Proactis Boardroom Chatter: Cost Reduction (Part 3 – Contract Management)

Over lunch, the CEO, CFO & CPO of a large corporation were having a discussion about how to reduce costs.
CEO (to the CPO): “You said the other day that we could further reduce costs with better contract management – what do you figure we could save?”

The CPO outlines the current position and targeted savings they are working towards:

  • $1.7M savings by increasing on-contract buying from 65% to 85% (20 percentage points) by making them fully visible to all buyers at purchase time
  • $400,000 savings by using improved contract visibility to consolidate duplicate contracts and gain higher volume discounts
  • $200,000 savings by preventing incorrect prices on POs (e.g. failure to use quantity price breaks)
That’s over $2.3M in annual savings.

CFO: “Based on a review of current contract activity we’ve done together, we’ve identified additional ways we can save as well…”

CFO: “Here’s our estimate of avoidable expenses we could achieve:”

  • $250,000 approximate savings by avoiding automatic renewal of contracts without re-negotiation, and in some cases, contracts we don’t even want to continue (e.g. maintenance agreements)
  • $50,000 approximate savings from reduced manpower required to handle contracts (e.g. manual authoring, filing, creating time-based payments, monitoring for review, etc.)

That’s another $300,000 savings a year from better, more efficient management of contracts within Procurement.

CEO: “So let’s recap what you’ve told me…”

CPO & CFO: “Here’s the summary:”

  • $2.3M through increased on-contract buying and better compliance with contract terms
  • $300,000 through avoidance of unwanted automatic contract renewals and elimination of non value-added manual contract administrative manpower – 1 FTE.

That’s a total of about $2.6M a year.

Click to view all articles for the EPIC:
Or click to view the full company profile:
Facebook
Twitter
LinkedIn
Proactis Holdings Plc

More articles like this

Proactis included in QUANTIQ’s virtual conference line-up

Proactis, the spend management experts, has announced its support of new strategic partner, QUANTIQ, by presenting a session at its upcoming virtual conference. Running from 20-22 April, WinTEQ, QUANTIQ’s annual conference, will be 3 days packed

What are the main advantages of implementing technology solutions

Proactis Holdings Plc (LON:PHD) develops and sells business software, and provides installation and related support services in Europe and the United States. The company offers Spend Control and eProcurement solutions that help organizations to improve operational and

British Land transforms its finance processes with Proactis

Objectives To automate the Purchase-to-Pay and Accounts Payable processes. Full visibility of purchase orders and committed spend. Improved purchasing control, whilst continually aiming to reduce the time taken to process invoices. How Proactis helped Complete access

The key to supply chain resilience and effective risk management

Proactis Holdings Plc (LON:PHD) develops and sells business software, and provides installation and related support services in Europe and the United States. The company offers Spend Control and eProcurement solutions that help organizations to improve operational and

How to manage your purchasing process

All businesses need to purchase goods to meet their day-to-day needs. If you do not have a formal purchasing process in place, you may be spending more than you need to procure items and services. How

Proactis signs contract with Denbighshire County Council

Proactis Holdings plc, (LON:PHD), the business spend management solution provider, has announced that it has signed a contract with Denbighshire County Council to provide its early payment service, bePayd, into DCC’s supply chain. bePayd will enable DCC’s suppliers

Proactis announces 2020 UK Partner award winners

Proactis, the spend management experts, would like to announce the winners of its prestigious UK Partner Awards which recognise the tremendous achievements attained by Proactis partners. Reseller Partner 2020 – Lake Referral Partner 2020 – Unit4

Proactis named Unit4 ISV Partner of the year

Proactis, the spend management experts, is delighted to announce that it has been awarded “ISV (Independent Software Vendor) Partner of the Year” by Unit4. Proactis received the award, based on new business revenue, current mutual customer