5 Quick Tips To Close Value Gaps in your Contracts

Why wasting your time and take the opportunity to extract significant additional value from your portfolio of contracts with one simple action?

Amazing to see that a large number of organisations tend to wait for a large complex project to address the most obvious and easiest root cause to close their value gaps. I was surprised that these simple tips brought so much money.

I’m talking here about the value gap triggered by the fact that you didn’t get delivered or you delivered too much on what you agreed in the contract.

Here are the tips to get this significant value,

  1. Digitalise Your Contracts In The Most Simplest Way – Here you need to convert/capture the data of your contracts in a spread-sheet. Capture only the most critical value elements relevant for the delivery terms such as pricing features, product, volume, delivery conditions, discount / rebate features, payment terms etc.. Very useful additional tip is to capture the termination date to avoid any headache in the future. Don’t try to be perfect, only what differentiates the invoice value.
  2. Sort Your Contracts by Contract Value per Annum – Take an 80/20 approach, you will see that 20% of your contracts creates 80% of the value; sort your list by contract value. Get the largest value potential first handled.
  3. Take the Top 5% Largest Contracts and Verify Delivery – Set a target, which is feasible to be accomplished in a short period of time. Go through the list of contracts and verify the delivery aspects combined on what you’ve invoiced. You will be surprised to see that largest number of additional value comes from the special features, very hard to be negotiated, such as rebates based on period quantity bonus or floors in pricing.
  1. Structure Your Findings And Take Actions – Go through your contract list, capture your findings and for sure you will find a red threat and this will provide a listing of risky terms to watch for in new contract proposals. Also this list needs to provide info to take remedial actions such as raising a final invoice, after your internal legal consultations. In most cases, it’s still feasible to charge on at least you stopped to leak significant value for the future deliveries.
  2. Extend The Scope Towards your Top 20% Largest Contracts – My gut feel is, after your action of the Top 5% listing, that you’re already motivated enough to go through the complete list.

In most of the cases to tackle a total list will be too comprehensive and one of the key reason why you didn’t take the action before. This smart approach will make the difference to create impact to extract significant additional value in cash.

Don’t waste time and money and take this simple action. Let me know what worked well and or have something to add. Don’t hesitate to reach out to me, if you need some help or guidance alike a smart approach to digitalise.

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