In the economic climate of early 2023, finance is a key stakeholder in any and every deal.
So when it comes to investing in contract automation, what should CFOs consider, and what would make it an essential purchase? We caught up with RVU’s Chief Financial Officer, Debbie Chandler, to find out.
How has the business’ way of working changed due to the economic climate?
We've used the term “unprecedented” so many times in the last few years that we almost need to stop saying it - but it’s a strange time right now.
Input costs are rising for us, as with all businesses. Customers are squeezed, and when I look at RVU's value proposition for consumers, our raison d’etre is even more important now than it was in boom times. Anything that we can do to help save people money is crucial.
However, we need to do that with a particularly keen awareness of where our money's going and what those input costs coming into the business are - because they're increasing at an eye-watering rate.
How have things changed for finance?
Generally, as a leader, the risk–reward balance that you have shifts in this climate. A lot of business decisions come down to weighing that balance of risk vs reward.
You have less margin for error in your risk–reward balancing because of the financial pressures. If something is a particularly high cost, or has a long payback period, or it's not validated as robustly - those sorts of decisions need a lot more support than they would do in boom times.
We need to make sure that every single pound we spend is delivering value.
For many businesses, if spend is within budget, it gets signed off. If spend is not, it doesn’t. I don't look at it that way - value for money is the ultimate deciding factor
In this climate, when does finance get involved in software purchasing decisions?
That depends on the scale and complexity. If it’s a big portion of your department's budget, or it's a five-year contract or there are complicated commercial terms, then it would need much earlier involvement - probably pre-negotiation stages so that finance is always involved.
You don't want to get to the end of the contract, have the commercial team excited about the solution, and then involve finance and find out that the way that you have to account for the revenue is completely different, and it just changes the whole dynamic of the contract.
For something that's super straightforward and within budget, it might just be a case of dropping an ‘FYI’ message.
Who else should be involved?
We would always want legal to be involved from an early stage because around 90 per cent of contracts will need some kind of legal drafting changes.
Our business leaders are obviously vital. For some businesses where there's a large procurement team, procurement may take a lead in contract negotiations.
If there's an exchange of personal data, our specialist data protection team would need to be involved. We’d also bring in the engineering team if it's a particularly technical implementation where there's clever work needed in the background.
What information is top-of-mind for you when considering an approval request?
What I consider to be a small spend is different today than it would have been two years ago.
If somebody has a relatively small spend, that's within budget, and on a simple short-term contract, then that might mean that we’re not looking at it as tightly, because it's relatively low-risk.
If there's something that seems to be riskier, and may result in higher absolute spend, then finance would be involved at an earlier stage to examine and understand it better.
What are the ‘green flags’ that would lead you to approve a solution?
For many businesses, if spend is within budget, it gets signed off. If spend is not within budget, it doesn’t get signed off.
I don't look at it that way - value for money is the ultimate deciding factor.
Something can be within budget and six months ago you thought it was a brilliant idea and great value - but times rapidly change in our industries. Something that we thought six months ago was a good idea might not be a good idea now.
Conversely, the opposite might be true. We might not have a solution within budget, but now it’s such a no-brainer to invest in this solution. Budget is relevant, but it's not the be-all and end-all.
Time can be quantified by the value of the staff cost of the person who will have to compensate for the absence of the system
How would you define a business-critical solution?
Semantically, if it's business-critical, it means that the business can’t continue without it. Beyond that, everything else has differing degrees of importance.
I'd look at the impact of not having that system in place:
- How much additional time might it take
- What functions physically can't be performed without it
You should be able to quantify the impact of these - time can be quantified by the value of the staff cost of the person who will have to compensate for the absence of the system.
Maybe you can get a contractor to do the work of the system that you're not implementing. You should be able to quantify the impact of having a system versus the impact of not having a system.
And what about specifically around contract platforms?
The same rules of thumb apply. For example, we use Juro to automate contracts, so I'd be looking at how embedded it is in the day-to-day business operations now. How much does it get used?
How many contracts do we have every week, every month that go through Juro? How much is it going to impact the business if you take it out? What would we then have to do?
Probably it would mean the legal team is running around doing manual work, and they don't have enough bandwidth. Maybe you have to get a contractor.
We have to ask ourselves: what is the financial numerical impact of not having it?
What can vendors do to make the decision-making process easier?
I would want to know that the vendor is a partner and not a sales team. There's obviously a sales team involved, but with a really strong partnership is that both sides feel like they're getting benefit out of the relationship.
It's not a dynamic where ‘we sell, you buy’ and that’s the end of that. You want to feel like the account manager or the customer service team are responsive, and if there's an issue they're going to talk to you.
There has to be trust and a good relationship on both sides - and ideally this is enshrined in the contract terms.
What are finance’s top priorities for the year ahead?
In this kind of economic climate, I'd say delivering against budget on what we have planned to do is the priority. We operate at pace in RVU, and in a support function like Finance or Legal a lot of the time that you're spending is helping the business to do just that - to run at pace, but safely.
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