Over the last few years, the contract management (or contract lifecycle management) solution space has seen some exciting new innovations, after lagging behind other areas in the supply management space for some time. These new entrants are driving a renewed focus on contract management solutions. Today we talk about Automated Contract Compliance.
Automated Contract Compliance
Over the past decade, the general level of competition has expanded dramatically and suppliers now compete for business across a much wider range of areas than simply price. Pricing, in general, has become more complex, but service levels, revenue models, and contract financing structures have too. The result is much greater complexity in supplier contracts.
There is no doubt that digitizing a business’ procurement contracts and gaining a broad view into them and all associated obligations can drive value by enabling greater contract compliance and plugging savings leakage. While digitized ‘header-level’ information aggregated in a single location is helpful, the line-item price audits and other compliance efforts that drive great value have traditionally been a largely-manual effort.
However, this is changing with new solutions that can streamline and automate compliance in an advanced and powerful way. These solutions draw out more than basic header-level data and the operational and process info that tracks how contracts are managed. They can capture specific contract obligations, complex pricing schedules, payment terms, associated service-level agreements (“SLAs”) and other guarantees. After extracting data from existing electronic files (like PDFs and Word docs) and images (like JPGs and PNGs), the systems can automatically match or compare them to actual transactions and results.
These capabilities place innovative contract management systems at the intersection of big data management and analytics. These new systems have the ability to take large amounts of unstructured contract data (i.e., obligations, performance SLAs, pricing) and extract and parse it so that it becomes usable intelligence that can support better supplier management, governance, and invoicing. By capturing and centralizing key contract details and organizing them in a way to automate contract and compliance management, the system helps procurement and other stakeholders track and manage key supplier obligations and their performance while ensuring that supplier invoicing matches what was contracted.
With invoice processing, some modern contract management solutions are able to match orders and use contractual pricing structures to automatically calculate expected invoice values (or pro-forma invoices) before they are received to better manage price compliance. This enables the system to flag mistakes, exceptions, and variances in the invoice matching process and calculate what the value of a supplier invoice should be while also providing a platform for suppliers and AP (or the buying organization) to collaborate and resolve any potential discrepancies or disputes if the actual invoice does not match calculated value.
