Articles Posted in Contracting as Cross-Functional Business Process


The Point

1. A good business strategy: Accelerate revenue by making the order-to-cash cycle as short as prudently possible.

2. Tactically:

(1) Have lawyers draft pre-approved risk protection terms for sales contract templates before any discussions with customer,

(2) Agree in advance on the terms of all other standard risk protocols among lawyers, business unit management, and all other relevant corporate functions — again, before any discussions with the customer have taken place.

(3) Give your business unit head the authority to sign (i.e., no additional legal or other review required) if either (a) all prescribed terms of risk protocols have been met, or (b) he / she has approved any deviations from standard risk protocols that are within his / her authority to waive. Only if proposed deviations go outside those allowed by standard risk protocols should your lawyers be brought in as a condition for approval / disapproval.

3. Too many lawyers favor meddling as a matter of course — via last-minute contract mark-ups made while “running it by Legal” in mother-may-I fashion — rather than delegating their approval via protocols that sales people can implement themselves.

4. Protect your order-to-cash strategy by having your attorneys do their job in advance to the extent possible — to avoid such meddling and consequent choke points. Continue reading


The Point

Attorneys view contracts primarily through the lens of risk management. And only in a very specific context: Protecting the business in case of litigation. There is, of course, some merit to this focus. But only a tiny percentage of contracts actually end up in court.

The contracting process has implications for the business well beyond producing legal artifacts. For instance, such agreements help — or hurt — your company’s liquidity by driving the timing of payments into and out of the enterprise. Yet neither in my Ivy League law school’s contracts classes, nor in drafting agreement terms at the Wall Street law firm where I practiced afterward, did I ever read or hear the words “order-to-cash cycle”.

That’s why executives and frontline employees across multiple functions should take the lead in the contracting process. Being sure to access lawyers’ advice where needed. But with people from sales, finance, and operations managing the lion’s share of what should be considered, primarily, a business function. Continue reading

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