Drive Shareholder Value By Connecting Contract Data

Data-driven decisions are a proven quantitative method for improving the bottom line; and with machine learning and AI enhancing systems of record operations run more effectively. Despite proven success, AI and machine learning is not nearly as widely deployed as it could be to protect margins and drive shareholder value. Forward-thinking organizations are increasingly looking at how the data locked within contract documents across multiple systems can materially impact operating margins and improve capital efficiency.

With the recent banking turmoil, unsettling inflation trends, and the steady increase in interest rates, business leaders are experiencing elevated pressure to make business processes more effective. Contracts are at the center of all business processes – representing financial transactions, vendor agreements, go-to-market partnerships, customer obligations, and much more. Too often, however, that data becomes difficult to access–or even find–once the contract is negotiated and signed. According to a study by EY and the Harvard Law School Center on the Legal Profession, 90% of organizations report having difficulty locating contracts because they don’t have the necessary technology or processes.

Understanding contractual obligations helps organizations with making better operational decisions. “Getting immediate access to your contract data is the bare minimum,” said Steve Tucker, Chief Sales Officer at Evisort. “In a time of economic uncertainty, organizations are increasingly pushing the boundaries for micro- and macro-level business intelligence, including contract intelligence.” Even so, siloed processes, missing or inconsistent contracts, and substandard post-signature analysis capabilities leave teams unable to efficiently deliver on critical initiatives. What’s worse is that over 50% of organizations report these inefficiencies in contract processes have resulted in lost business.

In today’s economy, it’s more important than ever to bring in every dollar possible and manage operating margins wisely. Without constant vigilance, capital efficiency plummets, and shareholder value soon follows.

Innovative operations teams are not only ensuring access to their contract data, they’re integrating it into existing enterprise systems (like ERP, CRM, procure-to-pay) to connect contract data across the technology ecosystem. With this accurate, timely contract data at their fingertips:

• Sales teams can can negotiate better pricing for deals, driving increased revenue
• Procurement and Supply Chain teams can negotiate better discounts with suppliers, helping manage the cost of goods sold (COGS)
• Accounting and Finance teams can speed Sarbanes-Oxley (SOX) compliance reporting, mitigating fines and penalties
• Compliance teams can react quickly to fast-changing environmental, social, and governance (ESG) regulations, reducing the risk of legal and reputational repercussions

Organization leaders that are adopting this more strategic mindset toward contract management are deploying technologies that unlock the critical data–such as renewal, compliance, and pricing–locked within them to drive improved processes, and ultimately, support the value shareholders receive.

In a recent example, a large technology company used artificial intelligence to conduct due diligence on an acquisition target’s contracts, streamlining the acquisition process from two years to nine months. Upon the news of the intent to acquire, the stock price for both companies rose in the following months.

Acquisitions don’t happen often though, so how can businesses benefit from connected contract data in day-to-day operations? “Contract solutions that create a massively scalable and secure repository for accessing contract data, leverage artificial intelligence and intuitive search capabilities to easily extract key contract language, and automate workflows and alerts to liberate employees from manual tasks help companies save on selling, general, and administrative (SG&A) expenses,” said Tucker.

The cost for employees–let alone attorneys–to manually search across gigabits of contract data across multiple systems can be exorbitantly expensive. It is better to focus on more valuable activities, such as proactively ensuring regulatory compliance, crafting more profitable sales contracts, and optimizing the supplier mix.

“As enterprises look to maximize shareholder value, there is a huge need to move beyond the view of traditional contract management and see contracts as living documents,” according to Tucker. Even more, there is an opportunity to leverage AI and technology to draw insights from contracts that open new avenues for new, more profitable, and less risky ways of managing capital efficiency.

The only question is: will your organization seize it – or will your competitors do so first?

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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