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Contracting is a widespread activity, yet it is one that only a few businesses execute well. In fact, it’s been estimated that inefficient contracting costs businesses anywhere from 5% to 40% of the value of a deal, depending on the conditions. However, new technical advancements such as artificial intelligence (AI) are now assisting businesses in overcoming many contracting issues.
The biggest problem businesses confront when it comes to contracting is the vast amount of contracts they must keep track of; these contracts are often inconsistent and difficult to organise, maintain, and update. Because most companies don’t have a database of all the information in their contracts – let alone an effective means to extract it – there’s no easy way to evaluate complex outsourcing agreements or compare how a condition is worded across divisions. Not only does it take a lot of labour to create, execute, and improve contracts, it also takes a lot of manpower to draft, execute, and improve contracting processes and the transactions that these contracts regulate.
How AI is revolutionising the concept of contract management
If a large tech company, for example, has a high volume of procurement contracts with various renewal dates and renegotiation terms, reviewing and tracking all of this information would take hundreds of hours and a staff of contract managers to ensure that no renewal or opportunity is missed.
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AI software, on the other hand, can readily extract data and explain contract content. (Any number of contracts’ renewal dates and renegotiation clauses might be rapidly pulled and organised.) As a result, it can help businesses evaluate contracts faster, organise and locate vast amounts of contract data more readily, reduce the risk of contract disputes (and adversarial contract negotiations), and improve the number of contracts they can negotiate and sign.
Benefits of AI-based contract management
You’ll never miss a renewal or revenue opportunity with proactive AI-supported alerts:
Legal teams are in charge of keeping track of crucial contract lifecycle events, such as contract autorenewals and other data-driven events. Legal teams may remain on top of contracts with the help of contract AI by setting up automated alerts and notifications. These notifications can be issued before any date-based event, allowing legal teams to gather the information that can be used to re-negotiate contract terms before renewal.
Reduced risk and improved contract visibility:
One of the legal team’s major responsibilities is to guarantee that the corporation signs off on solid acquisitions and minimises risk. When there is a lack of visibility into each contract at every point of the contract lifecycle, liability and risk are increased. Legal contract automation and artificial intelligence (AI) can assist legal teams in ensuring that the company is signing off on excellent deals, avoiding risks, and having complete insight into all contract requirements.
Authoring with Intelligence:
An AI-enabled contract management system facilitates intelligent contract development by automatically detecting and arranging contracts. CMSes use machine learning algorithms to extract information from prior contract track records, identify patterns, and recommend permitted, acceptable pre-defined phrases and contract clauses. In addition, an AI-enhanced CMS’s context-based analysis is a crucial component. This means that the CMS searches for related conditions that should be used for specific contract types while generating contracts. For example, if the dealer is located outside of the country and across borders, a currency fluctuation clause in the procurement contract will be recommended.
AI and agreement data
Users of artificial intelligence for contract management can choose certain data points and set rules based on contract kinds. For example, users can set rules for locations, dates, monetary values, personally identifiable information (PII), payment card information (PCI), and other subsets of key data for a given contract using this intelligent contract management software functionality because data is consolidated and easily digestible. Once enabled, contract intelligence automates these operations, saving time spent on tedious data import processing and allowing more time to be spent on data-driven decisions.
What is next for Contractual Management AI
Contract lifecycle management (CLM) technology has become a standard part of modern corporate business practice. It is expected to increase at an annual rate of 11% on average until 2030 as more companies use CLM platforms. The automated procedures and processes take care of a lot of the data entry and paperwork that legal teams have dealt with in the past. However, as we approach 2022, basic automation will not be enough in an era where time is money, and legal teams are increasingly positioned to play a new strategic role in enterprises.
Contract intelligence is a next-generation approach to contract lifecycle management that enables sales, procurement, legal, and other teams across the business to obtain complete visibility into past and current contracts to track commitments, eliminate risk, and optimise revenue.