The hidden cost of your contracts: Unlocking savings with Contract Management
Contracts are the backbone of every organization. They define relationships with suppliers, clients, and partners, ensuring operations run smoothly. However, poorly managed contracts can come with hidden costs that significantly impact a company’s financial health, operational efficiency, and compliance.
This blog will uncover these hidden costs, explain their implications, and share best practices for addressing them.
The common hidden costs of contract mismanagement
Missed renewal dates
Failure to track renewal dates can lead to costly auto-renewals or lapsed services. For instance, outdated or overpriced agreements may auto-renew without renegotiation, draining your budget and locking your business into unfavorable terms.
Duplicate contracts
Often, multiple contracts with the same supplier result in fragmented spending and reduced negotiating power. This leads to unnecessary overspending and missed opportunities for consolidation.
Administrative time wastage
Manual processes, such as locating or reviewing contracts, slow procurement cycles and create inefficiencies across teams. Time spent grappling with outdated systems is better invested in strategic decision-making.
Forecasting failures
A lack of visibility into future contract commitments often leads to inaccurate budget forecasting, which in turn impacts financial planning and strategic initiatives.
Late fees and penalties
Missed payment terms or non-compliance with financial obligations may incur late fees, creating an avoidable expense that strains budgets.
Non-compliance issues
Neglecting negotiated terms, service-level agreements (SLAs), or regulatory obligations can result in penalties or missed financial targets. Non-compliance not only impacts profitability but also poses legal and reputational risks.
Poor reporting and KPIs
Disjointed systems make it challenging to monitor key performance indicators (KPIs) and assess overall contract performance. Without clear reporting, procurement teams lose valuable insight into how contracts contribute to business objectives.
Lost opportunities for renegotiation
Contracts nearing expiry provide an opportunity to renegotiate better terms or consolidate agreements. Without visibility into deadlines, these opportunities are often overlooked, resulting in lost revenue.
Regulatory and audit risks
Lacking access to a clear audit trail makes it challenging to demonstrate due diligence during audits, thereby increasing legal risk and reputational damage.
The financial and operational impact of poor contract management
The consequences of these hidden costs extend far beyond numbers. Financially, they drain budgets, decrease negotiating power, and hinder profitability. Operationally, they slow processes, disrupt service delivery, and create misalignment across departments.
From a compliance standpoint, they expose organizations to legal and reputational risks that can harm their long-term sustainability.
Consider this simple fact from the National Contract Management Association study: over 75% of large companies struggle to locate their contracts and rely on manual or partially automated processes. With tens of thousands of contracts in play, this is a significant financial and operational burden.
Solutions for effective contract management
To address these challenges, organizations need a strategic and technology-driven approach. Here’s how to tackle poor contract management and unlock cost savings.
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Implement a centralized repository
A centralized contract repository ensures visibility and access across departments. It eliminates duplicated efforts and creates a single source of truth for all contracts, improving transparency and alignment.
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Automate renewal and compliance alerts
Automated notifications ensure companies never miss renewal milestones or compliance obligations. This feature reduces reliance on manual tracking, improving efficiency and better risk management.
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AI-powered insights and reporting
Real-time reporting, powered by AI, helps procurement teams identify inconsistencies, uncover savings opportunities, and benchmark contract performance against KPIs.
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Audit trails for transparency
Maintaining an automated audit trail enhances accountability and ensures adherence to procurement policies. It also simplifies regulatory compliance and audit processes.
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Pre-approved templates and clause libraries
Pre-approved templates and clause libraries streamline contract authoring, minimize errors, and ensure all departments utilize updated, legally approved terms.
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Integration with eSourcing and digital signatures
Seamless integration with eSourcing tools converts event data directly into new contracts, reducing manual inputs and errors. Digital signature capabilities further streamline approval workflows, enabling faster and more efficient execution.
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Boost collaboration with workflow management
Contract workflows define the roles and approval stages for different contract types. By involving relevant stakeholders early on, enterprises achieve alignment and reduce delays in approvals or renewals.
Scanmarket by Unit4: A strategic partner in contract management
Scanmarket by Unit4 is here to empower businesses with a user-friendly, scalable, and intelligent contract management solution. Designed for enterprise needs, our platform offers features such as automation, AI-driven insights, and real-time tracking to address the challenges of poor contract management directly.
Key benefits
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Reduced cycle times
Digitize the entire contract lifecycle, from creation to execution, to significantly reduce lead times.
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Improved compliance
Set alerts to ensure critical dates and obligations are met, safeguarding against penalties.
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Enhanced cost savings
Spot overlapping contracts, identify renegotiation opportunities, and consolidate agreements for maximum savings.
With an integrated, centralized solution like Scanmarket, organizations can move confidently toward operational efficiency, comprehensive compliance, and strategic cost savings.
Take control of your contracts today
Poor contract management might be costing you more than you think, but it doesn’t have to. By adopting best practices and leveraging advanced solutions, such as Scanmarket by Unit4’s Contract Management platform, you can unlock significant savings, eliminate inefficiencies, and enhance compliance.
See how advanced technology can simplify the entire contract lifecycle for your business. Talk to our sales team today and take the first step toward transforming your contract management strategy.