Do You Need To Revise Old Client Contracts?

One of the most talked about topics in 2022 has been the rising prices of goods and services, otherwise known as inflation. In January 2022, Canadian inflation surpassed 5% for the first time since September 1991, well above the 2% annual increase target and making 2022 the fastest year over year rate of expansion in three decades.

While as consumers, we’ve felt the effects in our everyday lives, organizations must also adjust accordingly as well. The question is, are organizations able to adapt quickly enough?

For companies that require third-party products or services in order to serve their clients, cost increase in products or services translate to lower profitability than initially anticipated. As companies grow in size, it becomes more difficult to maintain visibility on project profitability especially in real time.

Organizations that use proactive dashboards to review profitability on their product and service offerings can make immediate adjustments to optimize results. This is because the systems are set up to pull metrics such as revenue per client and cost per client into an easy, interactive, and insightful dashboard that can truly tell the story of business performance.

Alternatively, if your company hasn’t had much visibility into contract performance metrics in the past then setting the foundation to automate your business intelligence is a great place to start. You have an opportunity to better understand your clients and gain further insight into areas where clients have the highest or lowest revenues and gross margins, and pinpoint exactly where there are odd fluctuations happening over time.

The leaders who take this step of enabling automated insight are better armed to adjust to changes in the environment –such as inflation. A common action item is toto revisit client contracts and look to negotiate appropriate changes in contracts such as updating a contract to account for fluctuations in cost of key materials. Often these proactive reviews are left on the side of someone’s desk as more pressing items take precedent, but foundational documents like contracts have a large impact on business performance. Having a dashboard to consistently monitor client or product profitability can allow you to pinpoint exactly which contracts need to be updated and when their results drop below your profitability targets.

Pontem Innovations has developed many products that provide a solution to this demand. Our Gross Margin Dashboards and Client Scorecards are tailored to the needs of our clients, and we’ve seen these dashboards drive action and ultimately, positive results.

Contact Pontem today to learn more about how you can refresh client contracts for optimized profitability and efficiency.