Imagine a big tech company with a large number of procurement contracts, all with different renewal dates and re-negotiation terms, where hundreds of hours are being spent by a team of contract managers, reviewing and monitoring all of the information to make sure that no opportunity or renewal was missed. But what if I say that technology could tackle all of these issues in a more sensible way?
As a result of the quick expansion and advancement in technology, Artificial intelligence (AI) has developed into a potent tool that enables machines to think and behave like humans. Over the past six years, artificial intelligence (AI) has seen a significant increase in attention and interest as many new commercial applications for it have emerged.
It has been estimated that an inefficient contract costs businesses 9% of the deal value, depending on the circumstances. As a result, many companies employ tools like SpeedLegal to help manage contracts.
We are on the cusp of a revolution in the contract management industry. Artificial intelligence (AI) has arrived and is in leadership.
We anticipate that AI will similarly infiltrate our lives and the majority of B2B business processes, including contract lifecycle management, in a manner similar to how mobile computing has seeped almost every aspect of our lives and cloud computing has made for powerful, affordable computing processes.
Let's take a look at some more factors on how AI is changing contract management!
Contracts: The Foundation of Business Alliances
A contract is regarded as one of the core legal documents for any business partnership. So, let’s first try to understand what exactly it is...
Contracts are legally binding agreements that specify the terms of a partnership between two or more parties in the business. By articulating the duties, rights, and obligations of each party, they act as the framework for economic interactions.
Contracts can safeguard the interests of all parties involved by preventing misunderstandings and disputes. Because contracts are a part of daily life, it is crucial to thoroughly analyze and negotiate them before signing them, to make sure that all of the conditions are fair and reasonable and that they accurately reflect the intents and expectations of all parties.
Contracts must contain terms and conditions to make them legally effective. This means that a contract's terms must be specific, definite, and easy for all parties to understand. So, if you are curious about particular milestones? The dates should be clearly mentioned. Wondering about the expected price? A complete pricing structure should be included. Wanting to know the duration of the contract? The precise timeline should be implied in the contract.
I’m sure you get the gist!
And if any kind of conflicts and misunderstandings emerge between the parties due to a vague contract review, it can be harmful to business partnerships.
A contract serves to establish the foundation for the business-client relationship and the manner in which it will be managed over the contract lifecycle.
AI to innovate contract management
Artificial Intelligence is one of the greatest innovations in today’s time!
The management and evaluation of contracts have never been easy for businesses. Large contracts are exceedingly complex and challenging to assess. A different but no less difficult challenge is created by a huge number of smaller contracts, each with somewhat varying terms and conditions and all at different stages of their life cycles.
Artificial Intelligence, a branch of Computer Science has made a profound impact on everyday life to increase productivity and now has found its footing in the legal sector. Contract management could undergo a huge transformation thanks to artificial intelligence, an AI-supported contract management software that can streamline and automate many of the processes involved.
Traditional contract management requires manual labor and takes a lot of time. Not to mention, it is a significant waste of time that fee earners could be using to charge clients and boost business for their firm. The machine learning (ML) subfield of artificial intelligence is the most pertinent in terms of contract management since it focuses on creating algorithmic models to find links and patterns in data. AI-powered contract management software can be used to review and analyze such contracts, flag any potential problems or dangers, and discover important phrases and conditions.
Also, Data from contracts can be analyzed by AI to reveal trends, hazards, and business opportunities. This can assist organizations in deciding how to handle and negotiate contracts in an informed manner. Contract Analytics is essential in Artificial Intelligence powered platforms. At Speedlegal an analytic feature which is known as “Nutrition Labels” provides important information in layman's language from the contract.
How AI is a powerful tool for contract management to support Businesses?
Artificial intelligence can be a huge asset to your contract lifecycle management approach. Here are some of the ways AI is powering contract management-
1. Save Money with AI
Cost-effective contract management is facilitated by artificial intelligence. Several areas of your contract management process will see significant cost reductions. AI has the ability to complete jobs more quickly, methodically, and accurately. One of AI's most amazing capabilities is its ability to identify risky contract provisions and flag dubious contract terms so that you can quickly evaluate and make adjustments.
2. Automating Repetitive Task
Although contract management is a repetitive task by nature, it doesn't have to be done manually.
Many of the repetitive operations involved populating data entry manually, contract generation, and document processing. Creating complete contract records can be automated and gradually improved by using AI data extraction technologies on incoming contract documents. This can free up time and lower the chances of mistakes, allowing firms to concentrate on more important tasks.
For global businesses where contracts are generated across various time zones at all hours of the day and night, the systems can be left running around the clock.
3. Improved Contract Analysis
AI-powered CLM can scan the entire document and comprehend the meaning of every paragraph. It helps in analyzing the contracts to find important clauses and highlight any potential problems or hazards. AI can review contracts systematically and sort the clauses based on their content. This can assist companies in making sure that their contracts are both legally sound and consistent with their corporate goals.
4. Automated Contract Generation
With the help of a variety of contract templates and generation wizards, AI-powered contract solutions let teams from the sales, procurement, legal, and other departments quickly create new documents like contracts and quotations.
Clause libraries have made it possible to have more control over contract language without having to participate actively in each stage of the negotiation process. Additionally, all of these tasks can be carried out through a single centralized system, giving all involved teams more visibility.
Businesses can speed up the contract-generating process thanks to the potential time savings and decreased chance of mistakes or inconsistencies.
5. Analytics and Insights
An AI-powered contract management solution provides businesses with the intuitions they need to get the most out of their discussions. Data from contract analysis reveal trends, risks, and business opportunities. Better performance tracking, compliance, obligation management, and the discovery of areas for improvement are all made possible by increased contract visibility.
AI and contract lifecycle management tools are expected to become more popular.
Modern corporate business practices have adopted contract lifecycle management (CLM) technology, which is expected to continue to expand through 2030 at an annual pace of 11%. Simple automation won't be sufficient as we get closer to a period where people are expected to play a more strategic role in the organizations and when time is money.
Businesses looking to increase productivity and cut costs in their contract management procedures are likely to see an increase in the use of AI and contract lifecycle management systems.
Artificial intelligence (AI) and contract lifecycle management technologies can help firms cut expenses and boost productivity by automating repetitive work and streamlining contract management procedures.
Other business systems, like CRM or ERP, can be combined with AI and contract lifecycle management solutions to provide a more thorough perspective of the customer or supplier relationship. This can lower the risk of data silos and help firms collaborate and communicate more effectively across divisions.
Platforms namely SpeedLegal use AI and machine learning to extract unstructured text from commercial agreements and organize that information into the contract, making the data structured and simpler to analyze and manage. This eliminates the need for manual and numerous rounds of reviews and revisions
In summary, artificial intelligence is poised to integrate almost every facet of B2B relationships governed by corporate contracts. AI will support CLM strategies and streamline workflows, saving time and money, preventing errors, and producing fresh business insights and predictions all at once. Contracts are a perfect place to undertake digital transformation and automation, through the use of AI and predictive analytics in contract processes.
Humans are being completely replaced by AI, yet it can never fully replace them because it is still managed and finalized by humans solely. In the modern world, AI is at our disposal, and we must learn how to use it to work more effectively and quickly!