The end of the year is almost here, and retailers are beginning to finalize their numbers to see just how good a year they had.
Yet for many retailers, the year-end settlement will overlook a key source of revenue: their contracts—and the rebate entitlements and growth incentives they contain. That's because agreements with suppliers and manufacturers often are filed away once they are signed, with organization focus quickly shifted to maximizing performance. Come year-end, retailers may not even know where to find the contract, let alone what kind of revenue it entitles them to.
The potential profits are significant: Say, for example, your contracts carry a 2% rebate once certain milestones are met—how is this being tracked and acted upon?
Often, retailers rely on simple spreadsheets to track the rebates they are eligible to claim. Historically, however, this has proven ineffective. The spreadsheets require manual data entry, and, due to higher priorities, often get put to the side and forgotten about.
According to World Commerce & Contracting data, organizations typically see 8% contract value erosion due to poor contract management – including not availing themselves of monetary entitlements for performance.
The situation obviously varies from company to company. Ask yourself: How common are rebates in your contracts? How are you tracking them? At year-end, are you sure you're taking advantage of all the rebates your contracts offer?
How Contract Lifecycle Management Can Help
The good news is that there is now advanced contract management software that can help.
Advanced contract lifecycle management (CLM) technology enables companies to automatically extract data like rebates and growth incentives, then track performance against these factors by connecting this data to your transactional systems. When thresholds are reached, retailers are notified that they are entitled to a specific rebate. This kind of always-on contract monitoring pushes beyond contract management and into what we call contract intelligence.
The immediate value contract intelligence delivers to retailers is clear—especially in the context of rebates. These rebates represent pure profit that would otherwise leak from the business. Consider the hypothetical 2% rebate in our example above—a 2% rebate on $1 billion in sales translates into $20 million extra of essentially found money on top of annual earnings.
By more effectively managing contracts and automating fulfillment tracking with CLM software, companies can ensure the intent and value of every contract is fully realized, translating into a large sum of rebates that add up to a nice year-end bump indeed.
Want to learn more about Icertis’ contract intelligence solutions for retail? Visit our Retail Industry page.
Phil Barry is Icertis' Consumer Goods industry vertical lead. Phil has spent the last 25 years in the Consumer Goods industry and has worked in roles ranging from Category Management, Product Management, Business Development, Global Sourcing and Retail consulting.