How Seamless Collaboration Between IT and Finance Pays Off
How to enable seamless collaboration between finance and IT
To maintain profitability during uncertain times, cost efficiency is crucial, and automated contract lifecycle management (CLM) is a key strategy to reduce expenses. Investing in digital transformation can help identify risks and opportunities to give businesses a competitive advantage.
Economists suggest we may be facing yet another year of uncertainty. Reports suggest the U.S. economy will likely slow in 2023. This news puts renewed pressure on enterprises to find new ways to maintain profits and build new sources of revenue to survive in leaner times.
Investing in digital transformation is a critical step for businesses looking to stay competitive in an ever-changing economic environment. According to a recent PwC survey, 60% of business leaders, including CFOs, realize this and agree that digital transformation is the most important driver of growth right now. As crucial investments are made, cost efficiency is key; which is why many business leaders strive to increase automation wherever possible to reduce overhead expenses. Ultimately, digital transformation can identify risks and opportunities that give businesses a competitive edge in an uncertain landscape.
Out with the Old Ways of Doing Things
Antiquated systems create challenges, such as siloed departments, remote workers unable to collaborate, platforms that don’t work together and data that is not searchable or even usable. Digital transformation alleviates many of these major pain points by giving departments and teams enterprise-wide greater access to information stored across the ecosystem. This is especially valuable to finance teams, who can then unlock and analyze vital data to identify pain points, risks and opportunities.
One vast source of business knowledge comes from the various contracts signed with vendors and partners. Not only can the digital transformation of these contracts support the search and retrieval of the information they contain, but it can also leverage contract data to uncover valuable business insights. These insights can be used to maximize the value of contractual relationships, prevent revenue leakage and identify potential new revenue streams.
See More: How Businesses Can Mine Actionable Insights From Complex Legal Contracts
Automated CLM Gives Finance Departments a Competitive Advantage
Financial transactions and contracts, by nature, have sensitive information that needs to be stored in a manner that’s both secure and readily accessible. To make all financial information in contracts searchable, finance teams must work with their IT teams to implement a CLM platform that can organize data and make it available to the appropriate parties.
IT investment into a connected CLM system allows data to be analyzed for new insights into strategies to cut costs and boost revenue. To implement these changes, IT and finance departments need to seamlessly collaborate to develop a system that easily stores, retrieves and exchanges specific information. With the proper guidance, IT teams can set up a CLM platform that allows finance teams to have full visibility across all business transactions to monitor opportunity and risk better.
Transparency and Visibility Strengthen Finance Departments
Implementing a CLM platform creates greater visibility across the entire enterprise. With information easier to store, find and sort through, finance teams have a clearer picture of the health of the business.
This level of oversight is made possible as contracts are input into the CLM system. As the contracts are being input, the platform is recording and learning about the clauses and fulfillment obligations inside each contract. Through machine learning and automation, many of the most redundant and error-prone tasks – like searching contracts for terms and expiring clauses — can be automated, saving time and ensuring contract obligations are being met. This deep understanding of contracts also allows for AI-led contract drafting and risk evaluation.
Plugging Value Leakage With CLM
Vodafone procurement company (VPC) needed to find a way to manage thousands of supplier contracts more effectively. VPC manages most of Vodafone’s spending, which exceeds $24.8B, and it was challenged by 30K+ supplier contracts stored in siloed systems across the IT landscape, offering severely limited search-retrieve-analyze functionality. The contract creation process at VPC was time-consuming and inefficient, and it lacked the capacity to measure performance against agreed-upon service level agreements.
Seeking to gain better control of its contracts, VPC implemented an AI-led CLM platform. The first step was to migrate existing contracts to a central repository. Then pre-approved clause and template libraries were built based on those contracts. This enabled self-service contracting with authoring support for 70+ languages. VPC’s CLM platform also provided a configurable workflow engine to empower the enterprise to start creating smarter contracts from start to finish.
The result of this investment is improved supplier performance and business outcomes. By digitizing contracts, VPC was able to identify and fix areas where there was value leakage that could negatively impact financial outcomes. All told, VPC was able to achieve cost savings, improve risk mitigation and boost supplier performance.
What To Look for in a Modern CLM System
To lay the proper foundation for collaboration, companies should look for a CLM system that addresses current problems and can also scale to address future needs. Stakeholders from both the IT and finance departments must be pulled into the implementation process to ensure the system is deployed properly and to collect and report on the most important metrics. With the right system in place, it becomes infinitely simpler to review KPIs.
By 2025, some studies suggest 60% of organizations will capitalize on disruption with an enterprise- and ecosystem-wide approach to automation, leveraging model-based enterprise concepts and low/no-code platforms like CLM. Companies with a plethora of data can unlock business potential from that information. By observing and identifying patterns, finance departments can make more informed decisions to improve the organization’s overall performance.
As needs change, having a system that can adjust along the way allows enterprises to continue to scale. Poor contract management costs companies 9% of their bottom line. Improving these processes is imperative for the health of the organization, making it a top priority for finance departments, IT teams and C-suite business leaders.
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