Contracts Aren’t Just for the Legal Department Anymore

Cost-savings and strategic advantages hide in every business, and the latest procurement technology can reveal how to find it — in your contracts.

In our recent article about spend management, we focused on the flood of spend data that businesses face and the technology that can help make sense of that.

But that technology, like artificial intelligence, is also being used to connect contract data and accounts payable information. That connection offers insights into novel ways to think about contracts that can add profits to the bottom line.

Contracts represent a direct link to suppliers, and that can offer profitable information about supplier activity that can help with contract renewals, a common way to control spend and find savings. But with AI, it gives your business the advantage and reduces risk.

However, many companies don’t have their contracts all together in a system that gives stakeholders easy access to the documents and visibility into the contracts’ details. AI can help connect the dots and tip off companies to opportunities that once would have been difficult to see. This digital transformation can help businesses organize their own affairs, but it also aids in supplier management too.

To get a better understanding of how AI is transforming our view of contracts, we talked with Jake Arnold, Head of Customer Success at Suplari, a spend management provider that helps enterprises collect spend data so they can act on its insights.

Q&A

Spend Matters: Contracts are usually associated with the legal department. How has that view evolved to the point that contracts are now being connected to other parts of businesses, like finance and accounts payable?

Jake Arnold: Legal has always had a large part to play in the final input to and ownership of contracts. However, procurement teams have helped to shape the contracts with a mindset of operations, quality, cost and performance. Using multiple source-analytics tools, we can provide a better way to view and connect contract information with actual spend information. This gives all stakeholders a holistic view of supplier activity, such as other services a supplier is providing, or how the company’s spend is trending with that supplier.

What kind of insight is AI and other technology giving to contracts that businesses had trouble seeing before their use?

Technology should allow for contract or supplier managers to better control the risks associated with spend and contracts. Insights, such as upcoming contract expirations, spend without a contract coverage or insights that show overlapping contracts with a supplier, are all helpful tools for teams. The more proactive the contract owner can be, the less likely they’ll be surprised by upcoming supplier activities. This enables them to better adapt to the constantly changing spend landscape.

How should companies consolidate their contracts into a single system that allows them access and insights?

Ideally we would like to have a system of truth used to gather all information pertaining to supplier spend, PO, invoice, P-card, contracts, etc. This is not often the case. Insight platforms can help bridge the gap between multiple systems to give businesses the visibility they need. We have seen a number of methodologies to give visibility to contract data; from a simple spreadsheet containing the important areas of metadata (supplier, contract ID, value, start/end dates, etc.) to a full data dump from a contract management system. As long as contract owners can connect supplier contract data to their overall spend data, then they can better plan for activities surrounding the yearly cycle of cost and risk takeout.

Does this evolution in technology and its application reduce risks or help with compliance?

I would say it helps with both — and more. Depending upon your role within the company, you look to contracts to help with a number of factors important to your company. Contracts help to reduce legal risks, increase compliance to country, state or local regulations, formalize pricing and volume commitments, and also help to establish a long-term supplier relationship. With a clearer view of contracts, spend and compliance information, supplier contract owners are more likely to have a better-informed view of the current state of the relationship with their suppliers, and the stakeholder using the supplier’s goods or services.

 AI adds visibility, like a crystal ball, right? So, can you tell us what the future holds for putting contracts at the center of business operations and making contracts more interactive?

I wish I had a crystal ball!

But what we are seeing shows us the beginning of something interesting.

The effects of AI and machine learning are still in their infancy as far as the impact to our daily routines. I could foresee a world (mind you, I’m a procurement guy so it’s an odd world) in which more and more of my tasks revolving around company spend is informed by AI. A new request has come in from the marketing department, and before that request even arrives at my desk, the AI has reviewed all spend, contracts, performance and benchmark data for that request. The AI is another 10 steps ahead of me with a suggested path for a contract expansion or maybe has suggested a new supplier to call. The AI has already identified the team of stakeholders that would be in charge of the supplier and drafted an SOW based on the request.

OK, that’s a bit far-fetched, but why not? But I do foresee more and more tasks and alerts being done by AI to make sure we are not missing anything important.