Businesses must monitor and review contracts if they want to keep up positive working relationships. It helps them ensure they do not overlook beneficial opportunities, crucial clauses, or significant dates. Contractual agreements are a database of information on a business’s relationships with vendors, customers, employees, and partners. They contain all the details required to strengthen business ties.
However, the legal documents have plenty of unknowns, whether due to volume, variety, complexity, or lack of resources for a thorough examination. That is where AI contract management and contract analytics come in. In the era of Big Data, sophisticated contract analysis empowers businesses to transform contract data into business intelligence. It allows the legal department to overcome the shortcomings of disconnected systems and information silos to aggregate, analyze, and utilize contract information.
What is contract analytics?
Contract analytics is the systematic process of utilizing advanced tools and software to analyze contractual agreements to extract pertinent information. It enables the legal team to transform contract data into actionable intelligence and gain insights into the clauses and conditions, risks, and opportunities associated with those contracts. Apart from the terms of a deal, contractual agreements also dictate the quality and longevity of a business relationship.
With thorough contract review, enterprises can uncover opportunities to streamline the contract management lifecycle to improve business ties. The first step is, instead of going through multiple legal agreements, advanced AI technology enables organizations to extract data intelligently. The legal department can get a lot done by adopting an AI contract management system to conduct an in-depth analysis of legal documents.
Why is contract analytics a must-have for businesses?
The entire contract management process can become time-consuming, expensive, and incredibly risky without the right technology to facilitate data extraction and analysis. After all, contractual agreements contain a wealth of beneficial information just waiting to be utilized. Organizations can employ contract data throughout the business cycle to improve workflows and results.
Altering market conditions, outside factors, vendor performance, financial transactions, and more require prompt responses from the organization. Thanks to contract analytics and searchability, businesses can access pertinent data readily to address bottlenecks or opportunities. Whether it is one legal document or thousands, contract analytics make it possible to review contracts to collect data on the following points:
-
Obligations
The terms and conditions of a contractual agreement are binding on all parties. To get maximum value out of a business relationship, all stakeholders must stay on top of the obligations throughout the business partnership. With contract analytics and contract management software, firms can closely keep track of significant clauses.
-
Opportunities
Contract analysis can enable organizations to identify growth opportunities. They can track contract feasibility using key performance indicators. Businesses can consolidate contracts and financial data to recognize beneficial patterns and trends in the contract management processes.
-
Compliance
Organizations require constant compliance checks to ensure all the parties conform to the terms and stipulations stated in the business agreements. Growing businesses can use contract analytics to uphold internal and external standards, such as contractual language, legal requirements, corporate policies, and industry norms.
-
Risks
By their very nature, contracts are fraught with risks to reputation, the law, money, and security. Contract analytics leverages data about deadlines, parties, values, obligations, and clauses to identify and mitigate risks throughout the contract lifecycle. It aids in identifying inefficiencies in the contracting process by allowing you to see the larger picture.
How does AI contract management improve contract analytics?
When organizations have thousands of active contracts, merely archiving them in a digital repository does not do businesses any good. They must have the means to search and retrieve information instantly. AI-based contract management is revolutionizing how expanding enterprises handle contract data to enhance operational efficiency. Artificial intelligence can review thousands of contractual agreements to derive actional insights.
-
Automated data extraction
Archived contracts must be simple to search for businesses to get the most value out of them. It is made feasible by contract management software, which transforms legal documents into digital data in any format. AI-powered contract management tools take it further by automatically extracting relevant data from contracts, such as significant dates, obligations, and payment terms. Therefore, the legal team can extract relevant data and automatically populate it to create contractual agreements using OCR (Optical Character Recognition) and AI contract management. It saves time and reduces errors associated with manual data entry and retrieval. Thus, automated data extraction helps to make contract analysis and reporting more efficient for scaling organizations.
-
Contract Comparison
When handling large contract portfolios and data sets, organizations require specific tools and technology to ensure relevant information does not slip between the cracks. It is simpler to spot patterns and trends in contracts thanks to AI-powered contract management tools that analyze multiple contracts and identify similarities and differences. AI-driven contract management also means examining contract data before mapping them to existing contract templates, types, and parties. Organizations can search for contract metadata and locate crucial clauses in a contract by using innovative AI technology and custom filters. The legal team no longer must sift through countless documents for pertinent information.
-
Risk analysis
Contract risks can result from irregularities, non-standard language, passed deadlines, and a failure to adhere to the terms of the agreement, among other things. Artificial intelligence contract management can analyze contractual agreements to identify potential risks, such as compliance issues or content variations. It assists the legal team in identifying pertinent clauses and terms while conducting contract analyses to assess regulatory changes in third-party agreements. Therefore, it has a significant impact on risk assessment and mitigation.
Moreover, AI contract management empowers organizations to extract obligations across different contracts and classify them into operational and financial categories. Once identified, the legal department can set up automated reminders for significant terms and conditions. Thus, organizations can establish contract compliance with little effort.
-
Performance monitoring
To manage the success of any business operation, the organization must identify and evaluate contract performance. AI-powered contract management tools can track contract performance and point out areas where it falls short of expectations. AI technology evaluates contract management lifecycle and their metadata quickly and accurately to derive conclusions. They can go a long way in identifying key metrics and KPIs (Key Performance Indicators) for the contracting process and deriving insights and anomalies.
AI technology assists in keeping track of a variety of factors, including process timeliness, cost, payment, obligation status, and contract risks. Thousands of contracts and documents can be scanned within minutes using contract management software's speed and capabilities to provide real-time results on contract performance metrics. AI contract analysis can assess enormous amounts of data to find patterns and trends to anticipate contract non-performance. Based on historical data and KPIs can help parties involved in the contract to take proactive steps to improve performance and mitigate risks.
What benefits does AI-powered contract analytics offer?
AI-powered contract management software quickly sorts through and analyzes valuable data. These specific and measurable benchmarks generated using advanced AI help to evaluate pre-signature and post-signature contract management processes. AI contract management systems can automatically extract pertinent contract data from legal agreements, such as contract terms, dates, and parties involved in the contracting process. It helps organizations to reduce risks from inconsistencies and oversights in the contract management lifecycle.
A comprehensive and real-time overview of contract performance indicators enables contract managers to identify hidden opportunities and bottlenecks for cost savings. AI-supported tracking of obligations and terms helps businesses to tighten contract compliance. Moreover, organizations can quickly investigate the party's legal history during negotiations with AI-supported contract analytics, giving them more bargaining power and the ability to make wise decisions. The legal team needs quick access to accurate and comprehensive contract data to avoid erroneous contract clauses and conditions.
Conclusion
As we already discussed, contractual agreements are a mine of information for enterprises. Businesses can use contract analysis to see the bigger picture of what the data illustrates about their operations and relationships by looking beyond the contract's raw data. Instead of merely gathering data, AI contract management synthesizes information to uncover business intelligence. Overall, AI contract management can streamline contract analytics by automating manual tasks, improving search capabilities, identifying risks, monitoring performance, and providing valuable insights into contract language and trends.
Book a live demo for Dock contract management software to enhance your contract analytics with AI technology.
