Article

Loss of value due to poorly managed contracts

The best Commercial Contract Managers will surely tell you about the average 9.2% loss in value due to poorly managed contracts. But few will know how to go about winning them back.

Here, we’d like to show you how you can recover around 3-7%, almost immediately.

You don’t have to believe me. After all, some people make promises they don’t keep. But what if it were true? And it works.

However, I do have two preconditions:

• This text only applies to SMEs,
• and only to those facing the complexities arising from the transformation of their offerings through digitalization. In other words, some of their services will henceforth be managed by IT.

The first thing to do (for a company active in sales)

It’s all about creating the right terms and conditions.

Tip: Take the time to familiarize yourself with your competitors’ terms and conditions. This will enable you to get to know them (it’s extremely instructive, you’ll see!), to do better and to know how to argue how you stand out from them.

Second, optimize sales

Draw up model contracts covering the exact scope of your services/products. Don’t leave anything vague.

Did you know? “40% of contracts fail to achieve their objectives and involve disagreement (whether expressed or not), because the scope has not been clarified between the contractual partners”.

Your objective here is twofold:

To waste as little time as possible in the contractual phase
While ensuring that the scope is sufficiently clear to your customer (it needs to be discussed), so that you can provide your services within the most optimal framework possible.

You may spend a little more time validating the scope, but you’ll save more than twice as much by increasing your chances of winning an offer (“win chances”), reducing your selling costs (up to 50%) and your conflict costs (30%).

Then manage your negotiations efficiently.

Tip: “Focus on the success of the relationship with your contractual partner, rather than on the legal risks (without neglecting them, however)”.

When you’ve done all this, make sure your sales team understands the issues and makes the best use of the tools you’ve prepared for them. At this stage, you should already be seeing a marked improvement.

Take a deep breath – you’ve reached a real milestone!

The third thing to do (but this will be the first for a company in complex services)

Make sure that the services you provide for your customers live up to your image. Here again, your contract will be a useful working tool:

Tip: “As always, it’s in good preparation that you minimize risk and seize the best opportunities.”

I know, I’m mentioning the real points. But those are the ones!

Make sure you handle invoicing on time and on budget.
Finally, contractual changes should be managed fairly, but not omitted.

“We’re probably talking about 3-5% more business volume here.

Conclusion

Consider communication, effective conflict management, keeping satisfaction high and options for future collaborations. And remember to think like your customers!

Good to know: “Keeping a customer costs 7x less than finding a new one!”

With our method, by implementing its steps, you’ll get at least :

• More cash in your till
• A 3% increase in sales
• Costs reduced by 3 points (with a correspondingly improved profit margin)
• Stimulated sales motivation
• Secure delivery efficiency
• Increased customer satisfaction
• Enhanced reputation, and
• Maybe, you’ll sleep better!

The statistics in this article are based on research by the IACCM (International Association of Contracts & Commercial Management).