If you have vendor contracts expiring within the next 12-24 months, it’s imperative that you do not let them auto-renew. Why? Because it’s possible you’re not getting the most advantageous deal. And in these trying times, protecting your bottom line is more important than ever.
According to the U.S. Labor Bureau of Statistics, consumer prices increased 7.9% compared to 2022. Earlier this year it was reported that the increase was the largest 12-month advance in decades. As a result, financial institutions are experiencing increased product and service costs.
Nearly every service contract is affected by the CPI, too. Take card processing services, for example. At a 5.5% increase in the CPI, a financial institution that typically pays $20,000 per month for the service could end up paying an additional $13,200 annually. And that’s just one of many necessary services!
Plus, with many question marks about the future of the economy, those rates could very well continue to rise. Having a strategy to fight back against these increases is essential.
One of the best ways to combat this rise in costs — and limit the effects on your bottom line — is to ensure you have the most favorable contract terms with your vendors. That means examining your contract expiration dates and making plans to renegotiate at the optimal time.
While the easy choice for all involved is to let agreements auto-renew without asking questions or pressing for a better rate, that doesn’t make financial sense for your financial institution.
With a contract expiration on the horizon and other vendor options, YOU have the upper hand in the negotiation process. Make your vendors re-earn your business instead of just giving it to them.
Though you may be short-staffed or knee-deep in other important tasks, contract optimization is one housekeeping item you shouldn’t put aside. The following items should move up to the top of the to-do list:
For best results, consider engaging with a third-party expert to examine your contracts line item by line item. They’ll be able to estimate your potential savings based on direct proprietary knowledge of what other financial institutions pay for the same products and services. They can also examine the contract terms to see if they are in your best interest. This step should be free of charge, so you have nothing to lose by exploring this option.
Once you complete these three simple steps, the hardest part is done. You’ll have an estimated savings in hand and an ally that can take the reins of the entire process for you.
With inflation and the CPI continually rising, I encourage you to take control of your vendor agreements and reach out for a free analysis of your contracts to see how much money you can save, plus the additional value you can gain. It will likely be an eye-opening experience to see just how much an industry expert in contract negotiations can help enhance your financial institution’s bottom line.
To learn more about how to get more value out of your vendor contracts, contact us.
Download our whitepaper, “Three Reasons to Give Your Contracts a Closer Look.”
ABOUT THE AUTHOR
Kelly Flynn is the National Sales Director for JMFA Contract Optimizer. She leads a team whose charter is to optimize the value of every third-party vendor contract or agreement to help further the strategic vision of the credit unions they represent.