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Zycus recognized as a ‘Strong Performer’ in The Forrester Wave™: Contract Lifecycle Management, Q2 2023  Read More

How Contract Management Solutions Help You Save Dollars

When deliberating on investment in upgrading the contract management technology, businesses often postpone the best and settle for the status quo. However, a savings estimate can turn the tables on budget shortages and help you get the buy-in of key decision-makers. So, let’s look at the six ways you can calculate the savings that a contract management solutions generates.

6 Ways to calculate your savings

1. Savings in legal operations

According to a report by Goldman Sachs, using a contract lifecycle management system reduces the average number of hours spent on contracts by 20%. So, about 20% of the time devoted to the contract management process can be reallocated to tasks that were been outsourced.

Savings value = Yearly man-hours devoted to contract management * Average hourly pay * 20%

2. Prevention of losses

IACCM mentions that organizations lose 9.2% of revenue every year due to poor contract management. If 50% of this loss can be prevented by using an intelligent contract management solution, we can get a rough estimate of the savings potential.

Savings value = Annual revenue * 9.2% * 50%

3. Savings in sales operations

According to Aberdeen Group, the usage of a contract management tool results in a 24% reduction in the sales cycle. The time saved will result in about a 20% increase in sales with the same team size. It may also bring in 20% savings in sales operations costs.

Savings value = Total annual sales man-hours * Average hourly pay * 20%

4. Well-negotiated contract renewals

When renewable contracts are negotiated with more foresight and insight, organizations can capture higher savings from the same set of customers. (Let’s assume 5% leverage in negotiations being caused by an efficient contract management system.)

Savings value = Annual renewed revenue * 5%

5. Avoidance and recapture of penalties

By enforcing penalty clauses more efficiently, contract management systems bring in huge savings. Increased regulatory stringencies and large amounts of fines levied on non-compliance is a big challenge for companies. An intelligent system looks after the contracts and digs at the clause level. It also alerts you in time to take corrective actions.

Savings value = Average yearly penalties paid + Annual penalties captured

6. Consolidated purchasing

Just like in the case of revenue capture, contract management software also facilitates easy identification of savings opportunities among procurement contracts. It does so by way of consolidation as segregated, decentralized buying gives way to bulk purchases and more handsomely negotiate savings. (Let’s assume 0.3% of total procurement savings realized through consolidation.)

Savings value = Total procurement value * 0.3%

The above six are some of the quick, easy, and valid ways of also evaluating ROI from a contract management solution. For a more comprehensive and customized business case with intricate figures calculated just for your organizationget in touch with us! If you are interested in a self-service model, here’s an online ROI calculator we created just for that!

This blog is based on a May 2018 Zycus webinar “Realizing ROI from Contract Management Technology” presented by Arthur Raguette, EVP, Zycus.

Author

Anthony Scannell is the Director of Sales at Zycus, a leading provider of cognitive contract software solutions. With over a decade of experience in the field, he has become a subject matter expert for Contract Lifecycle Management (CLM), helping organizations streamline their contract processes, increase compliance, and reduce risk. Anthony’s expertise in CLM has helped numerous clients achieve their contracting goals and drive bottom-line results. He is known for his deep understanding of the complexities of the agreement process and his ability to present solutions that meet the unique needs of each client. Anthony’s dedication to customer success and his passion for CLM make him an invaluable asset to the Zycus team.
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