More and more, insight-driven CFOs are realizing that the secret to better forecasting lies in their relationships with procurement. Capturing the big-ticket items from vendor contracts can be an extremely useful forecasting tool, giving CFOs a realistic picture of the company bank accounts.
The supply chain can give CFOs a rich source of direct cash flow insight — if only they could access it. Building accurate direct cash flow models requires CFOs to get data from procurement teams in nearly real-time. Until the advent of contract intelligence, this data has been out of reach, stored in disparate systems.
Contract intelligence platforms like Evisort provide a single place for CFOs to leverage the paperwork usually hidden behind the software built for procurement (or sales or legal). Contract intelligence enables CFOs to break down those silos and get visibility into the data at the heart of the business: data that dictates cost, revenue, and opportunities.
Providing actionable forecasting insights is just one way contract intelligence can power more effective cost management. But just as CFOs have to break down siloed business systems to better access this cash flow data, they also have to break down the cultural silos between themselves, procurement, and legal.
In other words, CFOs need to form a close working relationship with their procurement reports to get insights into market conditions, liquidity, and supplier relationships that their business partners can easily understand and act on.
In our new ebook, Legal, Contracts, and You: Relationship Management for Finance and Procurement Pros, we guide finance leaders on how to create mutually beneficial relationships with their procurement and legal departments. We explore why contract intelligence is key to getting stakeholders on the same page, and how this collaboration pays off for the whole enterprise.
Get started with an excerpt from Legal, Contracts, and You: Relationship Management for Procurement and Finance Pros.
Usually it’s impossible to make everyone happy. But when it comes to digital contracting, there is one way: through contract intelligence.
Contract intelligence platforms enable businesses to uncover millions of dollars in potential cost savings and revenues, accelerate deal closure times and reduce risk at the same time.
Now the challenge becomes showing legal that it’s possible to improve your bottom line while ensuring compliance.
The next time a colleague expresses frustration with your current contracting process and a desire to adopt contracting technology to help, circulate the following three questions internally:
- Does the solution bring another dollar into the company?
- Does the solution defer another dollar coming out of the company?
- Does the solution mitigate risk?
If you can’t answer “yes” to every question, the solution you’re considering isn’t a true contract intelligence platform.
Exercise: Identifying Shared Goals
These three exercise questions are designed to help legal, procurement, and finance teams realize that you do share priorities. In this section, we’ll illustrate how to communicate that to the right stakeholders.
1. Does the solution bring another dollar into the company?*
If the solution can help procurement negotiate a better deal or collect a rebate they would have otherwise missed, it’s a win for them. It’s also a win for finance, who relies on cash flow into the business to assess its fiscal health.
If the solution also helps procurement negotiate contracts getting signed with your standard language, then the team is lowering risk in the process of accelerating revenue. That’s a win for procurement, finance, and legal.
2. Does the solution defer another dollar coming out of the company?
For example, if the solution enables procurement teams to manage supplier agreements more effectively, they can drive down direct procurement costs, improving gross margin and operating margin. Win for procurement, win for finance.
The solution might also reduce “contract debt,” here represented by the time spent on manual post-signature processes (searching for old agreements). Here’s an example of how contract debt translates to lost money: say a company misses an auto-renewal, and commits to spending on a vendor that they intended to terminate. Or, they sign a vendor contract on a less favorable rate because they didn’t know they had a better rate with a different vendor.
3. Does the solution mitigate risk?
Compliance isn’t always a casualty of efficiency. With a contract intelligence platform, efficiency can actually enhance compliance. For example, if procurement can halve the time it usually takes to sign a mutual NDA, they’re mitigating risk by getting that IP-protecting document in place sooner rather than later. Efficiency win for procurement (faster NDA enforcement leads to faster negotiation) and big compliance win for legal.
Looking at the regulatory landscape over the last decade, it’s clear that privacy laws will only continue to become more complicated. Legal departments have to be dynamic in protecting the business, for example, by quickly responding to new regulations with addendums or checking existing contracts against regulations as they evolve. They can only do that by modernizing their workstreams and making contract intelligence a priority. Organizations that fail to adapt to new regulatory standards will face serious fines for non-compliance — making risk mitigation a key objective for finance, too.
To learn more about how to lead productive relationships in the era of contract intelligence, download Legal, Contracts, and You: Relationship Management for Finance and Procurement Pros.