**Global:** Research reveals CFOs are taking the lead in digitising contract management, using AI to standardise processes, accelerate supplier onboarding by 80%, and reduce operational costs by up to 30%, fundamentally reshaping supply chain efficiency and risk mitigation.
Research from Gartner highlights that inefficiencies in procurement and supply chain management are significantly hampering operational success. Many companies still regard contracts merely as legal documents, overlooking their essential role as business processes. This common misconception is causing considerable bottlenecks within supply chains.
Matt Lhoumeau, CEO of a contract management platform serving over 1,500 companies, notes a transformative shift in contract oversight—Chief Financial Officers (CFOs) are increasingly taking charge of contract management, moving away from traditional roles held by legal teams. Lhoumeau emphasises, “A contract is not a legal document. A contract is a business process. It’s actually the most central business process in a company.”
The financial impact of treating contracts as legal tools is stark. McKinsey & Company estimates that organisations failing to digitise their supply chain processes face operational costs up to 30% higher than their digital counterparts. Furthermore, the World Economic Forum indicates that advancements in artificial intelligence (AI) are redefining the responsibilities of CFOs, presenting new opportunities in automation and risk management.
Over the past five years, there has been a significant shift in who manages contracts. Previously, contracts were under the sole purview of the legal team; however, many mid-market companies now function without an in-house legal team, instead relying on a paralegal for basic tasks. This change has been catalysed by two primary factors: the standardisation of contract templates—over 90% of contracts processed through Lhoumeau’s platform require no negotiation—and AI technology’s capability to identify potential issues without human intervention.
Lhoumeau’s observations reflect broader trends in the supply chain industry, where financial leaders increasingly oversee contract management to enhance efficiency. He cites Deloitte’s CFO Signals report, which notes that CFOs are increasingly digitising core operations, including contract oversight.
Modern contract management software can address three significant bottlenecks in supply chains:
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Accelerated Supplier Onboarding: Traditional onboarding processes often involve numerous emails and document revisions, extending over days or weeks. Companies employing AI-driven automation have reported onboarding times reduced by as much as 80%, turning a process that typically takes weeks into one that can be completed in hours.
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Real-Time Financial Visibility: CFOs face substantial challenges in attaining accurate, real-time financial insights. Modern contract management technologies allow finance teams to create precise cash flow forecasts based on actual obligations and optimise vendor spending.
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Continuous Risk Monitoring: Traditional contract management practices often involve one-time reviews, leaving companies vulnerable. Today’s AI-based systems enable ongoing monitoring of compliance, changes in regulatory landscapes, and supplier performance metrics.
To mitigate risks associated with transitioning from traditional contract management, Lhoumeau suggests a structured three-step approach:
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Start with One Contract Type: Rather than attempting an instant overhaul of the entire system, companies should begin by standardising one type of high-volume, low-complexity contract, such as non-disclosure agreements or standard supplier agreements.
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Create Templates with AI Assistance: Utilising AI to generate standardised contract templates can streamline the contract creation process, potentially reducing time by up to 85% while ensuring consistency.
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Automate Approvals Based on Risk Profiles: Establishing risk-based workflows allows routine contracts to bypass extensive scrutiny, enabling procurement teams to focus on strategic initiatives rather than administrative tasks.
Looking to the future, the evolution of contract management is likely to continue. Lhoumeau predicts that within five years, over 95% of routine supply chain contracts will be standardised, with AI handling the bulk of negotiations. Future contracts may also transition to visual formats that present key terms and performance metrics in a more comprehensible manner.
In summary, the ongoing transformation in the approach to contract management underscores the essential role that contracts play in operational workflows. By reframing contracts as business processes rather than legal documents, organisations can enhance efficiency, reduce costs, and position themselves competitively within the market.
Source: Noah Wire Services
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