Five ways poor contract storage could be costing your organisation money

As a crucial document in business, contracts are legally binding agreements between two or more parties and set the foundational structure of that business relationship. 

However, how your organisation stores contracts could be imposing a silent threat to your business, as ineffective contract storage could be cutting into your annual revenue, whether you realise it or not. 

Sounds alarming, right? Let’s look at five scenarios that may alert you to the costly impact of poor contract storage in your organisation.  

1. Lack of visibility can hurt your bottom line  

It’s not uncommon for each project, business unit, or region to have contracts stored in different places – this might be on an individual’s desktop or email, within a shared drive, or paper-based contracts may be found in filing cabinets. You might even find that your organisation is using a combination of various storage methods. Such decentralised methods create headaches when it’s time to be audited, as locating contracts scattered in different places takes time. 

But having contract visibility is more than just knowing where your contracts are. It provides organisations with greater control over their contracts – monitoring version control, keeping on top of contractual deadlines, including having a clear view of expiries and renewals, and allows for better decisions to be made off the back of complete contractual data. 

Without a view across your entire contract landscape, your organisation is prone to expensive errors. Working off an outdated version of a contract containing the wrong information can lead to poor decision-making and costly mistakes. Missed deadlines have financial consequences, and productivity impacts, which we explore in detail in the next section. Maybe you haven’t realised a vendor’s compliance has expired, which can be followed with financial and legal penalties. Either way, all these situations mean unnecessary costs that could have been avoided with a centralised approach to contract storage, allowing your organisation to be more proactive on contractual obligations.  

2. Missed renewals or expiries cause revenue leakage 

If contract expiry or renewal dates pass by unnoticed, the impact can affect your organisation’s annual revenue in many ways. Suppose no one notices a contract is up for renewal. In that case, this can lead to a disruption in supply that’s fundamental to a project, you could miss out on engaging a crucial vendor, or you could be subject to penalties if you breach terms or if a vendor’s insurance or licenses are also expiring. Further to this, additional costs may also be needed to help rectify these situations.  

Delays to services and project timelines from missed renewals or expiries impact productivity and the overall success of a project. This could then have negative consequences on your organisation’s reputation or even relationships with key vendors, which have long-term financial impacts of their own. 

3. A missed opportunity to negotiate a better deal impacts ROI 

If contract renewal deadlines sneak up on you or have even passed, you’ve missed the opportunity of being able to negotiate a better deal that could ultimately save your organisation money. 

To be in a strong point to negotiate, contracts need to be reviewed well ahead of their renewal or expiry date so that you can start the conversation, even research alternate vendors, and gather this information to make an informed decision about how best to move forward.  If a contract auto-renews without your knowledge, or you learn about a contract expiry date once it’s too late, it’s a missed opportunity for your organisation to be able to negotiate new terms, which could lead to better value for your business. No one wants to be in a position where they must keep engaging with a vendor who is too expensive or lose an important supplier because they have missed expiry or auto-renewal dates due to ineffective contract storage.  

Remember that negotiations take time as they can involve many stakeholders and sometimes require a formal process. By preparing for this well in advance, you’re in an excellent position to negotiate for the best possible outcome that could save your organisation spending more money than needed for a better ROI. 

4. Engaging with non-compliant vendors can have costly consequences 

In construction, you place a lot of responsibility on your vendors. However, if you engage with a non-compliant vendor, that responsibility falls on you. 

Engaging with vendors who have up-to-date licenses and insurance is crucial for compliance, as this means they have the appropriate paperwork in place to operate safely as a business. Non-compliant vendors expose you to liability and financial risk – especially in the case of an accident that results in injury or death – resulting in fines and costly legal issues.  

Poor contract storage makes it easy to miss expiry dates on licenses and insurances, which means you could be working with non-compliant vendors that put your organisation at financial and legal risk. There are tools available, such as vendor management and contract repository software, that can help you uphold your duty of care and help protect your organisation from the costly consequences of accidentally engaging or working with non-compliant vendors. 

5. Process inefficiencies cost your staff time and your organisation money 

Searching for contracts stored in different places while manually managing deadlines for compliance, renewals, and expiries is a highly administrative task.  As your organisation grows, the more vendors you engage, the more contracts are involved in doing business, which becomes increasingly more complex to manage without a proper contract repository in place. Manual workflows are inefficient and cost time and money, while employees focus on unproductive tasks. 

Imagine having to go through a contract every time to find important information or using a spreadsheet for manual deadline management. Poor contract storage processes place a significant burden on your employees and can hinder overall organisational financial goals (and employee satisfaction), as manual processes mean too much on administration and efforts are taken away from doing value-adding work. Let’s be honest; there’s a better use for your staff’s time.  

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