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Contract lifecycle management as a path to greater visibility

The Value of Contract Management Tech to a CFO

Contracting processes, though traditionally considered in the realm of General Counsel, have been gaining attention from the CFO largely due to the impact on financial risk and liability. Oftentimes contracts represent financial commitments. For example, payables which are unknown to finance prior to creation of a PO or receipt of an invoice are very real. Additionally, there are often collection terms that are unrealized, and revenue lost, which could be gained by a more thorough understanding of the contract.  Cash flow is key as well. There is a significant difference between a "pay on completion" versus a "progress" or "performance based" contract term. Overall, CFOs are beginning to embrace contract lifecycle management (CLM) technologies as a path to greater visibility - reducing risk and improving working capital position.

CLM is a broad concept that facilitates the contract lifecycle; from template authoring, initiation, ongoing management, through continuation or close-out. With the advancement of cloud computing infrastructure there has been an evolution of CLM applications from segmented solutions, focused on specific periods of perceived importance in the life cycle (e.g. procurement, authorship), to a more holistic value-design that transcends the iterative phases of a contract’s evolution.  These applications have digitized and automated the contracting process to improve the speed, efficiency, visibility and compliance of document management. Organizations that have CLM embedded into their company practices are seeing increased working capital, cost savings, better margins and timeliness of information.

The significant disruptions triggered by the emergence of COVID-19 have challenged organizations irrespective of company status, market capitalization, industry or geography. Almost overnight, contract intelligence has become a differentiator in this period of uncertainty. According to our impact survey, the primary concern of finance executives is how to manage financial impact.  Those that had greater access to contractual commitments over recent months were able to mitigate risk faster and gain traction to push through and emerge stronger.

While some organizations are rising to the challenge and embracing the opportunity, others are struggling. One critical factor of success is access to the organization's most current contract information. A second factor is the speed in transitioning from a centralized office environment to a remote working model. This has accentuated any weaknesses in data management, including any dependency on paper filing systems. Those with complete, accessible, digitized, contract data were able to make decisions and advance with better information.

From addressing the most common challenges to helping you see tomorrow’s opportunities; our teams are prepared to provide guidance at each stage of the CLM journey.  Working with us, you will be able to not only reduce overall risk (eg. leakage), but also capitalize on the rich possibilities of information you already own.

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Jessica Heidman

Principal Finance Effectiveness, PwC US

Gabe Andreescu

US Salesforce Partner, PwC US

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