Ignore your contracts and your money will go away—fast!
Ways credit unions and community banks are wasting money
Credit unions and community banks waste millions of dollars every year. The easiest, fastest way to stop wasting your money is your vendor management program.
As a part of this series, Maple Street’s pros explore ways your institution could be wasting money and what you can do to fix the problem.
Wasting money mistake #539: Ignoring contracts
Have you heard the expression, “Death by a thousand cuts?” It’s a figure of speech that refers to a failure that occurs as a result of many small problems. Ignoring your vendor contracts is an easy way to waste money. Each bit of neglect contributes to a total loss that can add up to something significant. After all, who has money to waste?
Credit unions and community banks, large and small, are notorious for not paying attention to the “other contracts” that aren’t considered critical and letting them automatically renew over and over. It’s all too easy to let the smaller contracts continue to roll over because you don’t have time to deal with them. However, every contract has an expense associated with it, which can ultimately hurt your bottom line.
Part of the problem is you’re not looking for savings opportunities in these contracts, but the other problem is that you don’t have them. It takes a lot of time and effort to identify, track down, and record all of these contracts and no one wants to do it. But you can’t manage contracts you don’t have.
Many times, you’re paying for services you’re not even using, simply because you haven’t reviewed the contract in a timely manner. Or you might be paying for products or services you’re only using in part. If you let contract terms automatically rollover without reviewing what you’re paying for, you could be paying a lot more than if you renegotiated at current rates and terms or just terminated contracts Candidly, you’re wasting money because you’re not getting anything back for it.
And if you have to ask yourself if you’re too busy to stop wasting your members’ or customers’ money, what on earth are you doing that’s worth more than paying attention to these contracts?
How to fix this money-wasting mistake
It’s easy to say you need to stay on top of your contracts. But in reality, most institutions are already too overloaded by trying to put out fires and exceeding their members’ or customers’ expectations. We realize it’s hard to keep track of all your contracts, especially those that you can let rollover. But it’s even harder to realize you let thousands of dollars slip through your fingers when you could have done something about it.
Here are some actual examples of ways money was wasted:
- One credit union was paying $6,000 a year for a postage meter it wasn’t using (and hadn’t used in years).
- Another credit union let a contract rollover for years without realizing it wasn’t using four of five “modules” even though it paid for them.
- A community bank had multiple contracts with the same vendor, but with different termination dates. It wanted to make a change, but couldn’t because it couldn’t terminate the contracts at the same time.
- A credit union had multiple contracts with the same vendor, but didn’t renegotiate all of the different contracts into one contract, with a discount.
- A community bank let a vendor contract continue to automatically renew with a seven percent increase every year, when other banks were getting the same service for much less.
All of these examples point back to managing all vendor contracts and taking the time to take a hard look at them from time to time. That’s why Maple Street’s services include identification, obtaining missing or incomplete contracts, and looking for savings opportunities. It does take time, but pays in the long run.
In addition, the most prevalent reason credit unions and community banks end up giving their vendors too much on a rollover, without getting anything in return, is because they don’t start their negotiation soon enough. Without sufficient time to negotiate, you’re boxed into having to make decisions last minute and the easiest thing to do is nothing. Maple Street ensures this doesn’t happen by keeping track of when your contracts renew and how much time is needed to get the best prices and terms. And, we do it for all contracts, not just the critical ones.
Maple Street’s Vendor Advantage System®
Only Maple Street has the Vendor Advantage System®, a comprehensive, systems approach to managing vendors, from new vendor selection through ending the vendor relationship. It includes the following services and software:
- Vendor planning
- Contract management
- Due diligence monitoring services
- Qualifying, selecting, and onboarding vendors
- Negotiating best prices and terms
- Measuring vendor performance and scorecarding
With the Vendor Advantage System®, you will reduce expenses, improve vendor performance and manage risk. We guarantee you’ll save more than you spend and you’ll pass your vendor management exam. Best of all, you’ll never have to worry about losing money to automatic contract renewals.
To date, we have saved our clients $132 million. If you’d like to stop wasting money by turning your vendor management program from an expense program to an expense reduction program, give us a call at 800-513-6839 or email firstname.lastname@example.org. Visit www.maplestreet.com/learn to learn more.
Get laser focused on managing your vendors now!
Request a meeting with a professional vendor management expert today