Unlocking Cost Savings and Maximising Revenue: The Essential Role of Optimised Contract Management
Managing contracts effectively is crucial not just for maintaining smooth operations, but also for optimising costs and maximising revenue. However, many businesses still struggle with poor contract management practices, which can lead to missed opportunities for cost savings and revenue generation. Whether it's failing to take advantage of early payment discounts, overlooking revenue opportunities, or incurring unnecessary expenses due to auto-renewals or unfavorable contract terms, the consequences of inadequate contract management are significant.
The good news is that these challenges can be addressed through the implementation of a Contract Lifecycle Management (CLM) system. CLM systems help businesses identify and eliminate unnecessary costs, optimise revenue, and ensure that contracts are managed and executed efficiently. In this blog post, we will delve into the pain points associated with poor contract management, explore how a CLM system can resolve these issues, and highlight the key benefits of unlocking cost savings and maximising revenue through optimised contract management processes.
The Costly Pitfalls of Poor Contract Management
Contracts are the foundation of business relationships, defining the terms, obligations, and benefits for all parties involved. However, when contracts are not managed properly, businesses can face several costly pitfalls. These include missing out on cost-saving opportunities, overlooking revenue opportunities, and incurring unnecessary expenses due to unfavorable terms or lack of proper tracking.
1. Missed Cost-Saving Opportunities
One of the most significant issues businesses face with poor contract management is the missed opportunity to save costs. For example, many contracts offer early payment discounts, where the vendor provides a financial incentive to the buyer for paying invoices before the due date. However, without a system to track these opportunities, businesses may miss the deadline, thereby losing out on potential savings. Additionally, contracts often include clauses that allow for price adjustments or discounts based on volume, performance, or other factors. Without proper monitoring, these opportunities can easily be overlooked, resulting in unnecessary expenses.
2. Overlooked Revenue Opportunities
Revenue leakage is another major concern for businesses that do not have an effective contract management system in place. This can occur when businesses fail to fully execute the terms of a contract, such as not billing for all services rendered or not enforcing penalties for late payments. Additionally, contracts that automatically renew without proper review may lock the business into outdated terms that no longer reflect market rates, thereby missing out on potential revenue increases. Furthermore, without a centralised system to monitor contract milestones, businesses might miss opportunities to renegotiate terms that could be more favorable or better aligned with current business objectives.
3. Unnecessary Expenses Due to Auto-Renewals and Unfavorable Terms
Contracts that automatically renew without a thorough review can result in businesses being locked into unfavorable terms. For example, a service agreement might automatically renew at a higher rate or under terms that are no longer beneficial. Without a CLM system to track renewal dates and terms, businesses might continue to incur unnecessary expenses. Additionally, poorly managed contracts can lead to paying for services or products that are no longer needed, simply because the contract was not properly terminated or renegotiated before the auto-renewal period.
The Solution: Optimised Contract Management with CLM Systems
The challenges associated with poor contract management are significant, but they are not insurmountable. A CLM system can provide the tools and processes needed to manage contracts more effectively, thereby unlocking cost savings and maximising revenue.
1. Identifying and Eliminating Unnecessary Costs
One of the key benefits of a CLM system is its ability to help businesses identify and eliminate unnecessary costs. By centralising all contract-related information in a single system, businesses can easily track and monitor key contract dates, such as payment deadlines, renewal dates, and review periods. This ensures that early payment discounts are not missed, auto-renewals are reviewed before they take effect, and any price adjustments or discounts are applied correctly.
Additionally, a CLM system can automate reminders and alerts for critical contract milestones, ensuring that contracts are reviewed and renegotiated in a timely manner. This proactive approach to contract management helps prevent unnecessary expenses and ensures that contracts remain aligned with the business’s current needs and objectives.
2. Optimising Revenue Opportunities
A CLM system not only helps reduce costs but also optimises revenue opportunities by ensuring that contracts are managed and executed efficiently. With a CLM system, businesses can easily track and enforce all contractual obligations, such as billing for services rendered, applying penalties for late payments, or adjusting pricing based on contract terms. This ensures that the business captures all potential revenue from its contracts.
Moreover, a CLM system can provide valuable insights into contract performance, allowing businesses to identify trends and opportunities for renegotiation. For example, if a contract is consistently underperforming or not delivering the expected value, the business can take action to renegotiate the terms or explore alternative solutions. By optimising contract management processes, businesses can maximise their revenue potential and improve overall financial performance.
3. Ensuring Favorable Terms and Preventing Unnecessary Renewals
A CLM system plays a crucial role in ensuring that contracts are reviewed and renegotiated before they automatically renew. By providing visibility into upcoming renewal dates and contract terms, the system enables businesses to take a proactive approach to contract management. This includes renegotiating terms to reflect current market conditions, terminating contracts that are no longer needed, or exploring alternative vendors or service providers.
Additionally, a CLM system can help standardise contract terms across the organisation, ensuring that all contracts are aligned with the business’s strategic goals and objectives. This reduces the risk of unfavorable terms being included in new contracts and ensures that all contracts are reviewed and approved according to a consistent set of criteria.
Key Benefits of Optimised Contract Management
The benefits of optimising contract management with a CLM system are clear. By streamlining and automating contract-related processes, businesses can unlock significant cost savings, maximise revenue, and ensure that contracts are managed in a way that supports the organisation’s overall goals. Here are some of the key benefits:
· Cost Savings: By identifying and eliminating unnecessary costs, businesses can save money on auto-renewals, missed discounts, and unfavorable terms.
· Revenue Optimisation: By ensuring that all contractual obligations are met and all revenue opportunities are captured, businesses can maximise their revenue potential.
· Improved Efficiency: By automating contract management processes, businesses can reduce the time and effort required to manage contracts, freeing up resources for other strategic activities.
· Better Compliance: A CLM system ensures that all contracts comply with legal, regulatory, and internal policy requirements, reducing the risk of non-compliance and associated penalties.
· Enhanced Visibility and Control: A centralised CLM system provides visibility into all contracts, enabling businesses to track performance, monitor key dates, and ensure that contracts are aligned with the organisation’s goals.
In today’s competitive business environment, effective contract management is essential for unlocking cost savings and maximising revenue. Poor contract management practices can lead to missed opportunities, unnecessary expenses, and unfavorable terms that hinder business performance.
SaaSam is a recognised partner of Agiloft and we have been leveraging Agiloft’s no-code CLM platform for 12+ years. By implementing an Agiloft Contract Lifecycle Management (CLM) system, businesses can optimise their contract management processes, ensuring that contracts are managed and executed efficiently. This not only helps reduce costs and maximise revenue but also improves overall operational efficiency and compliance.
Don’t let poor contract management hold your business back. Invest in a CLM system and unlock the full potential of your contracts. With automated workflows, centralised control, and proactive management, you can ensure that your business never misses a renewal or an opportunity to renegotiate favorable terms.
If your organisation would like to make the jump to a higher level of contract management maturity with the Agiloft Contract Lifecycle Management solution, reach out to SaaSam here.
About SaaSam
SaaSam is a global software consulting and implementation provider, with a proud association and history of delivering solutions through software. SaaSam has been leveraging some of the world’s most innovative no-code and low-code software platforms that empower our customers to drive business outcomes.
SaaSam is headquartered in Cambridge, New Zealand. We have a team of 26 expert employees spread across five company offices in New Zealand, Australia, the United Kingdom, the European Union (Ireland), and the United States. SaaSam has long-standing relationships with a diverse range of successful organisations across the following industries: IT and Telecommunications, Finance and Banking, Primary Industries (mining and horticulture), Pharmaceuticals and Biotechnology, Utilities, Government bodies and many others.
Our culture, driven by values of Integrity, Innovation, Commitment, Passion, and Accountability, embodies the Kiwi spirit.
