​Byline: Mae Cornes

Contracts govern nearly every financial interaction in business. They define obligations, prices, timelines, penalties, and rights. Yet according to a recent global report by World Commerce & Contracting (WorldCC), most companies fail to manage them with any degree of strategic discipline.

The consequences are measurable. WorldCC’s 2025 report, Contract Management: An Overlooked Driver of Business Agility and Financial Performance, found that organizations lose an average of 8.6% of their annual revenue due to inefficient contracting. In highly regulated or complex sectors like energy, aerospace, or public procurement, the losses climb to 15% or more.

This erosion comes from common, recurring failures: unclear terms, missed obligations, delayed deliveries, disputes over scope, and billing errors. Disjointed processes across legal, finance, procurement, and operations compound these issues, leading to a fragmented view of obligations and performance.

A Fragmented Process with Expensive Outcomes

One of the report’s key findings is that contract-related data is typically spread across more than two dozen systems. On average, 24 separate tools or platforms house key contract terms, risk positions, or performance metrics. That fragmentation often delays decision-making, reduces responsiveness to change, and weakens internal accountability.

Moreover, only 39% of commercial practitioners believe their contracts deliver the outcomes they are supposed to. Just 16% believe their contract negotiations focus on the right issues. These numbers suggest a fundamental misalignment between what contracts are supposed to achieve and how they’re actually used.

“In many companies, contracts have become rigid documents that are hard to access, harder to interpret, and nearly impossible to adapt once conditions change,” said Tim Cummins, President and Founder of WorldCC. “That’s not a legal problem - it’s a financial one.”

Missed Revenue, Stalled Projects, and Slower Time-to-Market

The 8.6% value loss does not come in one blow, but accumulates through thousands of preventable mistakes. Delayed contract approvals stall project launches. Missed payment terms disrupt cash flow. Disputes over ambiguous language trigger legal fees and broken relationships.

For billion-dollar enterprises, the cost is substantial. A business with $1 billion in annual revenue could be leaking over $86 million each year due to contract mismanagement alone. That kind of loss, if found in a supply chain or product line, would spark executive intervention. Yet when embedded in contracts, it often goes unnoticed.

One contributing factor is that contracts are still viewed primarily as legal documents, rather than financial tools. This perspective sidelines contract professionals from broader business planning, leaving gaps in performance oversight and forecasting.

Adaptive Contracting Emerges as a Practical Model

WorldCC’s report introduces a four-stage maturity model that categorizes how organizations currently manage contracts. At the lowest level, processes are reactive and compliance-driven. At the highest, contract data is centralized, analytics inform decisions in real time, and clauses are structured to accommodate change.

Organizations that progress through the model report measurable benefits: faster time to revenue, lower working capital needs, improved margin protection, and stronger supplier and customer relationships. But getting there requires more than just new technology - it calls for structural change in how contracts are designed, negotiated, and used internally.

Sally Guyer, CEO of WorldCC, emphasized the role of finance leaders in driving reform. “CFOs are uniquely positioned to rethink contract management not as a back-office task, but as a strategic lever. That perspective unlocks value that’s otherwise buried in complexity.”

A Business Priority That Can No Longer Be Deferred

Executives surveyed for the report recognized the problem, but few had previously quantified its financial impact. More than 80% said their contracts were too inflexible to respond to market disruptions, regulatory shifts, or supply chain issues. Yet despite those concerns, investment in contract lifecycle management remains inconsistent.

Part of the challenge stems from historical inertia. Many companies lack standardized processes or consistent ownership of contracts across functions. Others rely on legacy tools or siloed spreadsheets. This leaves them vulnerable to errors that cost more than most realize.

The report suggests that fixing this gap is no longer optional. In an environment of rising costs, tighter margins, and constant uncertainty, contract visibility and agility are not administrative upgrades - they are requirements for sustainable performance.

An Economic Tool, Not a Legal Afterthought

The research concludes that while contracts are created to define obligations and reduce risk, they should also be capable of enabling business growth. When managed well, they can provide insights on performance, accelerate delivery, and support faster response to change.

But that transformation depends on a shift in mindset. Organizations must move away from seeing contracts as static files drafted for compliance, and begin using them as live financial instruments. Doing so could recover millions in lost value - and help businesses adapt to whatever comes next.

For more insights, visit World Commerce & Contracting’s report page at www.worldcc.com.