It’s arguably one of the most important departments at any company.
Procurement is responsible for the acquisition of goods and services to meet the company’s needs. And considering that it’s one of the largest expenses on a company’s balance sheet, it’s crucial that this department is run effectively. Primarily motivated by areas such as price, volume mix, or service levels associated with a core product or service, procurement has a very different focus when compared to legal.
Legal — motivated by risk, as well as areas connected to data privacy, cyber security, and compliance — is just as critical to a business as procurement. Legal teams are tasked with ensuring that every transaction made by procurement meets legal requirements and mitigates risk for the enterprise. As procurement professionals work to meet company goals, legal teams help them understand what they can and cannot do.
While many businesses need both teams to run successfully, the distinctions between the two tend to cause delays within the purchasing process, making it hard for procurement to focus on actions that have previously been measured as effective for their organization.
But things are changing.
The business world is seeing a multitude of larger procurement organizations initiating major plans to create global contracting centers of excellence facilitated by CLM. By taking control of the contracting process, this step will create a more collaborative relationship between procurement and legal, which will speed up contracting cycles, allow legal to focus on their responsibilities, and create a consistent application of risk thresholds. When procurement adopts CLM, the entire enterprise will benefit.
Below are four ways procurement will take hold of its contracting destiny in 2023.
1. Double down on data privacy, cybersecurity, and compliance
Due to a recent increase in digital procurement tools, interoperability among services and processes has increased, and as a result, it has decreased the time it takes to perform certain functions. However, with the increase of integrative technology, there also comes an increase in data breaches. The larger a business becomes, the more technology it takes on. In turn, the risk of the data being breached grows.
The question is: What is procurement doing to handle this risk?
- Procurement teams are working closely with IT to enhance data security. Analyzing systems , defining the type of information that can be accessed, who can access it, and whether or not the third parties involved as well as any cloud-based services possess the proper network security. Additionally, companies can use APIs to transmit encrypted data between connected applications, preventing those with malicious intent from gaining access to secure information.
- As a result of better communication with IT, security is increased. Procurement teams can get a closer look at their own security ecosystem as well as the ecosystems of third parties with whom they do business.
- Finally, staying on top of compliance is an important factor. Cybersecurity compliance management means making sure that all internal policies, IT initiatives, and workflows are in check with certain industry cybersecurity regulations.
The best place to start is to perform a cybersecurity risk assessment. This can easily be outsourced and performed by a team of experts. Company employees then need to be trained and informed about security, what to look for, and the compliance standards. Once these areas are covered, procurement can set up a continuous monitoring plan, which identifies vulnerabilities and puts a remediation plan in place.
2. Find ways to make work quantifiable
CLM software gives businesses access to the analytics they need to control challenging areas such as revenue leakage, slow negotiations, payment cycle turnaround times, compliance failures, unexpected costs, and delayed project timelines. CLM platforms like Agiloft allow businesses to run specific reports to track certain facts of the company’s performance.
In 2023, procurement teams will drive performance using key performance indicators (KPIs). In order to accurately measure KPIs, procurement will clearly identify its contract monitoring methods, reporting frequency, milestones and performance metrics, the process for dispute and claim resolution, and more.
3. Launch major initiatives to create global contracting centers of excellence.
About 60% to 80% of an organization’s transactions are governed by contracts, according to Healthcare Finance. Contract agreements affect everyday activities, from the price that is paid for supplies to challenges that control tight project timelines.
A global procurement center of contracting excellence is a dedicated team equipped with the right technology and processes to handle the contract workload more efficiently than a siloed contracting team, or when data is controlled by one department and not available to the rest of the organization.
These centers aid business leaders in establishing mutual goals, processes to achieve those goals, and ways to communicate results. They create space to schedule kick-off meetings, put together plans and processes, and voice concerns.
4. Accelerate contracting cycle times
In a recent webinar entitled “How to Unleash Agile Contracting to Scale Your Procurement Organization,” Michael Mathews, College Purchasing Manager at Portland Community College (PCC), and Myles Van Leuven, Sr. Director of Customer Success at Agiloft, discussed how Portland Community College grew and improved its procurement using Agiloft CLM.
Prior to Agiloft, the time-to-contract for PCC was about 55 days. In addition, the college’s procurement team was dealing with a lack of visibility, clear processes, and staffing resources.
After implementing Agiloft CLM, PCC was able to get time-to-contract down to less than 21 days. That’s a 60% reduction, which changed the way they do business throughout the entire organization.
The superior contract visibility that Agiloft CLM brought to PCC is one of the reasons for the decreased contract cycle time. Utilizing Agiloft CLM dashboards granted them visibility into renewals, contract status, cost forecasts, who was responsible for each task, and other key metrics. The college was able to scale procurement and continuously improve the process as its needs changed. By utilizing this solution, PCC was able to bring other teams into the contracting process as well as easily integrate Agiloft with existing systems. The result is a procurement department that is able to scale, cut costs, reduce risk, and adapt processes to a business environment that is continuously advancing.
As CLM grows, gains more authority, and its demand skyrockets, many businesses cannot fathom how they ever functioned without it. Along with its integrative properties, seamless automation, and increased visibility, business is discovering different ways and departments that can greatly benefit from this technology. If you believe CLM will organize, streamline, and strengthen your procurement team, contact Agiloft to learn more about the many benefits of CLM.
Be the one to revolutionize the enterprise, and contact Agiloft today. We’re always available to show you the power of CLM.