The Hidden Cost of Commercial Contracts

One of the things that most businesses have in common is that we all have commercial agreements with suppliers of products or services. We're also likely to have suffered financial loss over the years due to these contracts not being properly applied.

According to the International Association of Contract and Commercial Management nearly 40% of commercial contracts do not deliver their full expected financial benefits. Non-compliance with commercial terms and conditions costs an average of 1.5% of annual spend, in a typical organization.

The Direct and Indirect Costs

Depending on the industry and the contract types involved, an average of 0.5% ($5M per billion) of annual company revenue is lost due to contracts not being properly adhered to. In some cases, this rate can run at 2% (or higher) of annual revenues, which is a substantial amount of money.

The effect on business partner relations is also a consideration. If the terms and conditions of a contractual agreement are being continuously undermined (by either party) - it's likely to lead to a deterioration of the relationship and a knock-on impact to your business.

Solving the Problem

Tracking business activities and related invoices across the enterprise and manually comparing these to their corresponding contractual terms and conditions is incredibly difficult, and for most organizations it is impossible - based on the limited resources and expertise available.

By leveraging Artificial Intelligence (AI), significant time and productivity can be saved by automating the process that safeguards both internal and external compliance, when it comes to contracts.

Through the automation of the contract monitoring process, insightful notifications can alert you to discrepancies such as overcharging, or discounts not being applied correctly - as they happen. This way, the analysis is done on a continuous basis and you only need to worry when you receive a notification, then you can act on it - ahead of time.

Looking Ahead

By following a proactive approach to monitoring your commercial contracts, you can eliminate revenue leaking from this area of your business and look to recover any lost benefits.

Doing nothing is always an option but in this case, it comes at a significant cost!