Eliminating Revenue Leakage
As many business leaders already know, artificial intelligence (AI) has stepped out of the pages of science fiction and landed firmly in present-day corporate data centers. The combination of AI, mainstream data extraction technologies and human expertise are driving new capabilities that were, until recently, out of reach. One key area being impacted by the rise of AI is regulatory compliance reporting. And, as it turns out, the solution that has evolved for compliance is even bigger than the sum of its parts—with groundbreaking, revenue-enhancing benefits that can directly affect an organization’s bottom line.
Struggling with the ASC 606 compliance mandate
Right now, inside public and private companies across the country, teams of workers are scrambling to review hundreds of thousands of customer contracts. The reason for this urgency is the need to comply with new ASC 606 rules, which have created sweeping changes for financial reporting. It’s a brute-force effort, with staffers and consultants manually poring over spreadsheets to uncover compliance tripwires buried deep within the data. Even in today’s tech-savvy business world, many of the answers to basic revenue questions must be assembled from a tangle of spreadsheets, PDFs and emails.
This painful dilemma is the result of years of investments in a variety of disjointed solutions such as CRM (customer relationship management), CPQ (configure price quote) and CLM (contract lifecycle management). These tools are often dysfunctional when it comes to surfacing vital, reliable revenue data and communicating it in a standardized way across an organization. That’s because, at the end of the day, the crucial revenue information required for ASC 606 compliance reporting (and optimizing revenue) is often locked away in customer contracts, where it is difficult, costly and time-consuming to access.
AI empowers Digitization-as-a-Service
Enter digitization-as-a-service (DaaS). This is the new holy grail for quickly and easily extricating critical data from contracts, without consigning teams of staffers to manually search through them. AI, data extraction technologies and human expertise combine to finally overcome the challenges of unlocking this data from contracts, which have been resistant to digitization because they are commonly distributed across disparate systems with specialized formats, phrasing and terminology.
In addition to extracting and digitizing contract data, DaaS also provides the ability to create a commercial relationship system of record—a single, unified version of truth across an organization. That’s a game-changing development. Not only does compliance with ASC 606 and other regulations become much faster and easier, but that valuable data can now be used to maximize revenue, reduce risk and drive efficiencies across the business. In particular, DaaS has opened the door to take on one of the most slippery problems a business can face; revenue leakage.
A new solution for revenue leakage
Revenue leakage occurs when sales and finance teams don’t have a complete understanding of commercial relationships. This lack of visibility means they are unable to capitalize on the full value of their contractual agreements. Missed renewals, overlooked price increases, over- or under-servicing customers, haphazard SLAs and over-discounting are some of the common areas where revenue leaks happen. It’s estimated that businesses leak 3 to 5% of revenue annually due to these errors and process gaps. Recovering that lost revenue is a top strategic priority.
With a commercial relationship system of record, reliable data that can be used to eliminate revenue leakage is now immediately available. Contracts, amendments, order forms, SOWs, agreed upon terms, pricing and operational commitments, order/billing data, and service delivery dates are now at the fingertips of professionals throughout the organization. Sales teams know precisely where and when to act strategically on renewals, and how to take advantage of the best opportunities to increase prices and grow recurring revenue. Entitlements, pricing variables and service commitments can be monitored and optimized in the moment to maximize revenue.
So in a strange twist, the use of AI for ASC 606 compliance may end up being the best thing that ever happened to contract management, and to the effort to eliminate revenue leakage. Digitization as a Service, powered by human-assisted AI, has unlocked the ability to free contract data, and provide organizations with a comprehensive digital platform for their commercial relationships. Of course, there are many more business problems to solve out there. Who knows what the combination of AI and other technologies will make possible in the months and years ahead?
By Jennifer Klostermann