The economic outlook continues to look cloudy.
A recent survey by the CEO advisory firm Teneo found that at least two-thirds of CEOs of large companies expect the first six months of 2023 to be marked by “worsening customer demand, industry conditions, access to capital, and domestic and global growth,” the Wall Street Journal reports.
As companies endure these economic headwinds, they need data-driven insights that allow them to find and protect revenue regardless of commercial conditions—and they need it fast.
That’s why contract intelligence has become a must-have: Contracts are the foundation of commerce, defining relationships with customers, suppliers, and partners. By gaining complete visibility of contract data, company leaders can leverage business data that already exists across the enterprise to improve revenue performance significantly.
Here are three ways contract intelligence is helping businesses find revenue that already exists in contracts today:
1. Protect revenue streams via compliance
Contracts are commitments. Missing those commitments can hit the bottom line hard. In addition to driving customer churn, Harvard Business Review says that firms stand to lose 5-40% of contract value if they have inefficient contracting practices.
Contract intelligence takes contract management to the next level. It gives companies the advanced tools to turn any static contract into structured components and with that, streamline processes, and maintain the strictest adherence to regulatory compliance. Rather than waiting for new contracts to deliver value, companies can use contract intelligence to drive growth by surfacing new insights from existing transactions, adding to their bottom line.
Rather than waiting for new contracts to deliver value, companies can use contract intelligence to drive growth by surfacing new insights from existing transactions, adding to their bottom line.
For example, one Fortune 500 company used contract intelligence to digitize and monitor contracts worth $13.6 billion, accounting for 85% of all company revenue. The firm analyzed its contract repository data to gain a 360-degree view of its obligations and entitlements and to surface areas of potential risk. Their global teams worked together to leverage their single source of truth to ensure 94% compliance delivery across all their commitments, avoiding costly fines and emerging as a solid and trustworthy partner. Not only did our customer protect their margins, but they also freed up human capital in the process, as it required no incremental headcount.
2. Accelerate cash flow via automation
Speed is another vital commercial vector supported by contract intelligence. Contract intelligence helps organizations get up to speed quickly: when contracts get signed faster, work starts faster and revenue is recognized faster.
As one CFO put it: “If I can get my sales and business desk to close orders even a day earlier, that’s an improvement in my business and my bottom line. Speed matters in every business!”
Alternatively, delayed deals can lead to altered terms, frustration on the part of all parties involved, and even bring an end to negotiations entirely.
Contract intelligence addresses the need for business speed in a number of ways. First, it allows legal to create pre-approved contract language that needs no further review, so sales can self-service their deals and get to close faster without compromising on risk and compliance. More advanced systems also integrate CRM and CPQ data into the contract creation process for a streamlined close. And after contracts rea signed, contract intelligence accelerates cash flow by automating invoicing and other business processes against the agreement.
3. Uncover revenue opportunities via price adjustment levers
Having all contract details immediately at hand makes your company more flexible and adaptable in periods of economic volatility. With contract intelligence businesses can quickly introduce and enact revenue adjustment parameters, like payment schedules or cost-of-living adjustments. The Boston Consulting Group says organizations can expect a 2-4% uplift in their margins by improving their contracting processes.
Organizations can also use contract intelligence to drive new revenue opportunities, particularly imperative when uncertainty has eroded margins for multiple quarters. An advanced contract intelligence platform allows companies to use AI-enabled assistance to examine past contracts covering different territories and departments. Such a comprehensive overview drives efficiencies regarding over-usage charges, inflation clauses, and pricing adjustments. Contract intelligence also adds revenue by automatically monitoring delivery terms to optimize costs and avoid penalties, along with tracking deviations between original and sold-as pricing.
Recently, one organization successfully analyzed 35,000 documents in three weeks using AI trained on contracts to discover inflation-related clauses. Not only did the analysis identify more than $50 million in anticipated revenue by surfacing neglected price adjustment entitlements, but the organization also reduced overhead by decreasing manual effort. What had previously taken more than 300 employees was now accomplished by AI.
Whatever the outcome of today’s economic uncertainty, contract data is too valuable to go underutilized in the enterprise. With contract intelligence, leaders can make contract data actionable and fully realize the inherent value of all their contracts, no matter how complex.
And thanks to the power of AI, organizations need not wait months to realize value from their contracts; the data they need to move the needle on revenue can be rapidly digitized and leveraged in a matter of weeks.
To learn more about how contract intelligence can help your organization build resilience amid uncertainty, access our Contract Value Toolkit, featuring research from BCG, Forrester, and others.