No one is enforcing your best-negotiated terms

Procurement teams spend most of their negotiating energy on everything that happens after the deal is done. They fight for things like volume discounts, credits after outages, and caps on price increases, and successfully getting those terms into a supplier contract is one of procurement's most important jobs.

But when all is said and done, ensuring that those suppliers fulfill those obligations is an entirely different story.

This is the subject of our new guide, The procurement leader's guide to stopping contract leakage, a deeper look into where supplier contract value goes after signature and how to get it back. 

The timing has never been more important.

World Commerce & Contracting estimates that the average business loses almost 9% of contract value this way, to missed renewals, untracked obligations, and unenforced terms. 

And in these, let’s say ‘complex times,’ it’s never been more imperative to ensure that you and your teams are getting the best possible outcomes for your business.

What causes contract leakage after signature

Let’s look at a typical supplier contract, where procurement and legal fight tooth and nail over the details. 

They fight for the rate card, the SLA credit clause, and the termination rights in the contract. But if those details are buried deep in the contract, it’s the rare organization that can readily recall them 6 months into the term. So here’s what happens: the contract gets negotiated in one system and stored in another, the invoice lands in a third, and the renewal date lives in a spreadsheet that only gets updates once a quarter (if that).

While each system does the job it was assigned to do, none of these tools communicates with each other, making the desired outcome invisible and optimization impossible 

We’ve seen this far too often. A volume discount the company earned isn’t applied, or a 500-seat license that only 60% of people use renews at 500 seats because the notice window closed before anyone had a chance (or the thought) to check.

This is a classic contract visibility problem. The terms exist, but they’re MIA when the invoice, outage, or renewal date arrives.

The numbers add up fast. 

McKinsey puts the cost of weak terms and weak post-signature management at 9% of annual revenue, or about $2.5 trillion across the Fortune Global 500. 

A large company can run tens of thousands of supplier contracts, each with conditions that trigger on an invoice, a receipt, or a date. There’s no (human only) team on Earth that can check that many by hand, so most never get checked. 

It shows in the data, too. The same McKinsey analysis found that 80% of procurement functions aren’t fully aware of competitive terms and contract structure.

Why procurement needs a different CLM

Managing supplier contracts requires a unique set of supporting capabilities. 

Most contract tools built around sales or legal requirements focus on the contents of an agreement: what’s negotiated or what risks they contain. 

Procurement cares about those things, but the real value in supplier contracts shows up later: in obligations, spend, and renewals. The value won during sourcing is only meaningful if the resulting contract’s terms are enforced. 

Those requirements change how a supplier contract is managed. The contracting system should orchestrate all of the supporting data and context that sit next to the request: the purchase, the budget, external benchmarks, risk alerts, the supplier record, the PO, and the invoice. 

On its own, a contract tells you what was agreed, but without the context of what sits around it, procurement can’t realize the value captured during negotiation. 

The procurement leader’s guide to stopping contract leakage

I highly suggest you grab the new guide, because it answers a host of questions I’ve been hearing, most notably:

• Where the value goes. Four common ways supplier contract value slips away, from invoices above the agreed rate to SLA credits nobody claims.
• Why supplier contracts need a different home. The unique requirements of supplier contracts, and what’s needed to make sure terms are enforced.
• Where Zip closes the gap. You’ll see how AI Contract Orchestration keeps supplier contracts in the same place as the request, spend, supplier, and invoice, and what that means for procurement, legal, and finance.
• What customers saw. Results from Bandwidth and BPM after moving supplier contracts into Zip.
• Seven questions for your next renewal. A quick way to gauge what your team might be missing today.

Read the full guide, The procurement leader's guide to stopping contract leakage

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