Can you simplify contract management?
While many individuals view spreadsheets as the only essential sources of data, one cannot ignore the fact that contracts provide crucial information about an enterprise. This includes relationships with customers, employees, and other enterprises.
Sorting contracts is rather challenging; it contributes to some of the most cumbersome tasks in any enterprise.
When contracts are scattered across different locations, handling them manually becomes even more difficult, especially when dealing with renewals, terminations, or amendments.
Digitization of contract management with an AI-based system is redefining the potential you can get from contracts. In fact, according to a report by ContractPod AI, 20% of the respondents are already adopting tools like AI-powered contract management solutions.
By leveraging the power of machine learning, Intelligent Document Processing, and AI contract analytics, a contract management system enables you to organize contracts, classify them, and extract essential information for strategic decision-making.
In this article, we’ll go through the 5 things to look for in an AI-based contract management system. Let’s get started.
1.Centralized Contract Repository
Enterprises handle many contracts daily. They are essential in defining how you interact with other companies.
In a day, you may find yourself needing to go back to various contracts so that you can adhere to obligations, understand the rules of engagement, and understand the terms of agreement. However, one of the contractual pain points is going over hundreds of contracts and missing one when you need it urgently.
Working with fragmented data from contracts doesn’t work well. Some of the challenges that tend do arise as a result, include:
- Missed renewals
- Non-compliance with regulations
- Time wastage
A good AI-based contract management system will offer you a centralized repository that allows you to store, organize, view, and manage your contracts in one place. With a powerful search capability, you can find automated documents when you need them.
By leveraging a dedicated contract management software that offers a central repository you can save you up to 7.5 hours a week; that is according to Gatekeeper.
This provides you with a single source of truth for contracts across multiple locations where you can gather insightful data whenever you need to. With redline generation tools, you can also determine who has worked on the document, new revisions, and downloads in an audit trail.
In addition to that, a dedicated solution eliminates the need for manual data entry. With intelligent document processing, you can extract data, such as clauses and terms faster, ultimately saving on time and avoiding the risk of human error.
Brownsville Public Utilities Board had a growing customer base which meant it was continuously incurring new contracts daily. However, they lacked a central location, therefore were unable to reference particular aspects of their contracts. Upon integrating the CobbleStone’s Contract Management Software, they were able to meet their contract lifecycle management needs.
2. Custom Data Tracking
Organizing your contracts in a centralized repository is one thing. However, if you can’t derive actionable insights from them, you will still have a lot of work on your hands. Again, you will constantly find yourself falling behind time when you miss important dates or fail to adhere to deadlines. This can also cost your business opportunities or land you in trouble when you fail to adhere to regulations and legislations.
An AI-based contract management system, by leveraging machine learning algorithms and natural language processing, can Extract Unstructured Data from contracts and allow you to report and track information within your contracts.
Research by Forrester and Aberdeen proves that you can reduce approval time by 82% using an intelligent contract management system.
Machine learning simplifies data; instead of manually tracking and analyzing the contracts one by one, algorithms process it from thousands of documents to reveal Intelligent Data and actionable information.
Your ideal AI-based contract management system allows you to customize your data tracking by setting alarms to alert you on key dates like expiration. This way, you are notified whenever you need to take action like signing a contract for approval or renewal. A systems analyst at SUNY Upstate Medical University explained that one of their challenges was storage, sharing, and tracking the progress of contracts. It was often challenging to determine where they were in the contract process because it was too long. With Cobblestone Software’s Insight, the process has improved significantly.
3. Risk Mitigation Review
Although contracts open your enterprise to more opportunities, there’s a lot of risk associated with them. For example, say you’re supposed to deliver supplies on a particular date but fail to do so. This means you didn’t comply with the contract terms, which can cause legal trouble for your business.
This challenge mainly arises when you’re handling your contract reviews manually because you may end up missing a document or getting caught up in other tasks, causing you to forget.
In addition to that, wording variations can sometimes make it difficult to understand terms in a contract causing you to be non-compliant.
An AI-based contract management system is an essential tool when it comes to mitigating risks. In fact, according to Gatekeeper, you can improve compliance by 55% with an automated contract management solution.
Instead of manually going through hundreds of contracts to review information which limits you to time and errors, leverage the power of Intelligent Document Processing on a contract management system. This way, you can extract unstructured data and transform it to structured data which is easy and fast to consume.
By leveraging natural language processing, AI also enables you to conduct post-mortem reviews on your contracts by cross referencing the language in a 3rd party document to yours. Where the language is non-compliant, it automatically flags it.
Microsoft CSU and CSE teams handle many contracts for clients and services. With the manual contract management processes, they experienced delayed approval times, which impacted negotiations.
On partnering with Evisort’s Smart Contracting, they were able to create new self-serve contracts and perform secondary checks on agreements. If language is changed, Evisort triggers automatically.
4. Third Party Accessibility
Collaboration is essential when it comes to timely contract execution.
It enables external and internal stakeholders in an enterprise to share their thoughts and suggestions through comments and redline changes before finalizing the documents for signing.
Tracking these changes and updates manually or through back-and-forth emails is cumbersome, error prone, and can lead to loss of contracts. In 71% of companies, there’s a report of losing at least 10% of their contracts according to Journal of Contract Management.
Up to date, there are still contract management systems that only allow you to derive insights on contracts you have generated from your system without granting access to 3rd party contracts.
This is why 3rd party accessibility is among the things to look for in an AI-based system. With this, you are able to compare and contrast data from all your contracts.
Making the shift from a manual to an AI-based contract management system gives you access to AI Contract Analytics. This reduces your workload by enabling you to quickly analyze the data you acquire from your comparison with 3rd party contracts.
Thanks to the state-of-the-art machine learning algorithms, AI contract analytics can synthesize many documents in a fraction of the time it would take you to do the same.
In addition to that, natural language processing enables your AI contract management system to understand the context in which 3rd party contracts operate, therefore providing insights into the relevance of a clause.
NetApp was unable to follow up on contracts due to manual solutions which had them going back to square one whenever there was new information during a review.
Upon leveraging an AI-based contract management system (Evisort), they were able to prioritize agreements and filter upcoming contracts for renewal.
5. Electronic Signature Integration
One of the time-consuming tasks with contracts is the lengthy waiting period one has to endure when both parties have to print, sign, and then scan hard copy contracts.
In addition to that, it’s easy to lose track of parties that have already signed and those that need to be followed up.
This not only delays the contract execution process but also potentially causes compliance and obligation challenges. Consequently, you spend a lot of resources on legal reliance and consulting.
Integrating your contract management system with an AI-powered electronic signature software speeds up the execution and approval processes.
With its encryption technology, electronic signature software verifies the authenticity of a signature, making the process secure, easy, and trackable.
In fact a study of DocuSign CLM reveals that organizations experience an ROI of 356% with savings from agreement error rate and risk of exposure.
Through Optical Character Recognition (OCR) Software, electronic signature integration into your AI-based contract management system enables you to obtain the proper consent for contracts from 3rd parties, ensuring that they go through the proper oversight procedures.
Electronic signatures when integrated with an AI-based contract management system can increase visibility, improve your audit process, and decrease fraud while enhancing productivity and reducing errors.
Unilever has many clients which makes it essential to have a cost-effective contracting system. Before working with Docusign, they had a lot of work on their hands as agreements were done with a mix of office applications like email, printing, and scanning.
However, with DocuSign eSignature, they were able to speed up their contracting process in a user-friendly way.
Having a cloud-based solution to store your documents simply isn’t enough. You have to repeat the same steps over and over for every document, therefore limiting your research and the amount of information you can analyze.
An AI-based contract management system enables you to not only store and organize documents, but also analyze data through AI contract analytics for actionable insights.
Having gone through the 5 features to look for in an AI-based contract management system like a centralized repository, ensure you can leverage its cutting-edge abilities such as intelligent document processing to extract unstructured data.