Contract Management Within Expense Management – What You Might Be Missing

Contract Management Within Expense Management – What You Might Be Missing

It’s common sense that Expense Management is critical to your business, every company, large and small, has room to improve their financial results with a streamlined Expense Management approach. When discussing Expense Management, most conversations center around cost controls, expense allocation, consumption tracking, reporting and budgeting.

However, many Expense Management programs fail to fully address the issue of Contract Management, which constantly reviews your vendor agreements to ensure you are getting the most effective deal for your business needs.

Contracts dictate the terms, pricing, and obligations of the vendor and the customer related to services and products, making them a fundamental piece of the expense management puzzle. Here’s a look at what you might be missing and how addressing these gaps can transform your approach to expense management within your telecom and IT services.

Compliance, Risk Mitigation, and Negotiation                                                                                                                  One of the most significant ways Contract Management impacts Expense Management is through compliance. Contracts contain terms related to pricing, service levels, and performance standards. Failure to adhere to these terms can result in penalties, additional costs, or loss of negotiated benefits. Effective contract management ensures that your organization complies with all contractual obligations, reducing the risk of unexpected expenses, service degradation and legal disputes.

Contracts are often negotiated to achieve cost savings or favorable terms. However, if contracts are not actively managed and reviewed, organizations may miss out on opportunities in the ever-changing world of wireless. Regularly visiting contract terms and performance metrics helps identify areas where renegotiation could lead to cost reductions or better terms.

For instance, if a vendor consistently delivers below expectations, you should renegotiate specific contract terms that align to your expectations for pricing, services, and support. Services that were initially important may no longer be required allowing you to free up vendor requirements and costs.  Understand contract commitments in terms of subscriptions, features and support.  Avoid being locked into commitments that can quickly become mis-aligned to your needs.   Flexibility to take advantage of changing market conditions with your organization and the vendors is key. This can include quantities, prices, features, technology upgrades, new technologies, and ongoing support.

Remember to create a negotiation strategy that incorporates what is important to you while incorporating areas that are aligned to the vendor’s needs.  This will allow you to successfully find mutual ground that gives you what your organization needs while allowing the vendor certain success.  With a one-sided contract, neither the vendor nor the customer will end up with what they wanted.

Visibility, Transparency, and Performance Monitoring                                                                                             Visibility into contract terms and their impact on expenses is critical. Without a centralized location for contract information, tracking obligations, renewal dates, and pricing terms becomes challenging. This lack of transparency can lead to missed deadlines, automatic renewals at unfavorable rates, and untracked expenses. Implementing a robust contract management system provides a comprehensive view of all contracts, facilitating better tracking and management of expenses.

Contracts define performance expectations and service levels. Monitoring vendor performance against these criteria helps ensure that you receive the agreed-upon value. If a vendor fails to meet their obligations, it can lead to additional costs or diminished service quality. Effective Contract Management involves regularly reviewing vendor performance and addressing any discrepancies to maintain cost efficiency and service quality.

Strategic Sourcing and Spend Analysis                                                                                                                  Integrating Contract Management with business requirements and consumption analysis allows organizations to gain insights into how contracts are key in overall vendor management strategies. For example, there are pros and cons of having a multi-vendor or a single-vendor strategy. The benefits of consolidating to negotiate volume discounts may or may not out-weigh the business requirements and ongoing competitiveness of your vendors.

Best Practices for Integrating Contract Management and Expense Management

1. Centralize Contract Information
   • Utilize a centralized contract management system to store and manage all contract-related documents. This ensures easy access to contract terms, renewal dates, and compliance requirements, allowing for better tracking and management of expenses.
2. Leverage Technology
   • Adopt Contract Management software that integrates with your expense management systems. Advanced tools offer features such as automated alerts for contract renewals, performance tracking, and real-time analytics.
3. Regularly Review Contracts
   • Establish a routine to proactively review contracts. Periodic reviews help identify contracts up for renewal, compliance issues, opportunities for cost savings, and alignment with current business requirements. This is key with prioritizing resources to allow an appropriate runway for effective negotiations.
4. Monitor and Enforce Compliance
   • Implement processes to regularly monitor compliance with contract terms. This includes tracking performance metrics and ensuring that all parties adhere to agreed-upon terms. SLAs are important in the negotiations but worthless if you don’t track their compliance.

Bringing it All Together                                                                                                                                              Integrating Contract Management with Expense Management strategies isn’t just a best practice, it’s a strategic imperative for maintaining competitive advantage and financial health in today’s business environment.

OVATION has been providing oversight and help with expense management for over 20 years, contact us today for help with contract management for your telecom services.