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Sourcing and Procurement

The financial impact of poor contract management on businesses

An effective contract management system is essential for any business seeking to maintain profitability, reduce risk, and enhance operational efficiency. Without it, companies face significant financial implications, including lost revenue, increased operational costs, and potential legal disputes. On average, contracting inefficiencies can cost businesses approximately $1.5 million in missed revenue opportunities per company.


Major financial risks of poor contract management

Implementing a CMS addresses many issues associated with traditional contract management, such as:

Revenue leakage and cost overruns

Without centralised contract management, missed obligations often lead to revenue loss and unplanned costs, impacting payment cycles and service level agreements. Poor tracking of contracts runs the risk of overcharges or vendor non-compliance, causing financial losses—especially in large, multi-year contracts.


Compliance and legal risks

Non-compliance in contract management can lead to costly fines, legal issues, and reputational harm, especially in regulated sectors like finance and healthcare. Ineffective oversight increases the risk of overlooked terms, which can quickly escalate into larger challenges.


Opportunity costs

Without structured monitoring, companies often miss out on contract benefits like renegotiation terms or volume discounts. A contract management system tracks (CMS) these opportunities, maximising cost savings and ensuring favourable terms are utilised.


Operational inefficiencies

Manual contract management increases administrative costs and slows essential business operations. Investing in a CMS streamlines workflows, ensuring smoother execution, faster contract turnaround on contract-related tasks, and improved productivity, benefiting both the company and clients.


Leveraging contract management solutions for cost optimisation

Understand How Good Contract  Management Can Help You Avoid Major Financial Risks

Understand How Good Contract Management Can Help You Avoid Major Financial Risks

By offering a centralised, digitised approach, CMS solutions help businesses organise and access their contracts easily, maintain compliance, and monitor all aspects of contract performance in real time. This system provides critical advantages:


Automation of key processes

Automating renewals, expiration alerts, and compliance checks reduces human error and ensures that all contracts are up to date. This not only saves time but also reduces labour costs and increases consistency.


Data-driven insights

Advanced CMS solutions often come with analytics that provide insights into contract performance, supplier reliability, and fiscal impact. Real-time data helps businesses make informed decisions that directly impact profitability.


Improved collaboration

With a CMS, cross-departmental teams can access and update contracts collaboratively, reducing miscommunication and ensuring transparency. For example, finance and legal departments can work together seamlessly, improving the accuracy of billing and compliance.


The ROI of managed contract solutions

On average, companies lose 190K hours annually due to disconnected agreement management workflows, totalling 55 billion hours globally and contributing to $1.8 trillion in economic value destruction.In contrast, implementing a well-structured contract management solution can help businesses recover from this inefficiency, providing measurable ROI by enhancing key areas such as:  


Efficiency and cost savings

AI reduces contract review and approval times by about 35%, allowing teams to focus on strategic work. Organisations can see a 30% reduction in contract management costs due to automation, which cuts down on manual labour and associated errors.


Compliance and accuracy

AI-driven monitoring boosts compliance rates by over 25%, proactively flagging potential risks. Data accuracy significantly improves compared to manual processes, reducing risks in contract obligations.


Speed and insights

AI shortens contract cycles by nearly 40%, allowing quicker negotiations in dynamic markets. Users gain better insights into contract performance and compliance metrics, supporting better vendor and negotiation decisions.


Trends in contract management

Advances in technology are poised to transform contract management further. For example:


Artificial intelligence (AI) and machine learning (ML)

AI can automate complex contract analysis, identifying risk areas and suggesting improvements. ML algorithms can improve forecasting, allowing businesses to anticipate potential issues before they arise.


Blockchain for contract security

Blockchain offers a transparent, secure ledger for contract transactions, reducing the likelihood of disputes and ensuring verifiable, tamper-proof records.


Intelligent Edge ecosystems

Intelligent edge ecosystems in contract management use AI and blockchain to enable faster, real-time decision-making at contract points, thereby reducing latency while improving responsiveness and productivity across operations.


Unlocking growth through future-ready solutions

Contract management is not simply about minimising risk; it’s a driver for proactive growth. Companies focused on scaling will find that managed contract solutions provide the agility to respond to market dynamics. Some of the leading benefits include:

  • Better budget allocation: Real-time insights into payment schedules, upcoming renewals, and termination fees help with accurate financial forecasting.
  • Informed negotiations: Predictive analytics can reveal insights into vendor performance, helping companies make data-driven adjustments to contractual terms.

How can Infosys help?

Infosys BPM delivers contract management services that streamline the entire contracting lifecycle. By combining analytics, automation, and industry expertise, Infosys BPM helps companies lower compliance risks, enhance contract transparency, and achieve cost efficiency. Tailored solutions address contract creation, risk assessment, and performance tracking, freeing businesses to concentrate on strategic objectives instead of administrative challenges.

Explore how Infosys BPM can help you achieve smarter, more efficient processes for long-term success.


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