AI is much more than just a fancy way to describe automation. With artificial intelligence, contracts can be drafted, negotiated, and approved with greater accuracy and efficiency. It’s like turbo-charging your CLM engine.
Let’s jump right in and discuss how AI improves CLM, empowering you to build better third-party connections.
Artificial Intelligence in Contract Lifecycle Management
CLM software is about so much more than simply automating tasks. Automation may be a step in the right direction toward efficiency — but AI takes things that much further.
In addition to saving time, AI delivers a much richer view of your contracts while helping you zero in on the most important details.
But why does it matter?
The Importance of Contract Management
Your contracts ultimately define how every dollar will be used, providing the governance that guides and protects your connection to suppliers and customers.
Poor contract management can easily lead to financial loss. According to research from World Commerce & Contracting, proper contract development and management can save companies an average of 9% of annual revenue. That also means many organizations are losing up to 10% of annual revenue on poor contract management — yikes.
How Is AI Used in Contract Management?
AI uses machine learning (ML) and natural language processing (NLP) to bring cognitive computing into the CLM process. In plain English — it’s like having a hyper-focused human investing all their energy to stay on top of every contract clause.
AI uses ML training to better understand the details that matter the most to you. No matter how much data there is to pore through, AI is extremely accurate when working with:
Creating and reviewing contracts
Monitoring and analysis
AI keeps a record of version history, connecting teams to improve your communication with suppliers.
Benefits of AI in Contract Management
It’s becoming clear that wherever AI technology goes, benefits are soon to follow. Let’s zoom in on just a few of the broader strokes of how AI is helping us draft better contracts.
Efficiency is a constant hurdle, even with today’s technology. Largely, we rely on professional expertise, but talent is often wasted on hours upon hours of menial — yet vital — tasks.
With CLM software that utilizes AI, ML, and NLP, you can enjoy the benefits of automation, but it goes much deeper than simply reducing your workload. Intelligent automation unlocks efficiencies that weren’t possible before.
For instance, AI allows for:
Contract review and optimization
Easy and quick contract searching
Manual entry will always contain the possibility of human error. Conversely, AI allows you to feel confident that the finer details aren’t overlooked.
Overlooking errors can have serious consequences, but it isn’t easy for people to trust critical review processes to technology. It takes time to build that trust, however, multiple sources have proven today’s AI is better than humans at finding errors, fact-checking, reviewing contract terms, and verifying compliance.
Artificial intelligence contract analysis, now the de facto standard for error correction, efficiency, and reducing mundane processes, also manages enormous datasets. AI quickly identifies patterns of anomalies to optimize your contracts. This is mainly due to AI’s ML tirelessly improving its skill set through unsupervised learning. (Another pro to using AI – it doesn’t get tired!)
Increased Visibility and Transparency
With AI, expect to get more from your contracts than just establishing terms with third parties. Better visibility and transparency can benefit everyone connected to your agreements.
Prebuilt and customizable dashboards
Alerts for renewals
Better tracking and reporting help you strengthen relationships with vendors. With AI-based contract intelligence, every party can gain better insight, plan future arrangements, and remain conscious of roles and responsibilities. It’s a win-win situation every time.
AI Leads to Better Risk Management
Risk management is a hot topic right now, and AI now plays a big part in that conversation. AI helps reduce risk at every stage of the contract lifecycle. For example, because it has become exceedingly accurate in mitigating risk by finding errors, comparing patterns in clauses, and working from templates, it can dramatically up the pace of contract creation.
Once terms are agreed upon, AI can alert all parties to their contract obligations, provide detailed reports, notify you of upcoming renewals, and perform other due diligence.
How Terzo Uses AI to Improve Contract Management
Most organizations are woefully behind the times when it comes to contract management today. Businesses often outsource production and other essential tasks to third-party vendors while relying on outdated customer relationship management (CRM) software.
This can result in:
Siloed data: Companies using CRM software lack a centralized database to search across multiple vendors. Third-party information is managed externally by phone, fax (yes, really), or email, but can’t be shared directly within their contract software.
Limited supplier collaboration: Without AI, companies miss out on opportunities to collaborate and further communicate with their vendors and other third parties.
Terzo uses ML and NLP to provide access to contract details, notices, and alerts for all parties involved. Say goodbye to silos.
Intelligent CLM software means the ability to analyze the language of contracts, identifying and extracting data about inventory, potential errors and redundancies, and assisting with compliance.
Sharing data openly with your vendors presents opportunities to collaborate, discuss insights, and negotiate future terms together — all while reducing countless hours of manual tracking.
What Does the Future Look Like for AI in Contract Management?
The future of artificial intelligence contract management is being formed today, unleashing the power to integrate with current and future platforms (like Oracle, ServiceNow, and Coupa) while building holistic connections with stakeholders and increasing productivity.
From here forward, managing your contracts isn’t just about finalizing terms of agreements; it’s about empowering innovative partnerships through elevated insight.