A Pramata Article
What’s in this article:
What is revenue leakage?
Far-reaching consequences
Causes of revenue leakage
The solution: CLM
Why Pramata?
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Picture this: It’s the second month in a row you’ve received a water bill that’s much higher than you expected. Suddenly, it hits you: There’s probably a leak.
You quickly realize you don’t have the tools and knowledge necessary to visualize every water source. There are so many pipes and valves within your walls and elsewhere. Your next step? Calling a plumber.
Revenue leakage is just like a hidden leak within your home. While you can see the damaging effects of revenue loss on your organization’s bottom line, it’s often hard to locate the source.
Believe it or not, revenue leakage can often be directly tied to your contracts and how you manage them. But what is it about your contract management processes that’s draining your resources? And how can you repair the leak?
For answers to your questions, you’ll need the kind of visibility that only comes from having a powerful contract management software in place. Here, we dive deeply into revenue leakage, its consequences and how to put a stop to it with the help of a contract management solution.
What is revenue leakage?
Revenue leakage refers both to when your business quietly trickles out more money than you intended and when it fails to capture legitimate potential income that it should be bringing in. Revenue leakage occurs most often due to simple oversight or operational inefficiencies within an organization.
Even if you’ve never heard of it, revenue leakage is a bigger problem than you might imagine. The most recent data available shows that companies allow between one and five percent of their earnings before interest, taxes, depreciation and amortization (EBITDA) to slip through their fingers. Other data shows that nearly half (42 percent) of companies experience revenue leakage.
The far-reaching consequences of leaking revenue
The consequences of revenue leakage can’t be overstated. They are far-reaching, touching every aspect of your business. Lower revenue is far from the only consequence.
Leaking revenue leads to lower cash flow, which can prevent you from keeping up with daily operations, payroll and other expenses. That lack of cash flow can lead to an inability to launch new products and services, making it difficult for your business to compete.
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What causes revenue leakage?
There are many reasons revenue leakage happens, ranging from uncollected billing to data entry mistakes. However, we’ve found that leaks are most often caused by subpar contract management processes. Here are some examples:
- Accidentally spending money because a vendor contract auto-renews without you realizing it
- Losing money because not all the contractually indicated ways to raise prices are being utilized
- Failing to act on upsells due to a lack of knowledge about what products or services a customer has (or doesn’t!)
- Do any of these scenarios ring true for you? If so, your contract management process, and a lack of visibility within it, could be to blame.
Many companies try to solve their revenue leaks and visibility issues by deploying tools like shared drives, CRM tools and enterprise systems. However, this often results in disconnected data distributed across multiple sources, without any way to see the full picture.
To gain visibility, teams must track down contract information, read through PDFs, populate spreadsheets and complete other tedious tasks. The resulting data is typically incomplete or inaccurate and often becomes outdated before it can even be used.
Without clear visibility into contracts and relationships, teams lack the information needed to upsell, manage contract renewals effectively and take advantage of other revenue-boosting activities.
What’s the solution? A visible, clean, organized, digital and 100 percent searchable repository—also known as contract management software.
The solution: Contract management software
Contract management software, also known as contract lifecycle management (CLM) or a contract management system, is a digital platform and centralized repository that helps business teams maintain, draft, request, negotiate and renew contractual agreements. Far beyond those basic functions, a truly exceptional contract management platform will allow everyone in the business to access contract data and the actionable insights that data can provide.
Contract management software provides your teams with a single source of truth for all contract data. This means they have instant access to the up-to-date information they need to prevent revenue leakage by:
Making the most of every customer renewal
Contract management software can alert teams to contracts in need of renewal with ample notice. Teams can then prepare for renegotiation by examining contracts for adherence to your playbook, looking for price uplift opportunities and ensuring that you’re getting every dollar your contracts entitle you to at renewal. Using contract management software to manage renewals means you won’t be leaving money on the table.
Meeting deadlines and milestones
Contract management software also alerts teams to contract deadlines and upcoming milestones. This ensures teams meet their obligations, preventing customer dissatisfaction and churn as well as penalties that drain resources. Contract management software can prevent you from spending unnecessary money for failing to meet SLAs that you’re contractually obligated to meet.
Reducing unnecessary spending
With contract management software, you can pinpoint areas where you may be paying for redundant products or services across different parts of the business without knowing it. You can also identify opportunities to consolidate different products or services with the same vendor, giving you the ability to negotiate more favorable terms. Without complete insight into every contract across all parts of the business, it’s easy to spend money you don’t need to be. Contract management software can solve this quickly and efficiently.
Why Pramata?
Pramata is a powerful contract lifecycle management (CLM) platform that features cutting-edge GenAI experiences to radically simplify your contract management processes.
Pramata’s platform can help you stop revenue leakage and find revenue opportunities. How? It enables true data visibility and accuracy across your contracts.
Your single source of truth
Pramata acts as a complete system of record for all of your commercial relationship data. The built-in and custom reporting and analytics target specific areas of opportunity, such as identifying price increase provisions or risky commitments. You can also integrate Pramata with your CRM, ERP and other systems to ensure all teams can easily visualize contract data whenever they need it.
Over 99% accurate data
Unlike other systems that use AI and then require you to manually QA and clean up its work, Pramata’s human-assisted contract AI transforms unstructured contract data into a structured, usable format. From your initial migration to ongoing contracts, you and your team are never required to clean or organize your contracts. Instead, the Pramata Platform does it for you and delivers over 99 percent accuracy.
One-click contract relationship insights
With just a click, Pramata instantly summarizes and provides critical insights from your contracts, including every amendment and order form. You can instantly see, report on and analyze key terms, contracted products or services, and more across all your contracts. Pramata also provides an analysis of where your current terms may deviate from your standard playbook. These insights allow you to stop revenue leaks before they start.
Stop revenue leakage & protect your bottom line with Pramata
Finding and plugging revenue leaks is a must-do for every organization. The quickest, most effective way to do so is by adopting a contract management solution that’s built to provide true visibility into each and every contract. Pramata can help. To learn more about how Pramata can reduce revenue leakage, schedule a demo today!
