AI (Artificial Intelligence) Transforms Contract Management Practices
AI is the new normal for any business these days. Managing tons of documents generated in a fraction of second is no more a manual job. Almost every business software is now using AI technology to automate the process and identify actionable insights from it. Contract management is no exception to this. According to a report presented by KPMG, inefficient contracting causes companies to lose up to 40% of the value on a given deal based on their handling circumstances. On the other hand, AI contract management is an easier, simpler, and reduces any chance of errors radically.
Contracting is one of the most common activities for the legal department of any business. Still, inefficiency occurs due to a large number of tasks and undergoing extreme pressure to support corporate objectives and improve productivity. Most companies deal with a large volume of contracts due to working with multiple vendors at a time. A traditional approach seems unprofitable because it requires high precision and constant manual supervision. Fortunately, with an AI-enabled contract management technology, there is a relief in the manual job and a rise in the efficiency can be observed.
Artificial Intelligence enhances the typical contract management system allowing them to perform labor-intensive tasks like automatic sorting of contracts based on their type, clause, and renewal and providing actionable insights from them. Some advanced contract management software suggests the clause based on the selected templates and gives alerts for renewal dates and renegotiation terms from any number of contracts. It helps companies rapidly review contracts, organize them, and assists in validating contract data accurately reduce contract disputes probability, and increase productivity and efficiency.
Before moving ahead, if you want to learn basics of contract management and 7 stages of contract life-cycle, click here.
Let’s check out how AI is enhancing Contract Management:
AI transforms the contract management practices at scale especially when contract volume is tremendous. There are three major areas where AI contributes when it comes to contract management.
Advanced Searching and Review
Contract management isn’t something new, companies, and firms have been doing these for a long time now. Earlier, the contract management software was just like a repository where you need to set rules manually and alerts for each contract. Now, contract management that uses AI has raised the bar very high. They are capable of doing a lot more things than earlier.AI contracting can identify contract types by analyzing their pattern. it can train its algorithm using the given data set to extract various variables (clauses) from them. Based on this learning, this software can perform due diligence tasks and offer a simple prediction.
Moreover, the AI contract management solution can quickly run a large volume of contracts, tagging each contract to a firm’s specified criteria. Such software can perform analysis by studying multiple formats and identifying accurate information from them. In other words, AI-enabled contract management software eases the legal professionals’ lives by making contract management hassle-free.
Maintaining Consistent Terminology
AI works on learning the patterns and content template provided to it for initial knowledge gathering a. Based on this learning, AI contract software keeps the terms and usage consistent in all the other contracts. For instance, if a firm defines any term in a specific way in its non-disclosure agreement, it is important to ensure that it is the same for all its divisions.
AI makes sure that any such terms are incorporated correctly across the firm’s templates. If there is any variation in the definition of the term, it can be risky for the firm. At the same time, it keeps on tracking the variation in terminology provisions, penalty and damage provision in both side contracts (own contracts and vendor/partner contracts). AI-enabled contract management can record and standardize these provisions in a firm’s contracts. It also keeps an eye on any non-compliance or unprofitable provisions flowing in from the vendor’s and partner’s contracts.
Switching to a process-oriented approach
As mentioned initially, contract management isn’t new. Professionals are doing it for long. However, there is a rise of a new era with technology like AI entering the system. AI eases up the process of contract drafting, due diligence, contract organizing, and reviewing up to a great extent. Once the AI is trained as per your system and firm, contract management becomes an automated process with minimal supervision. On the other hand, firm attorneys can now pay more attention to assessing risk and providing counsel rather than burying themselves with contract drafting, due diligence, and adding clauses. Legal teams can rely on AI to do most of the contract management tasks and raise the flags to the suspicious contracts where professionals can step in.
Now, you know how AI is making the highest impact in the contracting process. Investing in an AI-powered contract management solution leads an organization to a process-oriented approach. AI is the future of technology and AI-enabled contract management software is imperative for any business. Any Contract management software that uses AI helps any firm to reduce labor costs, saves time, and increases efficiency.
To learn how Knovos can help you in contract management, you can reach out to our team for a personalized product demo.