Effective dates vs. commencement dates

Be in the know or it can cost you big time

So what if you mix up your terminology – aren’t “effective” and “commencement” dates on a contract pretty much the same? No, they’re not, especially if you’re using Maple Street’s CADi Contract Management Software. 

Maple Street defines the effective date as the date the contract becomes legally binding. We define the commencement date as the date the term of the contract begins (AKA the date the “clock starts ticking” on the initial contractual commitment).

Sometimes these dates coincide, but frequently, they don’t. Not knowing which is which can cost you big time if you miss the deadline for auto renewal or termination.

Here are a few more important dates and terms that effect the life of your contract:

  • Renewal/termination date – The date the initial term ends and the renewal term begins unless you terminate on that date.
  • Notice period – The specific amount of time prior to the renewal/termination date that you must give notice regarding your renewal intentions (i.e., 30 days, three months)
  • Notice of intent date (NOI date) – The deadline to give your vendor notification that you want to AVOID auto-renewal or auto-termination. Without this notice you have no control over what happens to your contract.

It’s so important to correctly identify the commencement of a contract so you can determine when the current term will end, give notice of intent on time and get the results you want, either renewal or termination.

Here are some questions our clients ask about effective and commencement dates. You may be wondering the same things.

Isn’t the commencement date in the contract?

Oftentimes, a contract will provide a DEFINITION of when the clock starts on the initial term, but Maple Street doesn’t have enough information to use that definition accurately to calculate the month, day and year this event occurs. These exact dates can only be made available to Maple Street by asking the vendor and client when these events occurred.

If Maple Street has the effective date, why do you need the commencement date?

If a contract is flagged in CADi as incomplete due to a missing commencement date, it’s because the effective date and commencement date are different, and we don’t have when the clock starts on the initial term.

When the commencement date is missing, what date is Maple Street using to trigger alerts?

If the commencement date is missing, we use conservative substitution dates in CADi. We feel that it’s better to send CADi alert emails and give vendors notice too EARLY than too LATE.

Why do we need the commencement date if we’re not leaving the vendor?

What if you decide you want to terminate the contract in the future and we don’t have the correct dates in CADi? Always put yourself in a position to have the upper hand.  You don’t want things to go sour with a vendor before you have another plan in place.

Do all contracts have commencement dates?

You might see in the commencement date section in CADi, it shows an “N/A” rather than a date because the contract is one where the legally-binding event and the clock starting on the initial term event are the same date.

How much do dates matter?

If alert dates are missing or incorrect, then contracts can roll over and you can get stuck in another term. When planning for vendor transition, having the correct date helps you to coordinate the start date with a new vendor and an end date with the old vendor. It helps you avoid lapse in coverage or double coverage.

Do dates impact negotiation?

For the negotiation process, knowing the correct dates impacts a realistic timeline to implement changes, including the time needed to replace a vendor (since it could be a much longer timeframe to replace a vendor than the amount of time you’re required to give notice to end the contract).

The easiest way to keep track of your contract dates is through Maple Street’s Vendor Advantage System®, which includes our proprietary CADi software. This system’s strategic plan alignment and vendor planning helps you choose the right vendor, contract well and measure and monitor your vendor services, while making short work of due diligence, including contract management and those critical dates.

With the Vendor Advantage System®, you’ll reduce expenses, improve vendor performance and manage risk, guaranteed. Call 800-513-6839 or email mssales@maplestreetinc.com to get started. To learn more, visit www.maplestreetinc.com/learn.