An independent study conducted by the International Association for Contract & Commercial Management (IACCM), concluded that poor contract management can cost companies upwards of 9% of their total annual revenue. Consistently, these four areas are identified as the largest components of this revenue loss:
Often, organizations choose the path of least resistance. Contract renewals are no exception, especially when a previous contact/agreement with an auto renewal clause has already been approved by leadership. In fairness, leaders and managers don’t have the time or resources to research each vendor agreement and vet for better opportunities with a new vendor partner. However, each time an auto renewed contract is set into action losses can occur. A better solution would be outsourcing this process to trusted vendor management consultant who can personally manage and negotiate each contract to make sure your organization is receiving the best and most cost-effective vendor solution.
Many organizations have compliance measures that surround their agreements. Not verifying these vendors meet those compliances can lead to higher costs or worse yet severe legal repercussions to the organization. Additionally, mismanaging the terms of vendors contracts can lead to additional penalties for the organization. VMS consultants are able to focus on compliances making sure your agreements comply with all state, local, and federal regulations.
Often, when a vendor is pursuing an agreement with a new client, they focus on cost saving measures which can reduce a company’s overall bottom-line. This is an attractive pitch to organizations, which are always looking for new ways to be more efficient and cost effective. However, a company’s internal teams are usually not fully briefed on their part of the process. Additionally, these internal teams are usually not fully trained in the steps of managing the new agreement process. When internal teams don’t effectively manage the new cost saving measures in agreements, Company’s end up losing big potential savings.
Managing the contract is also important when significant costs are associated with delaying outlined timelines. Making sure vendors stay accountable for the timelines agreed upon could save large cost implications for the organization. Conversely, an outsourced vendor management team can cost saving solutions are implemented and are continually monitored to guarantee promised results.
When contracts are not managed effectively, significant redundant charges can be missed in annual reviews. Double charges and billing discrepancies are often missed when resources are not continually monitoring to audit vendor agreements. A VMS consultant has the ability to take a breadth of billing statements and thoroughly review inconsistencies to reduce redundant costs. In addition, they will monitor future billing to ensure similar redundancies don’t emerge months later.
These costs are something every company experiences, but are completely avoidable. All that is needed is an expertise in the auditing and management of your businesses current agreements. Limitless-CRS has a proven vendor management solution that eliminates these costs and returns that revenue to your organization. Click here to reach an explanation of our VMS process to understand how these costs can be reduced.