How Much Money Is Poor Contract Management Costing Your Business?
According to recent WorldCC research, companies lose an average of 8.6% of their revenue due to weaknesses in contract management. And yet, this remains a blind spot in many organizations. When discussing risk, most think of legal non-compliance or litigation. Few leaders realize the silent erosion caused by poorly negotiated, structured, or monitored contracts.
In this blog, we will explore where and how this erosion happens, why SMEs are particularly exposed, and how Contract & Commercial Management (CCM) practices can turn this vulnerability into a strategic advantage.
Phase by Phase: Where Does Value Leak?
Here is a data-driven breakdown of average value loss during each phase of the contract lifecycle, based on insights from WorldCC and industry experts:
| Contract Lifecycle Phase | Avg. Erosion | Max. Erosion | Key Causes |
| Offer & Terms Definition | 1.5% | 5% | One-sided terms, vague language, unclear objectives |
| Negotiation | 0.7% | 2.5% | Poor risk management, lack of governance, bad/wrong contract basis |
| Contract Handover | 0.9% | 2.5% | Poor communication, weak documentation |
| Execution | 1.2% | 8% | Inadequate follow-up, change mismanagement |
| Renewal / Termination | 0.4% | 1.5% | Uncontrolled auto-renewals, lack of contract value re-assessment |
Total: 4.7% to 19.5% of contract value lost without appropriate measures
Most Common Pitfalls
- One-sided terms: prolong negotiations, discourage partners, raise acquisition costs.
- Poorly defined scope: a frequent source of delivery disputes.
- Unclear dispute resolution mechanisms: turn minor issues into long, expensive conflicts.
- Ineffective review processes: delay time-to-contract and go-live.
- Post-signature neglect: bad performance of changes, unoptimised collaboration.
Why SMEs Are Hit Harder
Small and mid-sized businesses face additional challenges:
- No defined contracting policy
- Lack of specialized resources
- Outdated or copy-pasted templates
Yet these same businesses could reclaim 5 to 7% margin with better contract management.
3 Levers to optimization
Lever #1: Standardize and Clarify
- Use plain language
- Clarify duties and deliverables
- Define acceptance and performance criteria
- Include clauses that adapt to context (force majeure, inflation, etc.)
Lever #2: Moderate Digitalization
- Simple tools: clause libraries, e-signatures
- Understand what CLM does—and doesn’t—solve
Lever #3: Field-Driven CCM
- Don’t confuse legal with contract management
- Involve CCM early in the lifecycle
- Integrate CCM with sales, procurement and project teams
Conclusion: Could Your Contracts Become Performance Enablers?
Contracts are still too often written as protection against failure. But in today’s complex, interconnected world, they should evolve into tools for relationship management, governance, and value creation.
What about your company? Do you know where your 8.6% is leaking?
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