Unlocking Data is Key as CFOs Face Economic Headwinds

by Rajat Bahri

As CFOs prepare for 2023, the question isn’t whether they will continue to support digital transformation, but rather which emerging technologies can connect and analyze data to make a significant impact and create long-term resiliency for their business.

©francescoch/iStock/Getty Images Plus

The role of today’s CFO is arguably growing more expansive as companies lean on their expertise to weather the combined headwinds of inflation, high interest rates, and a potential recession. To effectively respond to these challenges, CFOs are turning to emerging technologies like artificial intelligence, blockchain, and machine learning to better identify risks and capitalize on potential opportunities. As CFOs prepare for 2023, the question isn’t whether they will continue to support digital transformation, but rather which emerging technologies can connect and analyze data to make a significant impact and create long-term resiliency for their business. 

Investing in Technology  

According to Gartner, 98 percent of CFOs plan to protect digital investments over the next 12 months despite budget cuts and one third will prioritize back-office automation to help reduce costs and increase efficiency. For those with a prescriptive focus on the back office, it can still be challenging to determine which cloud-based solutions will reduce costs and impact the bottom line while continuing to meet shifting business needs in the future. When presented with an opportunity to invest in new technology, I typically begin by asking myself one key question: Will this technology help our business tap into enterprise data?  

This question is a good litmus test because when information is connected and silos are broken down, it’s possible to dynamically analyze data and deliver actionable insights that support critical business areas. Visibility into data is the first step to unlocking new cost savings and revenue generation opportunities, along with increased productivity and improved compliance.  

Data exists across the enterprise, and contract data presents one of the largest untapped opportunities for CFOs to realize these benefits.  

Contract Data is Central to Business 

Contracts are the foundation of commerce and touch every facet of the business. They define who you’re buying from, who you’re selling to, and the rules governing those transactions. It’s not an exaggeration to say that every dollar in and out is ultimately governed by a contract and without insight into those rules— i.e., if you don’t know what's in your contracts—it can be difficult to get a handle on what’s driving your financial outcomes.  

Part of what makes contracts so valuable to CFOs is that they already exist. They’re signed and active—it just takes visibility into their terms to ensure you’re realizing value and avoiding risk. Gaining visibility into contracts means capturing crucial data with financial implications in real time, which requires new and innovative digital systems in the enterprise, reinforcing the need for CFOs to seek solutions that elevate data while integrating with other core systems of record like their company’s ERP. 

Bolstering the Balance Sheet with Contract Data 

Contracts can answer questions that may seem tactical on the surface, but in fact are tied to significant outcomes for the business. CFOs should have visibility into critical contract information to understand how agreements with customers, partners, and suppliers will impact their company’s financial performance. For example, are your payment terms with critical suppliers Net-30 or Net-60? The difference when you consider all contracts is important for CFOs, since that extra month of cash in the bank adds up on the balance sheet. Do your SLA terms on the sell-side expose you to penalties if you under-deliver? Do your contracts on the buy-side entitle you to rebates for volume purchases? If you consider the total amount of rebate potential collectively, the impact can be substantial.  

Accessing this data is far more efficient if you have all your contracts in one place, and the data in them is structured. For example, contract management systems that employ AI can identify what specific payment term looks like, allowing you to analyze that term across your business. Even more powerful, contract data can be integrated into your payment systems to provide insight into where you are paying out earlier than required by contract. 

Contract data also yields benefits by helping CFOs identify and mitigate business risks, such as contract rights in situations where customers canceled deliveries or where your company wants to cancel orders from its own suppliers.  

CFOs who gain visibility into the contract negotiation process with structured contract data can spot trends in negotiation terms and identify key levers that will enable the team to win deals more quickly, providing their companies with a competitive advantage. CFOs can also identify contract terms that negatively impact short-term cash flow and ensure those terms are not used moving forward. 

Likewise, with full contract visibility, data can help CFOs roll up insights to report out to fellow executives and the board on risks and opportunities. Information like which contracts have the largest dollar value and how many contracts are set to expire at year's end enables the company to act more confidently as it reacts to the changes at hand. 

For companies with contracts managed across disparate systems or stored on local hard drives in regional offices, this information is, at best, difficult to gather and, at worst, completely inaccessible. 

Now is the time for CFOs to focus on emerging technologies that leverage data to help reduce costs and drive revenue. Contracts represent every dollar in and out of an enterprise and offer a wealth of data right at the CFO’s fingertips. Pairing technologies like AI with contracts to create visibility and actionable insights enables CFOs to make smarter decisions for their business and prepare for whatever comes next. 

Rajat Bahri is the Chief Financial Officer at Icertis.