Comparing Three Master Service Agreements

Andrew Antos
Founder, CEO
Nick Tiscornia
Director of Business Development
Mike Whelan
Chief Community Officer

When lawyers negotiate service agreements, the language they use defines more than just the legal terms of the contract. It can also have a direct financial impact on how the company reports and recognizes revenue. Attorney Andrew Antos and accountant Nick Tiscornia compare three service agreements and show how your choice of contract language can directly impact the company’s financial side.

Questions in this Episode:

  1. How does legal language impact revenue recognition?
  2. What terms are important in an acceptability clause?
  3. Why is the term “convenience” dreaded in a termination clause?
  4. When is revenue recognized with a “right to reduce” clause?
  5. When should the lawyer call in the accountant?

Download K-Notes Now

Legal Language Can Produce Negative Financial Outcomes

Here, we compare three different clauses in three master subscription and service agreements and how they have both a legal and financial impact.  

The three companies are Junyo Inc., a data analytic platform for K-12 educators; Guidespark, Inc., which provides an HR and internal communications platform; and Workday, Inc., an on‑demand cloud-based financial management and human capital management software vendor.

Lawyers are trained in and know legal language. But often, they only think about the legal implications of the language they use when negotiating or drafting contracts.

But once those agreements get signed, you might end up with many significant unexpected financial implications.

"As lawyers, we often think about the legal implications of the language that we're negotiating or putting in the agreement. But once we actually get that agreement signed, there’s lots of accounting implications." Andrew Antos

The three clauses below are examples of how language can produce surprising adverse accounting complications unless you focus on both the legal and financial impact of your drafting.

As a lawyer negotiating on behalf of a business, it’s essential to understand that your contract language might be acceptable from a legal perspective but can have profound financial impacts on your clients and their customers.

Junyo’s Problematic Acceptability Clause

Legal Impact

The acceptance clause in the Junyo contract says that the customer can inspect, review and test whatever you are selling to them. In this case, it is software and related services.


3.2 Acceptance
The Hosted Service shall be tested in accordance with the terms of this Section 3, which shall include Acceptance Tests and the Acceptance Criteria, to determine whether it is fully operable, meets JUNYO’s specifications and will function in accordance with the Documentation when properly Delivered and used for its intended purpose.

 

After the inspection, the customer can decide if the software is acceptable or not. And if your software does not meet the test criteria, as determined by the customer, they can terminate the contract. This is the basic legal reading of this clause. 

Acceptability clauses are fairly typical in these types of contracts. However, Junyo’s clause is a bit more detailed than most. It allows the customer to define the acceptability test, which they must provide to Junyo at least 30 days before the delivery date.

What may be completely fine from a legal perspective can actually have significant implications for your customers. - Andrew Antos #ContractTeardown Click To Tweet

Financial Impact

How can the accounting department characterize and recognize the revenue on a contract that the client might reject for lack of acceptance?

The power of rejection is in the hands of the client, and you might not be able to collect any revenue at all. Financially, you cannot recognize the revenue until the acceptance period ends or the client gives you an explicit acceptance of the product.

There is a difference between goods, like computer hardware, and a service, like some software programs and platforms. With a tangible good, you might be able to prove the product was up to certain specifications and therefore decide to recognize the revenue.

Even so, this acceptance clause is unilateral in favor of the customer, so it is unlikely you would recognize the revenue until acceptance.

The situation might be different if there was an addition to the clause that allowed the company to fix any unacceptable issues and bring them up to contracted specifications. 

As written, the revenue accountant has to decide the likelihood of rejection before making any decision to recognize revenue from this contract. 

Guidespeak’s Mother of All Termination Clauses

The Guidespark agreement has a termination for convenience clause that is both legally and financially challenging.

"There are definitely nuances to a termination for convenience." Nick Tiscornia

Legal Impact

“Termination for convenience” gives the customer, or both parties in some cases, the ability to wake up one day and say, “I don’t want to be a part of this anymore,”  and then unilaterally terminate the contract.

There is usually a notice period before the termination takes effect. In this case, the customer can terminate for any reason by simply giving 60 days’ notice to Guidespark.

It’s not like the customer can wake up one morning and terminate the contract that day. But a unilateral termination for convenience clause with only sixty-day notice is a lot of contract power in the customer’s hands.

This type of clause is quite common in more minor non-financial agreements like NDAs.

But this clause is severe and highly uncommon in larger financial contracts like this one.

Imagine the dynamics of customer relations with this clause. The vendor might wake up in a cold sweat every morning checking their email to discover if the customer is terminating the contract. This clause is highly “non-standard” in larger financial agreements.

Financial Impact

From an accounting perspective, there are challenges with a “termination for convenience” clause. The main question is, how will it affect the length of the contract?

Also, do you recognize this as a 60-day contract, which hugely impacts revenue projections over the next year or two? Do you recognize the revenue on a daily or monthly basis?

If there are severe penalties for termination, as there are in this contract, can you then characterize it as a one-year contract? For example, what if the customer does not get the return of any hefty upfront fees when they cancel? With a severe enough penalty, the accountant is likely not to classify this as a short-term contract.

On the other hand, if the customer can recoup all fees upon cancelation, this might be considered a 60-day contract from the seller’s perspective.

A revenue accountant must interpret factors like larger non-recoupable fees, penalties, remaining fees, and other issues to correctly determine the length of the contract from an accounting perspective and how to recognize the revenue.

"You want to get the cash in the company, you want to start recognizing the revenue as soon as possible after the signature on the contract." Andrew Antos

Accounting is not retroactive, so this clause needs a skilled and nuanced interpretation by the revenue accountant.

Workday’s Right to Reduce Clause

Legal Impact

Workday’s contract has a “Right to Reduce” clause that allows the customer to reduce the order amount during the contract. Legally this is not difficult, but from a revenue recognition perspective, this is more than challenging.

In this contract, Workday sells the customer more than 66,000 bundled subscriptions of its cloud-based management software. And it gives the customer the option of reducing the number of subscriptions, subject to some terms and conditions, during the contract term.

"I might account for the contract at a lower value for the entire contract until that option expires, or until they exercise that option." Nick Tiscornia

This option is unilateral in the customer’s favor. There is a date for making the decision, along with terms for reducing the number of subscriptions. By using this type of clause, you are saying to customers that they can order $1,000,000 worth of product and then mid-contract reduce the amount to a $750,000 or lesser purchase.

This is a severe clause that is not standard in similar agreements. It squarely gives a lot of power to the customer.

Financial Impact

So how does a revenue accountant analyze and characterize a contract with a reduction option in it? 

Part of the subjective contract assessment includes the usual questions for the company. What are we going to deliver? What are our responsibilities as the entity?  What are the customer’s responsibilities?

But deciding the impact of the contract and its revenue on the company is more complicated. It pivots around the reduction option, and the revenue account now has to quantify other issues, such as:

  • What are the odds of the customer reducing the contract amount?
  • When would that happen?
  • How much might it be?
  • What are the financial best and worst-case scenarios?

Eventually, the accountant is going to have to make a judgment call. Other factors can be included, for instance what similar customers with similar contracts have done. 

The recognition of revenue and characterization of the contract time frame will be a subjective call by the accountant. And the accountant might lower the contract’s value until the exercise or expiration of the option to reduce. This clause presents few legal issues. But from an accounting perspective, it is a puzzle to be solved.

Better Together Than Apart

A contract is just a way to record the rights and obligations of the two parties regarding a business transaction they would like to transact with each other. Lawyers want to make sure terms are legal and express the client’s wishes, and accountants want to record the finances correctly.

But, the company is in business to make a profit and wants to recognize revenue and cash flow to the fullest extent as soon as possible after signing the sales or service contracts. This can only happen if the accountant and lawyer work together from the beginning of the negotiation process.

The three clauses reviewed in this episode were all well-defined legally. But, they all limited the time or financial scopes of the contracts and were therefore adverse to the goal of revenue recognition and profit.

Lawyers need to be aware of the downstream financial implications of the clauses they draft. Accountants need to work with lawyers early in the negotiating process to explain the financial impact of various clauses and strategies. 

Drafting these clauses well is critical because management, investors, and shareholders use revenue recognition, cash flow, profit, and other financial projections to value companies.

While the legal and accounting departments typically do not work closely with each other, they should. If they work separately, you will end up with revenue-damaging clauses. But by working together, they can create well-drafted contracts that optimize cash flow and revenue recognition.

Download K-Notes Now

Show Notes

THE CONTRACTS:

Master Subscription Agreement with Junyo

Master Subscription Agreement with Guidespark

Master Subscription Agreement with Workday

THE GUESTS: 

Andrew Antos is the Founder and CEO of Klarity, a company that helps revenue accounting and billing teams to automate their contract review and accounting documentation process.

Nick Tiscornia is a founding member of Klarity, and also works as their Director of Business Development and their Advisor.

They can both be found at www.tryklarity.com or on LinkedIn: Andrew Antos, Nick Tiscornia.

THE HOST: Mike Whelan is the author of Lawyer Forward: Finding Your Place in the Future of Law and host of the Lawyer Forward community. Learn more about his work for attorneys at www.lawyerforward.com.

If you are interested in being a guest on Contract Teardown, please email us at community@lawinsider.com.

Transcript

Andrew Antos [00:00:00] What may be completely fine from a legal perspective can actually have significant implications for your customers.

Intro Voice [00:00:07] Welcome to the Contract Teardown show from Law Insider, where legal experts tear down contracts from some of the most well-known companies and high profile executives around the world.

Mike Whelan [00:00:21] In this episode, attorney Andrew Antos and accountant Nick Tiscornia tell us why the money language matters in contracts. They review three clauses from three different master services agreements to underline how your drafting language choices can impact the money team. This is so important for proving your company’s profitability as you contract. So let’s tear it down.

Mike Whelan [00:00:48] Hey, everybody, welcome back to the Contract Teardown show from Law Insider. I’m Mike Whalen. The purpose of the show is exactly what it sounds like. We take contracts, we beat them up. We’re a little mean to them, occasionally finding the good. I’m here with a couple of friends in a special episode because there’s three of us. I’m here with Andrew Antos and Nick Tiscornia. We are going to do something weird. We are talking through three documents. Let me show you what these guys are. They are all master subscription and services agreements. One of them comes from a company called Juneo. The other one comes from Guide Spark, and the third one is coming from Work Day. So these are all available on Law Insider will make them available in the post. But to you guys, let me ask you, why are we looking at these documents, Andrew? What’s special about these three master services agreements?

Andrew Antos [00:01:40] Yeah. So what’s really interesting is that as lawyers like, we often think about the legal implications of the language that we’re negotiating or putting in agreement. But the really interesting thing is that once we actually get that agreement signed, there’s a lot of accounting implications. And the reason why we’re looking for these three different agreements is that they have three different clauses that actually have pretty significant accounting implications. And so if you’re a business or negotiating on behalf of a business as a lawyer, it’s actually important to understand that what you might be negotiating with might be completely fine from a legal perspective and actually have significant implications for your customers. And so what we are going to what we’re going to do is we’re going to look at these three different contracts and three different clauses and walk through what those implications might be and why it’s important to know this.

Mike Whelan [00:02:39] That’s right, Andrew, with the T is we are doing like a Venn diagram of Naderi. Where combined it, we’re crossing the streams to make a Ghostbusters reference that you guys are probably too young to get. But yeah, we are bringing two kinds of nerd together. That’s why we have both Andrew and Nick. So. Andrew, let’s talk about you quickly. Why you and we’ll talk about why, Nick, why are we discussing this with you in particular these documents with you?

Andrew Antos [00:03:04] Yeah, totally. So, you know, I was a corporate lawyer in my previous life, so originally from Europe and came to the U.S. five years ago to do my film at Harvard. And as a corporate lawyer, I had to review a lot of documents, not just agreements, but like all kinds of documents, and I always wanted to automate as much of it as I could. And I met a guy at MIT who was working on natural language processing intent, and we decided to automate document review for the world. And we spent years building this natural language processing platform that can understand the type of a document. And then we started looking for like, what are the best applications for this right? Our initial logic was like, if we people are reading a lot of documents every day, if we can help them not having to read all of these things again and again, then that could be a really big impact on the world. And so we built that platform and then we started looking for use cases. And I met Nick through a friend who was on the legal team at Slack, where Nick was at that time. And Nick was on the revenue accounting team. And I started talking to him about his document review workflows. And we ended up working together.

Mike Whelan [00:04:18] Yeah. Nick, we got a brief taste of your background there. Tell me about your background and how it relates to the documents we’re talking about today.

Nick Tiscornia [00:04:25] Yeah, absolutely. So my background is 100 percent in accounting until I until I came to clarity. So before clarity, I was at Slack for three years went through SC six of six adoption, which is the revenue accounting standard that every company that has a contract with the customer has to conform to. Went through the IPO there as well before that was at a company called Riverbed Technology. In a similar capacity at both companies, I ran the Technical Revenue Accounting Team, which was in charge of reviewing the MSOs Master Agreements Order forms purchase orders with their customers in order to validate that those contracts and the accounting related to those contracts were in line with AC 6.6, as well as the policy that each company had developed for revenue accounting specifically. Before that, I was at in the audit practice. And a couple of other places, so really a career focused in accounting.

Mike Whelan [00:05:22] Well, thank you, guys. So what we’re going to do now is go to the actual documents. I’m going to start first with this one in Juneo. And what I’ll do is point out specific sections in these documents. And then you guys can talk us through real quick how there’s like this financial overlap that matters. And also the legal part. So in this first document, we’re going to jump down to 3.2, which has to do with acceptance. Andrew, tell me about this acceptance section in this document.

Andrew Antos [00:05:50] Yeah, absolutely. So acceptance clause basically says that the customer can inspect and review and test whatever you’re selling to them. So in this specific case, it’s software and services related to the software. And so basically, rather than just saying, Hey, I’m buying software and you’re start paying on the date when you sign the contract. What this actually says is that the customer can review, can test the software and can decide if it’s acceptable or if it’s not acceptable and if it’s not acceptable. It sets up a certain process on how can that be revised or revalidated? But like, if it really like if you don’t meet the test criteria as determined by the customer, ultimately it terminates terminates the contract. And so that’s the that’s the that’s the legal reading of that clause.

Mike Whelan [00:06:55] Hey, everybody, I’m Mike Whalen. I hope you’re enjoying this episode of the Ccontract Teardown show. Real quick, I want to ask you to do me slash you really a quick favor. Look down below. You’ll see a discount code to join the Law Insider Premium subscription. When you do that, you get access to more content like this. You’ll see webinars daily tips on contract drafting. Not to mention access to the world’s largest database of sample contracts and clauses. It will help you write better contracts faster if you want to do it. Right now, there’s a code below, so get there. Also, if you’re part of a larger team, if you’re in-house or in a law firm, just email us where at sales@lawinsider.com. We’ll make sure you get a deal as well. Come join us in the community. The code is below. Let’s get back to the show.

Mike Whelan [00:07:41] Yeah, Nick, tell me I’m looking at this and I don’t know that I’ve ever. Is this a common section? Actually, let me ask you, Andrew, is this like this sort of format where there’s the test and then sort of the rejection of the test? Is this a normal protocol in these kinds of contracts?

Andrew Antos [00:07:57] Yeah, it’s it’s pretty normal. I think like this class specifically is a little bit more aware than usual, and it’s a little bit more details in terms of the actual procedure and so on and exactly how it’s going to how it’s going to work. So it’s a little bit more prescriptive in terms of the process, which I actually see as a good thing. It means that that it’s it’s fairly certain how the procedure should work. But generally speaking, it’s it’s fairly representative. Most of the time, it’s going to be a little bit shorter, a little bit more ambiguous, but not conceptually different.

Mike Whelan [00:08:32] But Nick, moneywise this is bugging you. What’s bothering you about this section?

Nick Tiscornia [00:08:37] Yeah, absolutely. So an acceptance clause could give you pause to recognize revenue at all on that contract because if the customer has the option to review what you’ve delivered to them in this case, software and services and say, no, this doesn’t conform to the contract or what I would want to see in this product, they might not pay. You might not be able to even collect on that. So so you wouldn’t be able to recognize revenue until either that acceptance period has expired or passed or they give you an explicit acceptance of. We accept this, this this product, right? It’s a little different than like computer hardware or actual, you know, actual deliverables where you might have a set of specifications. And if you can prove that the product you delivered is in line with those specifications, even if the customer has this right to accept in line with those specifications and you can, you can prove that they’re in line, then maybe you can recognize revenue and make a case for yourself there. But if they have the ability to unilaterally tell you, I do not accept this, you might not be able to recognize revenue until they do give you that acceptance for services. It could be a little different, so you might put an extra section in that clause that says, you know, if you don’t accept the services that we provided, we have the right to rework that at our own cost. We can come back and provide those services again and make it conform to the contract itself. If that’s the sole remedy for the acceptance or non-acceptance by the customer, then it might not cause a redirect issue. So it’s kind of a gray area that you would have to assess. As an accountant, you know, do I think there’s a probability that the customer will not accept and that we won’t be able to get the fees and we won’t be able to recognize revenue?

Mike Whelan [00:10:29] So to make a terrible analogy, when I buy something from Amazon and then want to return it, there was revenue received. We can say, OK, you made money and you know, they paid it back where in this situation that ability to refuse, there’s some ambiguity around, like when did money get made? Which screws up the math, guys, and nobody wants that. So similarly, let’s jump over to the Guide Spark agreement. I’m going to jump down to six three termination for convenience. I just love the word convenience in a contract. Andrew, tell me about this section.

Andrew Antos [00:11:00] Yeah. So termination for convenience or sometimes call termination at well is basically the mother of all termination clauses, right? It gives the customer or both parties, in some cases, the ability to just wake up one day and say, I don’t want to be a part of this anymore and just terminate the contract. Right. Some have a period of termination, right? So in this case, they could actually serve six days. So it’s not like the contract will terminate. You know, if I wake up today and decide to terminate, it’s not going to terminate today. Still going to be six days. But I can just feel like like there’s no reason that I have to give. And that’s really nonstandard in bigger agreements like this one. It’s quite common and NDAs and, you know, very, very simple agreements that actually don’t involve an exchange of money, but for actual kind of like product related or services related agreements. This is pretty severe, right? And so like, think about being the customer here and you have all the power in this relationship, pretty much. And then conversely, as the as the one providing the product in this case, like you’re waking up in cold sweats every morning and just like checking your email, it’s like, did they terminate that? They terminated, they terminate. And so it’s that kind of a relationship and that’s super, super, super nonstandard.

Mike Whelan [00:12:31] That’s company ownership anyway. Well, and it says Nick in here company shall be responsible for payment of any amounts due through the end of the then current subscription term. What are you seeing here in terms of there’s a bit of talk about prepaid and unused fees. Where’s the money part that’s bugging you here?

Nick Tiscornia [00:12:47] Yeah. So there are definitely nuances to a termination for convenience. So, you know, the concept just from an accounting perspective, is that this is going to impact the the length of the contract, right? So if the customer has 60, you know, termination for convenience with 60 days notice and they can recoup all of the fees that are related to anything after those 60 days, then that might be considered or would be considered a 60 day contract from the entity’s perspective, so they can’t put any of the remaining fees on their books at all. Right. So it’s a 60 day contract short term, which is very impactful when you’re reporting how Mab revenue is going to look over the next year or two years or three years. If there is a significant penalty, which there is in this contract, indicating you will not get a refund for any of the prepaid fees that you’ve already given, that wouldn’t cause this to be a short term contract. You can actually say this is a one year contract, even if they cancel and stop using the product after 60 days or half way through the term. We can still recognize the revenue because they can’t get a get a refund on that, and there’s a few different types of nuances on that significant penalty. It could be a stated fee. It could be the remaining fees in the contract. The the main important factor for a termination for convenience for like a SaaS company, for example, is that at least none of the fees that are related to services provided through the termination date can be recouped right. So I’m recognizing revenue on a daily basis or a monthly basis. As long as I recognize revenue correctly for those months, I don’t have to do any retroactive accounting, then that’s OK, although I’m not putting the rest of the contract on the books. So that’s very impactful to from a perception perspective for four companies. Hmm.

Mike Whelan [00:14:38] And Andrew, jump into the workday contract. The third one, this one’s got all kinds of legal speak. You’re going to have to translate. For me, this section is number five, the right to reduce fees or SKUs. It’s an option. Talk to me about this. Explain the legal piece to this.

Andrew Antos [00:14:55] Yeah, total it. So an option if you look at option, it’s basically just a unit unit unilateral right of the customer in this case to decrease. How much product are they buying from you until a certain date? So option basically always needs to say. It needs to be a date until which you can exercise it. It needs to be always unilateral. It can only rest upon the decision of the of the customer in this case. And then there needs to be some kind of a description of what’s happening with the price or with the volume that has an impact on the price. And so what we’re basically looking at here is that the customer can, based on the changes in their business, can basically decide that they will be buying less product from at some point. And so this is a fairly again like an extreme, fairly like nonstandard way of handling a situation where the customer, for example, comes to you and says, we really want to buy this product from you, but we just don’t know how much of the product we need to buy, right? And so what you’re saying is, you know, let’s say that today you might be buying one million dollars worth of product, but then you have the option to decide, you know, in the next six months, for example, to say, I actually feel like buying only $750000 worth of the product. And so again, like the the interesting kind of coming out here is like the dynamic is that the customer is in the in the driver’s seat. Hmm.

Mike Whelan [00:16:41] Yeah. Nick, I feel like from my contract’s class in law school, if I was to say, what’s the purpose in a contract, it’s who’s paying how much and what are they getting like? This seems like it would really screw up your world. Tell me what you’re seeing on the money and why this these sort of options are messing up your math.

Nick Tiscornia [00:16:57] Yeah, absolutely. So every revenue accountant when a contract comes in has to assess, you know, what is the lack of this contract and how much? What are we going to deliver? What are our responsibilities as the entity? And what is the customer’s responsibility? What are they going to pay? And that could vary, right? It could be variable. And hopefully that’s stated in the contract and you can actually do an assessment up front. So I would say, you know, here’s exactly what’s in the contract. Here’s the options that are provided to the customer. I have to make a judgment call and say, Do I think they’re going to exercise this downturn clause? Do I think they’re not going to? I can use history of other customers or history with that customer to make that determination. But eventually I’m going to have to come up with an assessment and say, here’s what I think the contract will be for the term of the contract. And that could be one year, two years, five years. And I have to assess that up front and recognize revenue in line with that. Now, every once in a while, I have to do an additional assessment, right? So whether it’s when the option expires or on a quarterly basis or on an annual basis, and that would be up to your your accounting policy. And you know, again, like many things in AC 66, there’s some subjectivity here. But as long as you can explain yourself to the auditors and they think that it applies to the standard correctly, then then you should be good to go. But you know, periodically I’m going to reassess this and say, Have you have things changed? Do I think that the contract will change in any way based on new information that I’ve I’ve received over this time? So, you know, if there is a downturn clause, I think it’s likely that they’re going to exercise that option. Then I might account for the contract at a lower value for the entire contract until that option exercises or until, or, excuse me, expires or, you know, until they exercise that option.

Mike Whelan [00:18:51] Well, Andrew, I’m stepping back for a sort of big principles, and I feel like we’re having a lot of conversation about how to make the accountants happy. And like the boss is probably like the accountants more than they like the lawyers. But let’s not act like we’re all going to the company party and we’re the cool kids, right? Why, from your perspective, in the complex environment of a company and of a deal like this, why is it so important to make the accountants happy to get this kind of clarity for the accountants to do their work?

Andrew Antos [00:19:21] Yeah, I mean, if you think about it like contract is just basically a way to record rights and obligations of two or more parties with respect to some kind of a business transaction that they want to write. And so like in this case, the company wants to sell whatever they’re selling for a certain amount of money. And because they’re better at building whatever they’re selling or providing it, and they’re going to make a profit, right? And making the profit is really important, especially with relation to your cash flow. Right. So you want to get the cash in the company, you want to start recognizing the revenue as soon as possible after signature of the contract and the kind of fullest possible scope. And so the commonality that basically we’re talking about here with all these three clauses is that they seem to somehow reduce the scope of the. Entourage, either from a time perspective or from a value monetary value perspective. And so if you’re a lawyer that’s just negotiating the contract to get that contract done and kind of like you don’t look left or right, like, what are they implicate? What are the actual tangible implications for for the business? That’s actually pretty hurtful for the company because you’re actually not achieving the main objective of getting of getting to a contract that will allow the company to sell what they’re selling and getting the revenue in the maximum possible state. And so from that perspective, it’s really important to understand what are the downstream implications of these actions, right? Those those implications. You kind of need to think about it in the negotiations process because once you get once you get to assign contract, the accounting team will operationalize it somehow. But it might actually be hurting the company. Yeah.

Mike Whelan [00:21:19] As we’ve talked about on the show before, if you’re going to turn contracting into a strategic advantage for the company you’re working with, you’ve got to think about the supply chain, all the people who are involved in turning that advantage into something that turns into profit. So Nick, let’s say we’ve got an attorney who’s in-house, who’s drafting and who wants to be mindful of that supply chain and make the accountants have it. Nick, how do we make the accountants happy? I mean, they just complain. We just want you to smile, Nick.

Nick Tiscornia [00:21:49] Right? Yeah. I mean, you know, at the end of the day, the accountants job is to get the accounting right. You know, no matter how the contract was negotiated or what’s in the signed contract, that’s going to be the source of truth. That’s how you’re going to apply the accounting standard and your and your policy. However, an accounting or revenue account specifically can be very influential over that negotiation process because they can take that information that they have in sign contracts and go back to the legal department and the sales group and say, Hey, you know, we’re really negotiating these terms that are impactful to our business, and it’s impacting how investors look at us or how, you know, management executive management is is assessing the company as a whole. So it really has a macro impact. And I think open lines of communication between these groups, which is sometimes very difficult depending on the nature of the company, is super important, right? You have to be able to have that relationship to go back and say, you know, this is this is how this is going to impact what we’re doing from a company goals perspective. And I think, you know, again, an accountant can do the accounting no matter how you do it, but you want to make sure you’re you’re achieving what you want to as a company.

Mike Whelan [00:23:02] Well, I respect this noble effort to become the cool kids at the party. Thank you, Andrew. Thank you, Nick. Andrew, if people want to reach out to you and learn more about your work and how to make the accountants happy from your perspective, what’s the best way to get in touch with you?

Andrew Antos [00:23:16] Yeah, please. I did reach out through our website, which is www.tryklarity.com. So try klarity dot com. Or you can just contact myself or nick on LinkedIn. I’m Andrew Antos and Nick Tiscornia. We respond to every single LinkedIn message that we get, so please reach out there

Mike Whelan [00:23:42] and nick any other info on how to connect with you and maybe invite you to all the parties.

Nick Tiscornia [00:23:50] I think Andrews summarized it well, I can always be reached at Nick@klaritylaw.com As well. Awesome.

Mike Whelan [00:23:57] Well, I appreciate you guys joining us and I appreciate all of you watching. Remember how important it is to make your accountant happy. You got to make everybody happy on the supply chain. We will see you guys on the next episode of the contract teardown show and information for this episode, including links to the contracts, will be over at lawinsider.com/resources. We’ll see you guys next time. Thank you.

Andrew Antos [00:24:20] Thanks so much, Mike.

Contributors

Andrew Antos
Founder, CEO
Nick Tiscornia
Director of Business Development
Mike Whelan
Chief Community Officer

You may also like

Master Service Agreement with Laurie Ehrlich

In this episode of the Contract Teardown, Laurie Ehrlich walks through an elaborate Master Service Agreement that’s used to document embedded operations. She highlights an overly broad scope of work, a risk-shifting due diligence clause, and a practical benchmarking process.

Event Liability Waiver with Elizabeth Cronin

Attorney Elizabeth Cronin highlights the responsible use of liability waivers in the events business.