The indexation problem most firms do not see clearly
An indexation clause is a contractual provision that allows rates to increase in line with an agreed index, typically inflation or a cost measure, at defined intervals. For consulting firms operating in an environment where salary costs rise annually, these clauses are commercially important. They are the mechanism that prevents a margin from quietly eroding year after year.
The problem is not that firms fail to include indexation clauses in their agreements. Many do. The problem is that when the time comes to act on them, no one can quickly identify which contracts include a clause, what the clause says, when the review window opens, and what process is required to trigger the increase.
Answering those questions requires someone to open each agreement individually and read it. For a firm with 80 or 300 active client relationships, that is not a realistic process. So the price increase gets deprioritised. It gets applied inconsistently. Or it does not happen at all.
"You have a contract signed ten years ago on auto-renewal. Nobody who wrote that contract is still around but it's sitting somewhere and you know the supplier but maybe you've started to drift a bit. We need to index but we have no clause. We can't be bothered to renegotiate the whole contract because then we risk losing it or triggering a procurement process. So we raise the price and see if they react, which nobody does." — Procurement and spend analytics company
That last observation is telling. The price increase lands because the client does not notice. But the firm is operating without a contractual basis for it, which creates exposure. And the underlying problem, not knowing what the contract says until someone goes looking, remains.
"The price adjustments are the important ones to get right, to make sure we're always correctly positioned with the client and that we're actually using the price adjustment opportunities available to us." — European ERP consultancy
The word "using" matters. Having the right is not the same as acting on it.
How the margin gap widens quietly
The commercial consequence of not acting on indexation rights compounds over time in a way that is easy to miss when it is happening.
In year one, a rate that should have increased by three per cent but did not creates a relatively small gap. In year three, after the same pattern has repeated, the gap between what the firm charges and what delivery actually costs has become significant. At some point, the engagement that was commercially viable when it was signed is no longer delivering the margin the firm needs.
That lost margin is not recoverable. It is not a delayed payment or a temporary shortfall. It is profit that the firm was entitled to charge, had a contractual right to pursue in many cases, and did not. Every month the rate stays flat is revenue the firm will not see.
This is not a hypothetical. It is a pattern that shows up consistently in consulting firms that have grown their client portfolios without building the systems needed to manage the commercial terms of those portfolios.
The difficulty is that the problem is not visible in any single agreement. It is distributed across the portfolio. And it requires contract-level data, aggregated and accessible, to see it clearly.
Why this is a contract management problem, not just a pricing problem
The instinct when margins are under pressure is to address it through pricing strategy: new rate cards, revised terms for new engagements, renegotiation conversations with key clients.
Those responses are appropriate. But they address the problem going forward without addressing the existing portfolio.
The existing portfolio contains agreements with indexation rights that have not been exercised, rate structures that were appropriate two years ago but have not been reviewed, and commercial terms that vary across clients in ways that are difficult to see without aggregated data.
Getting visibility into that portfolio is a contract management problem. It requires contracts to be stored as structured data rather than as documents in folders. It requires key commercial terms, including indexation clauses, rate review dates, and discount levels, to be captured as searchable metadata at the point of execution. And it requires a system that can surface the relevant information when decisions need to be made.
In Precisely, commercial terms are captured as structured metadata at the point a contract is created or registered. Indexation clauses, rate review dates, payment terms, and discount levels are not buried in document text. They are searchable data fields attached to the contract record.
That means a firm can filter its entire archive by indexation clause type, surface every agreement with a rate review window in the next quarter, or export the relevant metadata to a spreadsheet or BI tool for analysis. The platform supports integration with tools such as Snowflake and Google BigQuery, as well as a full REST API, for organisations that want to run more sophisticated modelling across their contract portfolio.
Legacy agreements, contracts that predate the CLM system and are currently sitting in inboxes or shared drives, can be uploaded through Archiving Workflows and registered with the same structured metadata. Once in the archive, they are subject to the same search, filtering, and reminder logic as any other agreement. The portfolio visibility does not require starting from scratch. It requires getting existing agreements into a governed system.
The question worth asking now
Which contracts in the current portfolio include an indexation clause? Which of those have not been reviewed in the past 12 months? What is the aggregate revenue impact of rates that should have increased but have not?
If those questions cannot be answered without a manual review of individual agreements, the firm does not have portfolio-level visibility into its commercial terms. That is a manageable situation for a small client base. It becomes increasingly costly as the portfolio grows.
The fix is structural. Commercial terms need to be captured as data at the point of contract execution, not reconstructed from documents when a decision needs to be made.
