The overwhelming majority of finance professionals we talk to, agree that dealing with multiple service providers and associated contracts creates added complexity. And the greater the complexity, the greater the direct and indirect costs surrounding contract management.
Any CFO knows that multiple contracts administered at different levels of the organisation entail a risk of duplicate purchases, forgetting to cancel or renegotiate contracts, or contracts being automatically renewed. CFOs are also aware of the indirect costs of dependence on key personnel and the time it takes to locate contract documents to compile projections and budgets.
How many contracts do you have? This is something we always ask potential customers. The answers we get are more often than not vague – and somewhat underestimated. Even the most experienced CFO is generally surprised to learn the scope of contracts that contribute to the company’s cost profile.
Establishing how many current service provider contracts the business has involves searching high and wide throughout the organisation. Here are nine common areas:
• IT contracts, for example for servers, cloud storage, licences, PCs and phones
• Solution, product and service deliverables that are essential for meeting your obligations to customers
• Rental contracts, and associated security, insurance, parking, electricity and Internet services
• Leases for company vehicles, production equipment and other items
• Framework contracts for legal, marketing and communication services
• Employee-related contracts, for example for travel, insurance, pensions and gym memberships
• Office equipment and consumables such as printers, stationery, furniture and screens
• Office services, including canteens, laundry, dry-cleaning and caretaking contracts
• Sundry office deliverables such as plants, coffee machines, fruit, water and snacks
So, how many contracts do you actually have? And how complex do things get when you factor in notice periods, contact people, document storage and so on? What about the interface with the ERP system?
One of our customers who now uses Complete Control for their rental contracts says that they used to use spreadsheets for contract management. “It worked reasonably well when we had relatively few rental contracts, but as the group grew and developed the situation gradually became unmanageable and completely unviable,” they recall.
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