The benefits of effective contract management are large-and quickly realized
Companies report that the major benefits of effective contract management lie in the ability to minimise risk and maximise the value of relationships. It helps
● Understand and control risk
● Realise huge cost savings
● Uncover opportunities to enhance revenue
● Gain administrative efficiency
● Improve customer service
| Better understanding and management of risk helps a company meet regulatory requirements and mitigate the impact of low-probability, high-impact events. This benefit may not materialise as day-to-day savings. But effective risk management could one day save the company. At the same time, effective contract management can unleash massive cost savings. One FTSE 100 company achieved savings of £4.7m with some of their key IT suppliers where opportunities arose in the course of manually renewing or realigning contracts. With an IT budget of over £100m their belief is that many more cases could have been reviewed, and equivalent savings made, if they had the benefits of a proactive contract management tool. | "Senior managers state that improvement from contract management would contribute to better risk management (69%) and reduced costs (89%)-both items high on the executive agenda. A smaller-but still significant-23% believe that it would also lead to higher revenue." |
Another benefit comes in the form of cutting the number of non-compliant transactions, and hence reducing the resulting time, expense and poor effect on reputation. An effective system will result in a higher proportion of trade made on-contract leading to improved trade relationships.
Opportunities to enhance revenue can also be uncovered. The IACCM identified one firm whose sales employees were prepared to guarantee an additional 5% of revenue if they were relieved of time-consuming administrative duties related to contracts.
| Gains in administrative efficiency and customer service will also result. Service will benefit from faster creation of customer contracts and more efficient handling of their queries. And taking routine tasks away from skilled staff will reduce man-hours and free them up for higher-value activities. You will be able to store, share and reuse the knowledge and finely-honed contract language that-through hard work and difficult experience-has generated best practice in your business. | An earlier PwC study found that by eliminating inaccuracy and non-compliance, contract management costs could be reduced by 33% -41%. This results in savings equating to 2% of total annual costs |