Contract management has changed over the past few years, specifically since artificial intelligence (also called AI) has come into existence and started to make the process of contract handling easier. Technology has changed the way businesses initiate, prepare, and manage agreements. With continuous advancements in AI, business organizations are increasingly moving toward automated contract management systems to improve the entire process, making it easier, smoother, and cost-effective.
Besides, AI is promoting smart contract management as it can perform tedious and time-consuming tasks in less time with greater accuracy than humans. It is not only streamlining the contract management process but also making it more effective and authentic. Let’s discuss how!
5 Ways AI is Revolutionizing Contract Management
Smart & Fast Contract Drafting
An AI-powered contract management system can automatically detect and take references from currently-existing contracts for the purpose of developing new contracts. Today’s smart contract management systems also use machine learning (also called ML). They can read and understand historical contract records to suggest appropriate keywords and clauses for contract drafting.
CMS uses Machine Learning algorithms to learn from historical contract track records, discover patterns, and suggest authorized, acceptable pre-defined keywords and contract clauses. Let’s check this excellent example explaining how it does that. If the other party is in any other country, your smart CMS will include a clause stating currency rate changes and their impact on the contract terms from time to time.
Making Contracts Error-free
Contract management requires sifting through hundreds of thousands of documents and legal papers. If your staff performs verification of these documents and tags clauses manually, it can take them days and sometimes months to prepare a few contracts. And there are chances of making a mistake if they do it in a hurry. Whereas, contract management systems powered by AI and ML can help identify and detect clauses according to what’s inside them correctly and quickly.
Using this and other similar features, the CMS automatically applies tags when you submit documents or other papers for processing. Not only that, in case the system finds incorrect information in clauses, it will notify you so that you can correct it well in time.
Contract Management Optimization at Its Best
Your contract managers might be spending additional time tracking the amount of time it takes to complete a draft and looking into details to determine delay-causing factors. This is a common practice to actually detect the inefficiencies across the contract management workflow.
By using an AI-powered contract management system you can ensure intelligent process automation that helps streamline the workflow. It automatically detects bottlenecks and helps you eliminate inefficient techniques. In fact, it actually minimizes the chances of workflow issues by optimizing the entire contract management process.
Valuable Insights for Contract Improvement
Smart CMS that uses AI can help simplify the contract evaluation and improvement processes. You can simply define key performance indicators and many other metrics to determine the value and performance of a contract. It has now made it easier to understand and set payment terms and search for a large number of contracts pertaining to a specific subject. This encourages greater visibility, which further enables you to enhance contract performance to ensure effective obligation management and compliance.
The CMS can also filter provisions or conditions that might not be in the best interest of your organization while also recommending the best possible alternatives, ensuring risk elimination to protect your business.
Cost-effective Contract Management
It requires a considerable number of staff members to effectively prepare and manage contracts, which usually becomes costly. In addition to that, the overtime billed can quickly raise your expenses, going out of your decided budget. Due to these and several other similar reasons, many businesses opt for contract management services, which usually turn out to be an excellent solution.
However, there’s another way to reduce contact management costs is to invest in an AI-enabled CMS. Automating the most tedious and time-eating tasks reduces the need for human resources, preparing a solid foundation for a cost-effective contract management process.
As we are now aware of how AI is transforming contract management, let’s discuss some of the greatest benefits you can reap using smart AI-enabled contract management systems.
Top Benefits of Smart Contract Management Systems
A smart CMS makes sure to record all the details of contractual terms while ensuring there’s no mistake made during the process. It helps you prevent problems that might otherwise be caused by one of your employees filling incomplete or incorrect information in a template, especially when doing it in a hurry to meet the deadline.
As your smart CMS takes over mundane, labor-intensive tasks, your staff saves a lot of their valuable time. You would then be able to delegate them to other important tasks such as negotiations and compliance assurance, utilizing your resources in the best possible manner.
The deeper the transparency the clearer the accountability. Once the AI-enabled CMS prepares and implements a contract, you and all key parties included in the agreement will be able to see transactional records. Besides, they can also see all contract terms with more clarity.
Smart CMSs typically are bundled with advanced data encryption methods which ensure your data remains protected and unharmed by any outside factor. The level of security is as stringent as that of blockchains. It not only gives you an assurance of data confidentiality but also makes sure your contracts are secure even in the digital format.
Since a smart CMS minimizes the need for human resources, you need not hire more staff in order to manage a growing flow of contracts. Similarly, you need not appoint external intermediaries, their requirements can be fulfilled by using in-house staff as they get more time freed by AI-powered CMSs.
It is commonly seen that when a contract is not prepared well, it usually leads to creating discrepancies that further arise disputes between parties. As smart CMSs ensure compliance, they ensure you need not to go court for contract-related litigations.
Smart contracts are managed digitally instead of on a paper-based process the way businesses have been doing traditionally. Some of the biggest factors that influence its usage are cost savings, enhanced efficiency, high data security, and assured compliance. Therefore, it would make sense if you moved from a legacy contract management system to an AI-powered CMS. Although its adoption may see gradual growth, in the coming few years, smart contract management systems will span across industries, benefiting organizations in each possible way. If you plan to use one, it is advised to perform thorough research before you choose.
Apart from that, you should also consult your legal and IT team seeking their views on this transformation. It is important to assess the system comprehensively before implementing one for your business contract management purposes, ensuring you make the best out of your investment.
Author: Cathrine Troyer is a thought leader in the fields of Legal Process Outsourcing, Technology, and Business Law. Her passion for writing persuades her to contribute toward inculcating knowledge amongst the avid readers of the legal fraternity. At Cogneesol, she regularly provides her expertise to clients, teaching them how to renew their strategies and leverage technology to achieve better results.