CLM is evolving from an operational record-keeping system, primarily used for legal audit purposes, to an enterprise-level core system addressing business risk, costs and the pursuit of revenue maximization.
According to Gartner Reports, Contract lifecycle management software can cut contract lifecycle time to half, reduce administrative overhead by 25%-30%, and improves compliances by 55%.
Rising demand for agile contract management, rapid adoption of AI/ML technologies, and increasing need for contract compliance are fueling the demand for AI-enabled contract management software.
Top 10 Contract Management Trends 2024
When you reminisce about the contract management trends of 2022, you see the year has seen the advent of even more advanced tools. After relying on contract management technology for the past year and a half, businesses realize the advantages of using these solutions beyond the pandemic.
These are the top contract management trends to watch out for in 2024 and beyond.
Trend #1 The increasing role of AI in contract visibility
In most organizations, once contracts are signed, they sit in Gmail, One Drive, or in a dedicated contract repository until, in rare cases, someone needs to recheck the agreement terms. These lead to missed key milestones, resulting in revenue leakage or strained vendor relationships.
It calls for the dire need for intelligent contract analytics and visual dashboards which provide timely and actionable insights. Interestingly, according to Deloitte, using intelligent contract analytics, companies achieve a 60% reduction in contract management costs.
Aavenir Contractflow allows contract managers to build custom visual dashboards that provide an elevated overview of data relevant to your business and track key trends and metrics.
Trend #2 The increasing role of NLP in simplifying complex contract language.
According to a PwC study, Fortune 1,000 companies manage anywhere from 20,000 to 40,000 active contracts on a regular basis.
An attorney usually takes more than two hours to create and review a single contract. It is an unwieldy task if we think about bulk contracts, i.e., managing 20,000 or more active contracts over their entire life cycle. Although more contracts mean more revenue, it also requires more management.
To ease management issues, contract management teams are now leaning towards solutions powered by AI and NLP, which helps them understand the precise nature of contracts and perform human-like comprehension of the complex legal language. AI and NLP can quickly extract and classify key contractual metadata while providing accurate insights/analysis on ambiguous or hard-to-understand terms.
Legal language is not universal. It varies from country to country and industry to industry. However, NLP can extract clauses from your own standard contract template and help you create a repository of clauses to be used while evaluating future contracts or authoring new contracts.
How can Aavenir AI Engine and NLP-search extract key contractual data from your complex and lengthy contract document? Book a Demo.
Trend #3 Automated contract clause analysis
As per Global Legal, 65% of Legal professionals lose time on administrative tasks.
Poorly drafted contractual clauses lead to problems in Post Contract management. It is a very important function with both operational and financial implications requiring close and effective monitoring. From requests to renewals, it is vital to standardize clauses across the company contracts for quick and easy contract management to avoid contract and compliance risks.
Effective clause analysis is a must to accelerate contract signature and ensure a smooth transition from the pre- to post-contract stage while staying compliant. You need a technology that can identify and extract key clauses and terms from your contracts. Usually, contract metadata extraction with AI includes extracting key dates, contract value, contract types, names of the parties, and associated departments. However, in 2024 and beyond, Generative AI will surely expand its roots and wings and play a major role in extracting and automating clause analysis.
Advanced Aavenir AI Engine extraction with state-of-the-art deep learning understands contracts like humans, discovers terms and clauses, and automatically identifies deviations from approved clause libraries. Book a Demo.
Trend #4 Automation of contract review and negotiations
As per Gartner, AI-based contract analytics solutions will reduce the manual effort needed for contract review by 50%.
Currently, in most organizations, legal departments often rely on traditional contract review and negotiation processes. Needless to say, each contract review cycle necessitates countless emails back and forth to share and discuss concerns. Over and above, contract negotiation is a lengthy process.
AI contract management technology is intended to streamline data analysis and risk management using automated data entry and risk mapping. Also, more time is given to focus on critical parts of a business's daily operations and growth, while less time is spent on the minute details of contract signing. AI automation can speed up the contract review process by 5X or more and also derisk the negotiation process. Missed deadlines or constant delays are far less common, and all versions and edits of contracts are saved and retrievable at all times.
Aavenir Contractflow simplifies contract review and negotiation by shortening your contract approval time by 85% with streamlined redlining and negotiation.
Trend #5 CLM solution integrations and customizations
Most organizations often face challenges using CRM to manage customers, ERP to manage AP and AR, and similar other systems to manage multiple business functions. It simply ends up creating silos of information with no direct communication. This calls for business applications to point towards a holistic technology streamlining all contracts and related operations.
Hence, many CLM platforms already have a host of external apps that you can use. However, different companies have different needs, so software providers will likely continue to add compatible apps. For example, some organizations need integration with payment platforms, whereas some might need integration with vendor management platforms. A CLM solution's integration capability and flexibility with a host of external applications will make it far easier for professionals to utilize management software as they can integrate it with many other platforms they’re already comfortable using. A truly integrated CLM solution that seamlessly connects multiple systems to enable communication will be in vogue in 2024 and beyond.
Trend #6 Portal for effective collaboration with vendors for contract management
According to a study from 3M, 70% of suppliers claim that half of their customers do not have systems in place for supplier collaboration, and they still rely on manual processes.
Long cycle times, lengthy negotiation processes, and overall low visibility into life cycle stages are basic problems of traditional contract collaboration. Email-based collaboration approaches no longer work in an agile environment. Organizations need a central hub to collaborate and communicate with their vendors on an ongoing basis.
This collaboration acts as a self-service supplier portal and is vital in streamlining and accelerating the contract negotiation, review, and signature process. Collaboration portals will have significant importance across Source-to-Contract and Procure-to-Pay processes.
Trend #7 Intuitive and simplified contract management user experience
Modern organizations are looking for features like intuitive UX design and customer-centric support regarding contract management software. They do not want something that looks outdated or causes frustration for their customers. In fact, many companies (especially large enterprises) are looking for white-label solutions that may be customized to fit their needs and boost their branding.
Read More: Contractflow Enhancements to Boost User Adoption and Augment User Experience
Trend #8 Compliances for secured data exchange and data privacy
Some people are hesitant to adopt contract management software unless it holds a very high-security standard. Data privacy is not only relevant to stay on the right side of the law and complying with the current regulation. With the current trend of digitization and documentation moving online in this age of the pandemic, it is imperative for businesses to have data security in place.
Preventing data breaches and ensuring compliance with changing legislation should be a high priority for businesses as the year progresses. As regulatory and policy compliance is vital for consumer/client trust, manually trying to manage the changing legal landscape is a complex task for compliance and legal teams, with many businesses now looking at contract management software to provide an efficient solution.
Trend #9 Improved visibility to post-signature contract obligation compliance management
As per World Commerce & Contracting, poor contract management practices and non-compliance cost businesses an average of 9% of their annual revenues.
Failures to comply with contractual obligations expose you to risk and miss out on possibilities. This happens mainly due to the need for more visibility into or inaccessibility of contractual data like terms, conditions, commitments, obligations, and entitlements.
Contract managers are looking for ways to track contractual performance and drive predictability with AI. CLM solutions that can detect deviations from stipulated agreements and commitments will be highly sought after. AI-enabled contract compliance management is expected to result in an improved ability to manage renewals and more robust and better collaboration among stakeholders.
Aavenir AI Engine intelligently and accurately extracts obligations from contracts using AI, ML, and NLP, assigns ownership, and manages and tracks fulfillment. Learn More
Trend #10 Easy to trace audit trails and activity logs
Centralized contract storage with smart clause retrieval can boost contract tracking efficiency by 90% and augment a business’ audit efficiency by nearly 60%.
From procurement to finance to legal, contract compliance audits can benefit the many functions of your organization. This may be achieved well by centralizing your contract document management system. A cloud-based, centralized contract repository highlights modern contract management software solutions. With centralized and optimized storage of contracts, you do not need to worry about losing track of documents. It not only helps in maintaining activity logs and versions but also assists in carrying out smarter audit trails.
On top of it, when AI comes into play, it enables auditors to review more data in less time through probabilistic sampling approaches. It can sift through and identify any contract language or clause which allows contract auditors to focus on the areas that need attention. In addition, it accelerates the entire contract review process and executes contract reviews more accurately than manual reviews, dramatically lowering a company's risk exposure.
Increase in pre-award compliance and ensure effective ongoing monitoring of post-award compliance with Aavenir Obligationflow. Schedule a Demo.
Closing Thoughts
Contract automation and analytics, along with advanced AI, could bring us more success in 2024 than ever before. Stay tuned and integrate a robust contract management platform if your organization wants to stay ahead of the trend. Download this Product Brief to learn more about how Aavenir Contractflow is helping businesses organize and manage contracts within ServiceNow.
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