In the dynamic world of small and medium-sized businesses (SMBs), every dollar counts. Yet, there’s a silent revenue killer lurking within many SMB operations: ineffective contract management. It’s a problem often underestimated or ignored, but the consequences can be staggering. According to research, SMBs can lose up to 10% of their annual revenue due to poor contract management practices. That’s a significant hit to the bottom line that no business can afford to ignore.

Ignoring contract management is a common pitfall for many SMBs, often due to a variety of excuses that may seem valid at first glance. Here are some common excuses used by SMBs to justify neglecting contract management:

1. Limited Resources: SMBs often cite limited resources, both in terms of budget and manpower, as a reason for neglecting contract management. Many believe that they lack the funds or personnel to invest in dedicated contract management tools or personnel.
2. Perceived Complexity: Contract management can seem daunting, especially for SMBs with limited experience or expertise in legal matters. Some SMB owners and managers may avoid implementing proper contract management processes because they perceive contracts as too complex or time-consuming to manage effectively or that there is no payoff for the time and money invested. In other words, “…it’s a nice to have, but not essential.”
3. Trust-Based Relationships: In small businesses, relationships often play a significant role in operations. SMBs may rely on verbal agreements or handshake deals with trusted partners, suppliers, or clients, believing that formal contracts are unnecessary.
4. Short-Term Focus: SMBs may prioritize short-term goals and immediate needs over long-term strategic planning. Contract management is sometimes viewed as a back-office function that can be deferred until it becomes absolutely necessary, such as during a legal dispute or compliance audit.
5. Lack of Awareness: Many SMB owners and managers may simply be unaware of the risks and consequences associated with poor contract management practices. They may not fully understand how ineffective contract management can impact their bottom line or expose their business to legal and financial risks.
6. Overconfidence: Some SMBs may overestimate their ability to manage contracts manually or with basic tools such as spreadsheets and email. They may believe that they can handle contract management internally without the need for specialized software or expertise. Since the average contract is now about 50 pages long and requires about 4.2 hours by a skilled attorney to digest and summarize, the need for an automated solution has never been greater.
7. Fear of Change: Implementing a new contract management system or process requires change, and change can be intimidating. SMBs may resist adopting new technologies or workflows due to fear of disruption, employee resistance, or unfamiliarity with the new system.
8. Prioritization of Other Initiatives: SMBs often have competing priorities vying for their attention and resources. Contract management may take a back seat to other pressing concerns such as sales, marketing, or product development. Again, we have another argument for an automated tool like Contract Sage.
9. Small Scale: Some SMBs may underestimate the importance of contract management, believing that it’s only necessary for larger organizations with extensive contract portfolios. They may fail to recognize that even a few contracts can have a significant impact on their business operations and financial health.
10. Optimism Bias: Finally, there’s a tendency among some SMB owners and managers to adopt an “it won’t happen to us” mentality regarding contract-related risks. They may believe that they can avoid problems or disputes through sheer luck or optimism, rather than proactive management.

While these excuses may seem valid on the surface, they ultimately leave SMBs vulnerable to a range of risks and missed opportunities. Effective contract management is essential for SMBs to protect their interests, optimize their operations, and achieve long-term success in today’s competitive business landscape. Spoiler alert: Contract Sage can help with all of these.

Contracts are the lifeblood of business operations. They govern relationships with customers, suppliers, partners, and employees. However, without proper oversight and management, contracts can become liabilities rather than assets. Remember too, that most SMBs do not create the contracts that constrain their operations, they sign someone else’s agreement. Here’s how SMBs end up losing revenue by neglecting this critical aspect of their business:

1. Missed Opportunities: Contracts hold valuable insights and opportunities for revenue generation, cost savings, and risk mitigation. Yet, without a proactive approach to contract management, SMBs risk missing out on renegotiation opportunities, upselling possibilities, and favorable terms with suppliers or clients.
2. Compliance Risks: In today’s complex regulatory landscape, compliance is non-negotiable. Failure to adhere to contractual obligations or industry regulations can result in hefty fines, legal disputes, and damage to the company’s reputation. A Saas-based contract management tool like Contract Sage can help SMBs stay on top of compliance requirements, ensuring they avoid costly penalties and legal battles.
3. Time Drain: Manually managing contracts is not only tedious but also time-consuming. SMBs often lack dedicated resources for contract administration, leading to inefficiencies, delays, and missed deadlines. By automating contract workflows and centralizing document storage, Contract Sage streamlines the entire contract lifecycle, freeing up valuable time for employees to focus on revenue-generating activities.
4. Revenue Leakage: Without proper oversight, revenue leakage can occur through missed billing opportunities, inaccurate invoicing, or unenforced pricing terms. Contract Sage’s advanced analytics and reporting capabilities empower SMBs to identify revenue leakage points, optimize pricing strategies, and maximize profitability across their contract portfolio.
5. Legal Exposure: Poorly managed contracts leave SMBs vulnerable to legal disputes and litigation. In the event of a contract breach or dispute, having a comprehensive contract management system in place can mean the difference between a swift resolution and a protracted legal battle that drains resources and damages relationships.

By adopting a proactive approach to contract management with a Saas-based tool like Contract Sage, SMBs can mitigate these risks, unlock hidden opportunities, and safeguard their bottom line. With features such as automated alerts, document tracking, and customizable workflows, Contract Sage empowers SMBs to take control of their contracts and drive business growth.

Imagine the peace of mind that comes from knowing you have ALL of your obligations summarized, searchable and in ONE PLACE. Contract Sage provides a TOTAL view of your obligations as an SMB and can serve as the foundation for undertaking a Digital Transformation for your SMB. You can ask specific questions about a contract when the need arises allowing you to rest easy.

In today’s competitive landscape, SMBs can’t afford to overlook the importance of effective contract management. The hidden costs of ignoring this critical aspect of business operations can have far-reaching consequences. By investing in a Saas-based contract management solution like Contract Sage, SMBs can protect their revenue, enhance operational efficiency, and position themselves for long-term success in the marketplace. Don’t let poor contract management hold your business back—take control and unlock the full potential of your contracts with Contract Sage.