Home Business News British businesses ‘wasting millions of pounds’ on unwanted contract renewals

British businesses ‘wasting millions of pounds’ on unwanted contract renewals

by LLB Finance Reporter
28th Apr 21 12:44 pm

Businesses are losing tens of thousands of pounds each year through ‘forgotten’ high value contracts they have failed to halt or renegotiate, new research reveals today.

The survey of in-house lawyers, commissioned by contract management software company ContractWorks, found that over half (56%) worked for a company that had missed an automatic contract renewal, and 46% had missed one in the last 12 months.

On average, each auto-renewing contract had cost the company £41,473, with companies missing an average of more than two contracts in the past year. One respondent said their company had mistakenly renewed a contract costing over £250,000.

The survey also revealed that 15% of executives had resorted to using Post-it notes to remind themselves of important contract milestones, while 19% said they had relied on their partner to remind them. 12% said they had even written reminders about an upcoming contract renewal on their hand.

ContractWorks MD Mark Rhodes said “this new data suggests that unwanted contract renewals are costing UK businesses more than a billion pounds a year, and shines a light on the costly practice of ‘file and forget’ once agreements have been signed.

“But missed renewals are only one consequence of losing visibility of live agreements. Failure to stay on top of contract obligations can result in non-compliance, with consequences including financial penalties, lost customers, reputational damage and even formal disputes.”

Indeed, 71% of in-house lawyers surveyed believe that their business doesn’t focus enough on managing post-signature contracts, with financial risk to the organisation, impact on productivity and risk to the organisation the top concerns.

Rhodes added “organisations naturally focus on negotiating and signing new contracts to win new customers and secure the best deals from suppliers. But it’s once contracts have been signed that the greatest risk of financial and reputational damage exists, and it’s often this area which internal processes overlook.

“Creating visibility of crucial contract data for stakeholders across the business, not just lawyers, has the potential to eliminate unwanted renewals, reduce further unnecessary costs and minimise organisational risk.”

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