Many companies in all industries spend a large portion of their spending on contracts. Global consulting firm McKinsey & Company found that companies in the utilities, aerospace, defense and food production sectors contract at least 90% of their annual revenue. Nevertheless, most companies spend a tiny fraction of the expenses spent on purchasing operating costs, including contract development and supplier management. By not investing in good contract management, companies lose up to 9% of their annual turnover. A successful contract compliance program can help correct these leaks. Companies need to consolidate contracts across the company. One of the main objectives of public procurement experts should be to fill procedural gaps and ensure the visibility of all contractual and non-contractual expenditure. Top-class companies save up to 80% more than others through a clearly defined contractual compliance process. (Source: Aberdeen Research) In addition, all employees must feel that they have played an important role in the success of the organization as a whole by ensuring compliance, and managers play an important role.
In a survey of 3,000 executives conducted by Ernst and Young, 42 percent of executives would justify behaving unethically to achieve financial goals. Unfortunately, without strong management, employees will not be motivated enough to achieve compliance goals. In order to improve compliance for all employees, you first gain the buy-in of team leaders who can then focus on compliance as an enterprise-wide priority. Much of the sales contract process goes back and forth with the other party until a final agreement is reached. Be sure to strengthen your ability to negotiate in advance. Operational efficiency is essential in times of recession. There is no doubt that over the past twelve months, it has become essential for companies of all sizes to eliminate unnecessary costs and increase financial transparency. And in the coming year, public procurement officials will have to balance the need to further streamline their procedures. For many companies, contract management will prove critical to bringing operational efficiency closer to keeping savings closer.
“Contract Compliance Management can encompass many different aspects and stages of contract management. This is an important area of business development that, in theory, increases efficiency and reduces risk. While compliance monitoring is required, it is important that there are processes that provide insight into the need for or opportunities for change. Therefore, best practices have two forms: on the one hand, the control of non-compliance and, on the other hand, the monitoring of compliance definitions and the necessary adaptation to changing commercial or market conditions. . . .