Clear agreements with suppliers, employees and any other party with which you enter into a specific business relationship. Are essential to the operating result. Good contract management will even significantly increase your result. In this article, we emphasize the importance of well-founded contract management. In addition, we discuss some tips to actively get started as an entrepreneur.
The value of good contract management
Research has shown that a weak or missing contract administration has a negative impact on the operating result. For example, the International Association for Commercial and Contract Management (IACCM) calculated that the loss could be as high as 9.15%.
In addition to financial profit, there is also profit to be gained in many other areas with well-thought-out contract management:
- Time savings
- Better service
- Limited legal risks
- In the event of a disrupted relationship with a supplier, employee or any other relationship, it is possible to fall back on previously made agreements
Reason enough to take a critical look at your existing and future contracts.
You can lay a strong foundation with the following steps:
1. Appoint a contract manager
Good contract management starts with a clear division of tasks and roles and the associated responsibilities. In other words: who is the contract manager? Usually, the tasks related to contract management are assigned to the purchasing department. Which leads to its importance being seriously underestimated.
A good contract manager strives for maximum contract performance and minimal risks. He or she can point out both internally and externally to agreements made and the associated responsibilities. Insufficient in-house expertise? Invest in good contract management training or courses.
2. Negotiate with current suppliers
Usually, buyers only negotiate when concluding contracts.
However, there is always room for negotiation.
- Perhaps the purchase price can be reduced
- Or the deductible upwards (and thus the premium down)
- You can cancel or downgrade subscriptions
- Converting monthly subscriptions to annual subscriptions
As a contract manager you will therefore take a critical look at existing contracts and then you will contact the relevant suppliers. If you have done everything you can to optimizeyour contract, an important aspect remains: to confirm the agreements made and to strengthen the relationship.
3. Check contract agreements
In practice, it still happens far too often that agreements made are not complied with. It is therefore essential that the contract manager and the responsible employees have the (price) agreements clear and clear on (digital) paper. Only in this way can it be checked and adjusted if the situation requires it.
In addition, keep in mind that contracts are terminated on time. In many cases contracts are renewed tacitly and you are unnecessarily tied to a subscription.
Contract management software is your ideal partner for this.
4. Have a lawyer watch
Have existing and new contracts legally checked. So that you gain more insight into the opportunities and risks that you run. Do not hesitate to call in outside support for this. Due to the software mentioned above, many things already happen automatically, which means that legal interventions are limited and additional costs remain limited.
A solid foundation
Well thought out contract management is without a doubt a strong foundation on which to build your business. By putting everything in black and white or by pouring it into a software system, you keep a clear overview. You can also achieve better results and deliver higher quality. And last but not least: you can save considerably on costs. This way you go from contractual hassle to an efficient, well-oiled contract management machine!