Your commercial contracts generate a lot of useful data. But, it is challenging to know what all of the data means. The best way to manage the performance of your contracts is to track the key performance indicators (KPIs) that are most relevant to your profits.\n\n\n\nHere are the 8 KPIs you should be using to manage your\norganization\u2019s contract performance. \n\n\n\n1. Length of Contract\nInitiation Lifecycle\n\n\n\nHow many days does it take for your company to close a deal?\nThe more time between contract initiation and contract signature, the worse\nyour cash flow is going to be, and the lower your profits will be. \n\n\n\nYou should focus on making the pre-signing process as\nefficient as possible. Some ways to lower the length of the contract initiation\nlifecycle include having clear lines of authority, using electronic signatures,\nand making someone responsible for tracking the lifecycle for each contract. \n\n\n\n2. Delays in Approval\n\n\n\nThe metric for delays in approval is related to the contract\ninitiation lifecycle. But, it focuses on a narrow issue that plagues companies\nof all sizes. This KPI measures whether specific sub-cycles are creating a\nbottleneck in the contract process. \n\n\n\nYou need to measure and monitor how long it takes a contract\nto get approved by legal, finance, operations, and management. By tracking this\nKPI, you can easily find common delays and then work to resolve them. \n\n\n\n3. Missed Milestones\nor Contract Obligations Performance \n\n\n\nIf you want to maximize revenues, you need to make sure that\nyour company and your partners are meeting milestones. Missed milestones can be\ncostly in terms of both contractual penalties and lost time.\n\n\n\nAnother issue with missed milestones is that they commonly\nlead to overpayment of claims and introduce another point of friction into the\ncontracting process. But, until you start tracking contract obligation\nperformance issues, you will never be able to get them under control. \n\n\n\n4. Agreements\nExpiring Without Renewal\n\n\n\nHaving contracts on an autorenewal cycle can save the organization valuable time. However, it can also hamper the firm\u2019s flexibility if renewals are not carefully monitored. The same goes for contracts that expire without renewal.\n\n\n\nYou should be tracking the percentage of contracts that\nexpire without renewal to give you a sense of how much contractual flexibility\nyou have and how much of your business is dependent on ongoing relationships. \n\n\n\nIf this KPI is too high or too low, it could be a sign of\nfuture problems. \n\n\n\n5. Vendor Fraud\n\n\n\nFraud can be costly and difficult to detect. One of the most\ncommon forms of fraud is billing fraud. Vendors may try and pad their bills by\nsmall amounts of long periods of time to avoid detection. \n\n\n\nThis KPI helps you prevent fraud by tracking what is being\npaid out each month against historical payouts and contractual obligations.\n\n\n\n6. Annualized\nContract Value (ACV)\n\n\n\nThe ACV KPI helps you\nget a sense of the sources of your company\u2019s revenues and makes it easy to see\nhow dependent you are on contract renewals. This metric aggregates the value of\nall of your recurring contracts.\n\n\n\nBy comparing this KPI against your other revenue data, you can see how much revenue is lost on contracts that are not renewed or how much revenue you are taking in from new contracts compared to renewals. \n\n\n\n Get online in minutes, implement in hours, realize ROI in weeks! Easy-to-use, helps you increase productivity, contracts & revenue. Available anywhere, anytime & on any device.Try a Free Demo today!\n\n\n\n7. Order Value\nVariance from Original Contract Value (OVV)\n\n\n\nThe OVV KPI helps you track losses from mistakes. If you\nhave a high OVV, it means that you need to improve things like client\ncommunication, contract goals assessment, or contract drafting accuracy. Your\nOVV value should be less than 5%.\n\n\n\nChanges in scope, fulfillment errors, and conditions that\nshould have been discovered are all preventable mistakes that cost your company\nmoney. OVV helps you spot these problems so you can fix them before they get\nout of hand. \n\n\n\n8. Terminated\nContract Remaining Value (TRV)\n\n\n\nThe TRV metric is most useful in analyzing service\ncontracts. It helps you see how much potential lost revenue is hidden in your\ncompany. It shows you the total amount of money you haven\u2019t collected due to\noutstanding bills, unbilled amounts, and credit amounts.