From digital assistants and smart home devices to personalized shopping experiences and health diagnoses, we have come a way forward with AI. And, it can do wonders with Contract Lifecycle Management too!! Regardless of the industry, business function, or contract type, AI helps to solve all the challenges faced in managing third-party and legacy contracts with AI-powered contract metadata extraction.
Challenges in managing third-party contracts
Organizations often have numerous third-party and legacy contracts with varying terms and conditions. Managing a large volume of contracts can be overwhelming, especially when dealing with different vendors, partners, and service providers.
Before we directly jump on challenges, let’s look at a few questions that every contract manager should ask themselves to review existing third-party contract management processes.
- Are you able to locate a specific contract from thousands of contracts stored in Google Drive, Dropbox, e-mail inboxes or listed in excel sheets?
- Is it possible for you to easily locate all necessary contact information from a centralized place, in real-time?
- Are you looking at most reliable and latest version of your managed contract documents?
- Can you extract the required metadata from existing format of contract documents for internal review, negotiation, processing and monitoring?
- How often have you struggled with extracting useful insights from third-party contracts?
- Are you able to maintain and track a single version of truth for key contract information, dates and timeframes?
- Are you able to easily report and track pre and post contract events like renewals, expirations, obligation compliances etc.?
- Are you able to get insights from the contract data connected with other business operations to derive actionable intelligence and make strategic decisions?
You know the answer! These are practical challenges, and every organization is looking for a permanent solution to overcome them.
Third-party contracts can be especially challenging to effectively review due to unfamiliar terms and material clauses. And hence, processing third-party contracts exposes companies to serious risk as the room for human error is high. Inability to track important clauses introduces legal risk.
Even though you have a proper contract management system in a place that takes care of the organization of contract documents, a manual review of high volumes of lengthy contracts is labor-intensive and time-consuming. And poor visibility into important clauses and obligations introduces business risks.
Using AI for intelligent contract metadata extraction
Businesses have a hard time getting the data they need from third-party contracts. Organizations would have to check large repositories of contracts for key information and datasets to extract any information at any point of time. Manually scanning thousands of active or legacy contracts is often a slow and tedious process. AI-powered contract digitization could help contract managers across business functions to save efforts and time in the processing. One can also eliminate manual data entry with AI-enabled contract extraction.
How AI-powered automated contract metadata extraction from unstructured contracts helps?
Process multiple contract document formats with higher accuracy.
AI-powered contract management solutions can automatically extract and analyze data from contracts, making them accessible to software for further processing. Using AI, contract management systems can import contracts in any electronic format — even PDFs and images— into the software, from where the data gets analyzed and processed with machine learning algorithms. It helps organizations access contract data from various sources, store in a centralized CLM platform repository and analyze the data in real-time.
Extract and analyze data in real-time.
The use of AI in contract management offers the ability to identify hundreds of common data points and clauses in sales contracts, vendor agreements, commercial contracts, employment agreements, NDAs, leases, licenses, and more. AI processes contracts in dozens of formats (whether .PNGs, .BMPs, .TIFs, .JPGs, .PDFs – image or text-based) and automatically converts them to machine-readable text for extraction of relevant data. It comes with workflow tools that allow your team to verify the outcomes before they’re entered into your system.
Let’s take the example of finance and insurance firms. When it comes to paperwork including submissions, quotes, and loss run reports, they face difficulties because of the unstructured nature of the data, and the sheer volume of content. The manual process of extracting related information in a relevant format is simply tedious and time-consuming. Any sort of mistakes, either human or resulted from legacy solutions, can be quite expensive for the firm. Here, using AI-enabled contract management solutions can easily extract data and clarify the content of contracts.
Capture key information from complex contract language.
In contract management, many key information is often stored in complex contract language. Like some contracts keep title, parties, payment due dates, pricing, etc. in tabular formats, and some may have in textual formats. With AI, key information from non-standard formats is captured in a few seconds, fed back to the machine learning engine and supports workflows for third-party review.
Automate and trigger alerts for contract SLAs, renewals, and other events.
Throughout the contract authoring process, AI provides invaluable support by offering easy visibility into critical terms that may require negotiation. This proactive approach helps organizations secure more favorable agreements by highlighting areas of potential concern or improvement. Furthermore, AI-driven contract management systems offer robust reporting capabilities and automated alerts. These features are instrumental in keeping stakeholders informed about important milestones, deadlines, and compliance requirements. Automated alerts can trigger dynamic workflows, facilitating the swift approval of various processes.
Smart suggestions while contract in review, renewal and negotiation process.
With AI-based contract metadata extraction, companies and their advisors can complete a review and analysis of the project in half the time and increase the accuracy of their review. Legal professionals can streamline the contract review process by extracting all the structured data from unstructured data formats, such as PDF, image files, Microsoft Word.
Read More – AI in Legal Contract Lifecycle Management
Any number of contracts’ renewal dates and renegotiation terms could be easily pulled and organized. It can let companies review contracts more rapidly, organize and locate large amounts of contract data more easily, decrease the potential for contract disputes (and antagonistic contract negotiations), and increase the volume of contracts it is able to negotiate and execute.
Bring your legacy and third-party contracts to life with Aavenir Contractflow
If you are considering the adoption of AI-enabled solutions, Aavenir's AI-enabled contract management software, Aavenir Contractflow, use machine learning and natural language processing to extract the most relevant data from contracts and documents so information is readily available and easily understandable. With this technology, enterprises can foster a customer-centric business model.
AI-Powered Aavenir Contractflow not only connects contract data but also intelligently extracts key insights from various functions, effectively breaking down silos and drive efficiency across the organization. It curates key contractual obligations, ensuring that organizations have a comprehensive understanding of their commitments. This includes, but not restricted to, the meticulous tracking of credits, penalties, and other contractual provisions.
Download Now: OOTB Contract Terms and Clauses You Must Extract Using AI
For instance, AI can monitor payment terms to ensure they fall within an acceptable range. If a contract's total amount surpasses the agreed-upon threshold, it can automatically flag this liability for review and approval. This proactive approach not only prevents potential financial risks but also enhances overall contract governance and compliance.
It enables the extraction of crucial details such as payment terms and pricing information from contracts, which can then be seamlessly shared with the Invoice and Accounts Payable department. Furthermore, it extracts important dates like renewals and expirations, allowing for their integration into external systems to ensure compliance.
Built natively on ServiceNow®, Aavenir Contractflow offers a centralized secure, and full-text searchable contract repository and the world’s most advanced workflow to foster collaboration between suppliers, customers, partners, legal, or employees. Schedule a Demo.
