As with many (if not all) business processes, AI has a transformative potential for contract management. AI-powered systems can analyze vast amounts of contract data faster than whole legal teams. AI’s capabilities are particularly valuable in contract lifecycle management. Using contract lifecycle management software makes your processes more efficient and streamlined while minimizing risks.
Let’s discuss 10 primary reasons why using AI in your contract management plan is important. These reasons are divided into three sections:
- Efficiency and Productivity: Automate and streamline tasks
- Risk Mitigation: Identify red flags and address them immediately
- Data-Driven Decision Making: Get accurate data, create accurate solutions
- EFFICIENCY AND PRODUCTIVITY
AI can revolutionize contract management by automating mundane tasks, thereby enhancing efficiency and productivity. Let’s explore how:
1. Automate Contract Review
Companies deal with large quantities of contracts and legal documents. Finding specific information is akin to looking for a needle in a haystack. An AI-powered contract management system can quickly look at these papers and find important information such as dates, numbers, and special conditions. This means you don’t have to spend as much time scanning through legalese. You get the right information immediately.
2. Intelligent Search
The newest AI models can scan within context. This means they can process and understand information in isolation and about its surrounding text. AI understands the nuances of what you’re searching for and finds the most relevant information. For example, instead of typing in “contract expiration date,” you could ask, “When does this contract end?” and the AI will immediately show you the answer.
3. Anomaly Detection
Contracts can contain ambiguous language that human eyes might overlook. Contract management systems can look at all your contracts and find anything that doesn’t look normal. These can include hidden costs, unfair terms, and legal loopholes. Suppose a contract has an unusual budget breakdown or a strange clause. The AI can spot these anomalies and say, “This looks weird, you should check this out.”
Related Article: Advanced AI-Enabled Contract Negotiations with AI driven redlining
- RISK MITIGATION
Risk is one critical challenge when reviewing and managing contracts. The next three reasons explain how AI can help you with risk mitigation:
4. Proactive Risk Identification
Are you wary of potential risks that might prove problematic to your contract in the future? Breaches and regulatory violations are serious matters that may sometimes slip through the cracks. AI can help you identify these problems before they even occur. You’re more prepared to negotiate your terms, seek legal advice, or plan your contingency.
5. Improved Due Diligence
When going into business, you’d want to know as much as possible about your potential partner. Due diligence entails gathering information about the other party, and AI moves it forward faster. The AI can check your partner’s online presence and see if it has any history of red flags, such as unpaid debt or regulatory issues. The more information you have about your potential partner, the more you can decide if working together is a smart choice.
6. Improved Contract Lifecycle Management
The entire life of a contract is filled with time-consuming work. When you draft a contract, you must ensure it abides by existing rules and regulations. This is true as long as the contract is in effect. With AI, you can make the work easier by:
- Drafting accurately. AI can scan through existing regulations so they are addressed even before you start writing the contract.
- Monitoring compliance. AI keeps an eye on the contract to make sure it’s up-to-date when regulations change.
- Identifying issues. AI spots possible legal problems and provides suggestions on how to fix them.
An example would be you working out a complicated supply chain deal with a global provider. AI will help create the contracts, check for international compliance laws, and handle renewals. With AI, you cut down on physical work and minimize mistakes and noncompliance.
- DATA-DRIVEN DECISION MAKING
Decisions are best made when you have the most accurate data. Through AI-driven contract management, you can ensure that data is not only accurate but also accessible, actionable, and up-to-date.
7. Reduced Operational Costs
Some tasks that come with contract management can be boring and repetitive, but you don’t need to handle these yourself. Spending time on forms and copying data can be better used elsewhere. AI can help you by doing these tasks automatically. You save money because you don’t have to spend resources and work hours doing repetitive tasks. Plus, you can get the work done faster and with fewer mistakes.
Related Article: Aligning Sales and Contract Management Teams for Success
8. Optimized Resource Allocation
Your team doesn’t have the time nor the resources to scan through all your legal and contractual data. AI can help you sort your contracts and find the most important ones. It can identify contracts that are due soon or have big risks. With AI, you can update your playbook and plan your next steps.
9. Contract Analytics
AI can analyze contracts to identify patterns like overspending or unreliable suppliers. This helps you understand how your deals are performing. You can negotiate better terms or find new suppliers with the correct analysis.
10. Predictive Analytics
While the future is not 100% predictable, AI helps you identify trends more accurately. As it analyzes your previous contracts and current market data, it gives you more nuanced information, so you’re better equipped when it’s time to change your prices or deal with shortages. A more accurate analysis gives you an edge when negotiating your future contracts.
Let’s say your company uses paper for your products. By evaluating past contracts and paper usage, the AI can predict that you’ll need to increase your paper order in the next quarter due to an upcoming project. This gives you time to find the best price and ensure you have enough paper in stock.
The Future of Contract Management Is AI
The era of manual, error-prone contract management is waning. AI-powered solutions are reshaping how businesses approach contracts, and they are no longer a luxury but a necessity. Automating routine tasks frees up time and work hours. Avoid unnecessary risks by spotting red flags early. Make smarter decisions with correct and timely data.
AI will undoubtedly drive the future of contract management, and it’s up to you if you’re ready to make the big leap forward.
Originally published by https://www.convergepoint.com/
