- Customers Undercharged: This can occur, for example, when a contract for services expires but the company continues to provide the service to the customer.
- Vendors Overcharging: The solution provider cites the example of one company that reduced its license fees paid to a software firm by $200,000 by improving its contract management practices.
- Uncontrolled Impact of External Events: Occasionally, terms of a contract may have to be changed to account for new regulations, bankruptcy, legal settlements, mergers, acquisitions and so on. "In those circumstances, the ability to quickly retrieve all affected contracts is a real competitive advantage," Memba wrote.
- Time and Productivity Inefficiency: Many companies lose productivity because their staff must spend too much time searching for contracts among "islands of information." "In too many companies, retrieving the information and checking the status of a contract can take up to three days when it could take a single click with a proper IT system," Memba asserted.
- Employee Turnover Leading to Loss of Key Knowledge: Like it or not, companies often depend on information contained only in the heads of their contract managers. "Their initiatives have made them key personnel of the organization because access to the information is dependent upon their know-how," Memba wrote. "Let them leave, let their personal computer hard drive be wiped and you'll experience a dramatic loss of key knowledge."
- Compromised Customer Loyalty: A company's failure to properly meet its contractual obligations to its customers puts it at risk of losing those clients. "Managing contractual commitments is about keeping promises, whether it is a promise to deliver what has been ordered in the agreed time frame or a promise to pay within the agreed terms," Memba wrote.
- Competitive Disadvantage: "Contract management is about being in control," the solution provider asserts, suggesting that companies that have implemented contract management solutions can attain the control they need to meet their obligations and, in doing so, gain a competitive advantage over other companies that have not put in place such solutions.
For additional information on contract management best practices, see the SDCExec.com articles "Five Myths of Contract Management" (July 9, 2003), "Contract Management: Improving Corporate Governance" (July 21, 2003) and "Contract Management for Procurement Best Practices" (August 4, 2003).