Behind every successful business is a strong contract management strategy. Contracts define revenue, influence business decisions, and carry compliance obligations. Although many businesses understand the importance of a solid contract management approach, some still lack visibility into their contract costs. Worse, many fail to recognize their potential savings on contract costs.
The expenses don’t always appear in a single budget line; they often hide as inefficiencies, delays, or missed opportunities. Understanding where contract management drains resources is the first step toward reducing costs. To stop working with assumed numbers and approximate figures, teams must shift their attention toward the return on investment (ROI) a contract lifecycle management (CLM) tool could afford them. Let’s dig into it.
1. Routine work consuming
high-value time
Legal teams spend a significant share of their capacity on repetitive, low-value tasks such as re-drafting standard clauses, tracking approvals, or searching for past contracts. DiliTrust’s Legal Inefficiencies Report, created in collaboration with Above the Law, found that 88% of attorneys and legal professionals reported that their workday is burdened (either somewhat or heavily) by administrative tasks that detract from high-level legal work.
This routine work adds little strategic value but absorbs considerable resources accounts for on average 20% of a senior counsel’s time.
Let’s use a clearer example: if a senior counsel’s time costs €120 per hour, that 20% of time lost translates into roughly €48,000 per year per lawyer wasted on manual work. Across a full department, the total can easily reach six-figure inefficiencies.
Being aware of these numbers provides insight into where to focus efforts to obtain contract cost savings. For example, pushing for a CLM solution that can gradually free up time for higher-impact work while reducing other potential costs.
2. External counsel costs that go unmeasured
In-house legal teams are usually in high demand and work with multiple business units. At a time when resources are scarcer but workloads aren’t, it often makes sense to outsource some legal work. The issue isn’t outsourcing itself but keeping tabs on the actual costs. Unfortunately, many teams lack visibility here, and outsourced legal help are often a major cost center.
The 2023 ACC Law Department Management Benchmarking Report shows that companies allocate around 52% of their legal budgets to inside counsel and 48% to external services, such as law firms or alternative legal service providers.
Despite this near-even split, many legal departments don’t know whether that external spend delivers measurable returns. It shows in the numbers: 79% of in-house teams report pressure to reduce outside counsel costs, yet 57% admit they don’t track or quantify the savings achieved.
This combination of poor tracking and high spending creates a blind spot. Without data on what work is being outsourced, and how often, it’s nearly impossible for legal leaders to evaluate whether those costs are justified (if they even know the exact numbers).
But it’s not hopeless. Measuring the ROI of external counsel versus internal automated work is a step toward solving the issue. It helps teams build their case for investing in tools like CLM solutions, which enable them to keep control over contracts instead of externalizing work that could be automated.
3. Revenue leakage and missed opportunities
Value leakage isn’t limited to legal budgets. For instance, it also occurs when contract delays or poor management slow down revenue. Deals that sit idle in approval cycles, missed renewals, or forgotten obligations can all have a measurable financial impact.
Research from McKinsey found that ineffective contracting practices and weak management can cause value erosion equal to about 9% of annual revenues across organizations.
This percentage is high, particularly when contracts directly influence how and when revenue is recognized. Improving turnaround times and monitoring obligations not only reduce costs but also accelerate the path from signature to cash.
This lack of visibility drives reactive rather than preventive compliance, often resulting also in penalties or wasted time during contract audits. Centralizing contract data in a single CLM platform allows legal and compliance teams to act before deadlines or obligations are missed. This is an often-overlooked but effective strategy for improving contract cost savings. With exact data in mind, it’s also easier to push for a solution that can enable such savings.
Begin with the basics: understand your potential ROI
Even as legal departments modernize, many still can’t answer a simple question: how much are our contracts really costing us?
That’s partly cultural, since legal work hasn’t always been measured in financial terms. Nevertheless, it’s increasingly necessary to view it from this perspective. A clear ROI view helps pinpoint the biggest savings opportunities, justify investments, and strengthen collaboration with the business. It turns anecdotal frustration (“our contracts take too long”) into quantifiable insights (“each week of delay costs €X in revenue leakage”).
Know your numbers
This article highlights that reducing contract costs isn’t just about the budget, it’s about directing resources where they generate the most impact and stopping the waste of energy on tasks that can be automated or improved through better processes. Automating low-value work, consolidating external spend, and improving visibility can collectively save organizations significant time and money.
What’s next? Since you can’t improve what you can’t measure, the real solution lies in calculating your contract ROI. This can easily be done with tools such as DiliTrust’s ROI Calculator.
Once legal teams gain that insight, the doors truly open to the future of contract management.
