Contract management’s value: a $500 million example

Is there any doubt that contract management can lead to bottom-line results? OK, sure, there may be some doubt – among organizations that don’t have any contract management practices.

savings image
Photo Credit: 401(K) 2013 via Compfight cc

But here’s an example from the Commitment Matters blog (written by Tim Cummins, CEO of the International Association for Contract & Commercial Management). In a post back in June citing the growing scrutiny of contracts among IACCM members, Cummins notes an example of a company that decided to review its sales contracts more thoroughly.

What the company found was surprising: 29 percent of its sales contracts were underperforming, bringing in an average of 22 percent less than projected revenue. The company identified that main areas of “leakage,” and now “a plan is in place to tackle this leakage, with the expectation that it can be halved this year. That will bring approximately 2.5% extra revenue to the bottom line – or around $500 million.”

While no one can say with certainty if the company mentioned above will reach that goal, the example nonetheless shows how much upside there is in contract review and scrutiny.

The process of contract management, however, starts with centralizing information and putting scattered contracts and related records in electronic form. Using a solution like Contract Assistant is an easy-to-use option for users of all sizes.

How could your company benefit like the one in the above example? First, after capturing all sales contacts into the database, you can track activity (such as paid invoices) in Financial Summary fields, or even just as text notes. The Contract Assistant administrator can also set alarms to act as reminders of when to check for payments made on the contract. Over time, you can actually record a history of payments on a contract. With searchable fields, it’s easy to look up the information on a contract, and advanced search functions can finely narrow the scope of those searches as well.

Once this information is collected, administrators can flag the attention of a manager in sales to review the summaries and payments made on sales contracts. The results may end up helping your organization or company find out the true performance on those contracts.

It may not produce a $500 million bonanza, but it may lead to better sales performance. It all starts with a system to centralize key contract data, which could end up giving your enterprise a better bottom line.