documents
  2. Extracting what’s in the document as is … and stopping there
  3. Underestimating the complexity of commercial relationships
  4. No quality control plan—or resources
  5. Buying into the AI hype
  6. Extracting so much data the contract gets restated or expanded
  7. Thinking CRM or CLM systems will solve the problem
  8. Viewing a contract review as a one time project
  9. Considering contract review a “necessary evil”

1. Thinking contract review is (only) about summarizing or digitizing documents

At its core, contract review isn’t about summarizing and digitizing the documents. It’s about answering critical questions about your customers at a moment’s notice—for both your front line teams and your executives. Document summaries alone won’t work when these stakeholders need data fast to make quick business decisions. Usually, what you’re trying to do is make it easy to answer questions that add business value, like:

  • Where are there upcoming contract renewals
  • What do my customers own? 
  • What’s their current pricing? 
  • Are we billing what we should? 
  • Where are the latest terms? 
  • Where’s the most current contract?
  • Where can we sell more?

Just summarizing or digitizing the documents you already have, even if you’re making their storage less disparate, won’t solve your problem. You’ll still have to go hunting through the summaries (which will quickly become outdated) to gather any relevant answers.

2. Extracting what’s in the contract as is … and stopping there

To answer the questions asked in mistake #1, you need a uniform set of information organized in a particular way. Unfortunately, your active contracts can span dozens of acquisitions, hundreds of templates, deals written on third party paper, negotiated terms, and outdated product terminology. Even something as simple as a customer’s name can be written hundreds of different ways. You don’t want frontline teams having to interpret information on the fly, and you need to be able to compare apples to apples before you run any type of report or portfolio analysis.

3. Underestimating the complexity of commercial relationships

In order to address specific use cases accurately, an organization needs to understand what each of its customers owns and what terms apply to each of those products. This task is nowhere near as simple as it sounds. Contracts are very complicated, full of nuance and product-specific terms and conflicting terms. Sometimes, the data you need—like the last date for a renewal notice—does not exist. Other times, it’s dependent on information in another system—like renewal dates based on date of installation. Without considering these things, you’ll never arrive at the most correct answers to help you drive the most value.

4. No quality control plan—or resources

You will potentially have dozens of people or outside consultants reviewing documents who may or may not be familiar with your business. In order to get the most from your contracts, all these people must enter complete, consistent, and correct data, be able to find and remove duplicates, and have the knowledge to identify and track down missing documents. As we discussed in #2 and #3, this is much more difficult and complicated than companies initially expect.   

5. Buying into the AI hype

Contract AI tools promise automation and can sometimes deliver on searchability or document clause extraction. But those things don’t equal reporting or sales enablement. AI certainly has its time and purpose, but relying on it to complete an accurate contract review is a mistake. 

Usually, AI leaves you with one (or more, or all) of these issues:

  • Poor OCR quality means your team will need to do a manual review regardless.
  • Order of precedence isn’t considered, so you don’t know what terms are currently active when you run a search.
  • There’s no way to run a summary by customer. 
  • They’re unable to handle the complexities in #2 and #3. 

6. Extracting so much data the contract gets restated or expanded

Contracts touch every department in your organization, from sales to finance, legal to operations, customer success to services.  Each of these departments needs something different from the contract, and they all have trouble finding what they need. These departments are often given a blank slate and asked what data they want from contracts, open-endedly. When you have to pull different information from each contract for every department, you end up restating the contract … costing money, putting quality at risk and extending the review timeline with every piece of data you extract.

7. Thinking CRM or CLM systems will solve the problem

It’s incredibly common to think some combination of a CRM contract object, CLM, CPQ, or document repository will solve all your contract problems. But CPQ and CLM are fundamentally transactional systems, Q2C systems weren’t designed to help people understand the customer and contractual relationships, and CRM objects and document repositories are just meant to store PDFs with basic metadata. 

When you’re trying to get to the heart of why contracts matter—to glean valuable data that you can use to increase profitability and customer satisfaction—these systems just won’t cut it. 

They make it incredibly difficult to know what’s still active, create roadblocks for multi-year renewals, don’t roll up to reflect current terms, and don’t map to individual products. That means you can’t get an accurate customer level summary from any of these systems … and you’re left dealing with multiple duplicate records.

8. Viewing a contract review as a one time project

Whether you try to tackle the project in-house, by hiring consultants, or by relying on AI, the data uncovered becomes outdated as soon as the project is done.

Unless someone is assigned to keep hundreds of contracts updated as new deals and terms are signed and business changes, who keeps it updated as new deals are signed and the business changes? 

9. Considering contract review a “necessary evil”

Often, companies focus on the process automation aspect of CLM, and current contracts are viewed as an afterthought … a “necessary evil.” This mindset is dangerous because it leads to a ”check the box” mentality. And when you’re just doing it to get it done, you’re missing out on valuable insight and opportunities. 

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