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8 March 2018

Save costs on your supplier contracts? Do these 3 things.


I recently visited the IT department of an educational institution to advise them about their contract management. Three months later they’d saved one million euros for the coming two years. Just on IT contracts. And guess what? It wasn’t even that hard.

As a consultant it's easy to see how organizations can save on their contracts. Many institutions lack a clear overview of their contracts and the additional expenses. This leads to unnecessary costs, because you’re paying for services you don’t need anymore, services you already had or services that are simply too expensive. 

Take stock of your current contracts. What contracts are you paying for? Do you still need them? What is supplied and don’t you have a similar contract with a different party? You’ll have to invest time to get a better overview, but if you do it right you’ll easily earn back your investment.

1. Get Finance to look at the financial flows

Your Finance department knows exactly what comes in and goes out of the organization when it comes to money. Make an appointment with a Finance colleague to discuss financial flows. Take a look at the names of suppliers, the money that is spent and whether you have contract numbers, for example. You may come across some striking things. Like an invoice from an internet provider that’s not your current supplier, or invoices for software licences that aren’t used anymore. Time to talk to your suppliers.

2. Go through your paper contracts

The archiving obligation dictates that contracts need to be stored up to seven years after their end date. Your organization needs to comply to this. Which means that somewhere in your organization there should be an archive where physical contracts are stored. Dive into the archives so you can create a solid foundation for better contract management.

3. Digitize you contract database

With that said, it’s time to digitize everything in the contract archive. Before you get started: think about what you want to record. Things like the internal contact person, supplier, criteria for renewal and duration you probably want to record. However, the contract might contain other details you don’t necessarily need to copy. If you make smart choices, you know you don’t lose valuable time entering details you won’t use in the future.

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