What is contract value?
Many (old-fashioned) software packages for contract management require you to enter a 'contract value'.
What exactly does this mean? What is the contract value of a contract?
Contract Value in Contract Management
Now if we take a step back:
Why would you want to measure a contract value? How does it help you to maximize the return on your contract?
Contract Lifecycle Management eBook: What is contract value?
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Content eBook
What is this eBook about?
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What is a contract value?
You will find enough definitions on the internet: The contract value must be determined by the 'homogeneous goods' (municipality of Zwolle)
The contract value is equal to the value of the investments (de Amersfoortse) The invoice value is equal to the contract value (Microsoft)
So which of those definitions is correct? What value should you use for your own organization in your contract management software?
![The problem with one contract value](https://academy.mochadocs.com/hubfs/1.%20eBooks/eBook%20-%20NL-EN%20-%20Wat%20is%20contractwaarde/EN/IMAGES/EN%20-%20What%20is%20contract%20value9.png)
The invoice value is equal to the contract value (Microsoft). Suppose I purchased the domain name Google.com quite a few years ago. I receive an annual bill of 9 dollars for this.
Then the contract value is 9 dollars. But that domain name is of course worth much more on the market. What value is that then? This way you already have two contract values.
And you can think of many more contract values:
- For one it is the purchase price, for the other a price per square meter, perhaps it is an indexation, license values, surety, etc.
- There is not one contract value - there are different values that you can attach to a contract.
What is the contract value?
Market value
Take a domain name as an example. It costs only 9 euros per year. Is this also the market value?
Why would you want to measure a contract value?
How does it help you to maximize the return on your contract?