Survey Reveals Alarming Contract Management Practices

A new AberdeenGroup analyst report reveals some alarming practices in global business today.

The report The Contract Management Benchmark Report: Sales Contracts reveals that 85 percent of responding companies are using manual or only partially automated systems to manage sales contracts and 32 percent of customer contracts are not tracked, improperly serviced or forgotten entirely. Such practices pose significant risk for legal and regulatory non-compliance, financial reporting violations, customer dissatisfaction, lost revenue and more.


Low Cost Accounting Software Support

Provider of low cost support, consulting, training and custom report writing for MAS 90, MAS 200 and MAS 500 accounting software systems. Call us toll free at 1-866-762-3990 to learn how we can help.

“According to our research, almost 88 percent of survey respondents report that their sales contracts address varying combinations of products, services (including consulting services), warranties, and upgrades,” Vishal Patel, research analyst at Aberdeen, elaborated in a prepared statement about his report. “Despite this complexity and the obvious need to now manage them more carefully, contract management in most organizations usually involves largely manual, labor-intensive, and disjointed processes – resulting in poor visibility into contracts and compliance, as well as missed renewal opportunities.”

As the report explains, contracts are simply becoming more complicated, containing increasing amounts of critical information that demands precise and unblinking attention. At the same time, businesses continue to look for more revenue wherever possible, while navigating a maze of financial and other compliance requirements. Taken together, the logical conclusion is that businesses need to evolve their processes and technology to more proactively manage their contracts. The report also indicates potential growth for the contract performance management (CPM) industry with nearly one-third of respondents reporting they are planning to invest in contract management technology in the near term.

“Given all the risks to which companies expose themselves by not paying attention to this critical issue, the Aberdeen report makes a clear case for large companies to invest in CPM technology,” said Kyle Bowker, president and chief executive chairman of Nextance in a prepared statement.

The analyst reports also recommend best-practices and benchmarks the success of companies identified as “Best in Class” by Aberdeen. For instance, these business leaders are able to achieve contract renewal rates 92 percent on average, or 35 percent better than other companies. They are also able to close deals 75 percent faster by reducing the contract cycle times to about one week, compared to the average of nearly one month.

Accounting and financial professionals should be particularly aware of the potential compliance and reporting issues related to unmanaged or inadequately managed sales contracts.

“Sales contracts now often have very detailed terms and conditions, complex payment options and various channel sales strategies. Partner sales and distributor relationships, for example, can get complicated when it comes to revenue sharing and discounts or rebates,” Patel said. “Also, certain regulations (e.g., SOX and Basel II) require documentation and reporting, requiring management to assess the internal controls and procedures for financial reporting. Regulations also require that revenue be recognized at the right time, not too early or late.”

You may like these other stories...

For the first time in the five-year history of’s rankings of the top 50 accounting firms to work for in North America, a firm has held the top spot as best accounting employer for two consecutive years....
With tomorrow being Tax Day, you might see some procrastinators at your office filling out forms, printing out paperwork, or getting last-minute tax advice from their accountant so they can meet the IRS’s filing...
You can read volumes on how to manage an accounting practice. But if you want the quick version, just read the following four points. Everything else is just commentary.  (These points come out of the 1997 book, The...

Upcoming CPE Webinars

Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
Apr 30
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.