You're always on the lookout for ways to save in your business. Chances are, you've found a lot of opportunities to redirect funds to more valuable pursuits. But you're only human, and you may be missing some of your chances. Contract AI can transform your business operations by identifying cost-saving opportunities that humans will simply miss.
This article will show you how AI’s speed and accuracy keep you fully updated on cost-saving opportunities and risks throughout the entire contract lifecycle.
The Power of AI in Contract Analysis
Artificial intelligence is a powerhouse in any sort of analysis. It can consume and analyze massive datasets with incredible speed and accuracy. It can also collate and analyze data from entirely different document sources and bring it into one easy-to-view location.
This is particularly important in smart contract AI, where every detail matters. Contract software that uses AI can quickly analyze complex contract language, flag high-risk clauses, and identify opportunities for improvement.
You don’t just get recommendations on current data. Predictive AI can also future-proof your business by notifying you of upcoming opportunities and risks.
Key Areas Where Contract AI Identifies Cost Savings
Here are some of the ways that AI contract analysis identifies cost-saving opportunities throughout the contract process.
Procurement and Sourcing
Data is key when sourcing suppliers. AI analyzes vast datasets from various sources, such as historical vendor reliability and market conditions. Then, predictive AI combines this information with your company's needs to help create the most accurate shortlist possible. Each potential short-listed supplier receives a risk assessment and a rank based on desirability. This process transforms the way you approach suppliers and which ones you will approach first. Plus, these rankings will update instantly based on new information or changing market conditions.
In addition, AI can automate the entire request for proposal (RFP) process. Once it creates your shortlist, you can generate personalized documents and send them out to each prospective supplier. AI uses natural language processing to evaluate their proposals and further narrow down the field.
This automation saves a huge amount of time and money that you would normally spend running the process manually, immediately lowering your operational costs. It also means you can send out more RFPs while maintaining a personal touch, improving your chances of getting a reply.
Supplier Management and Negotiation
Legacy contracts eliminate the cost of finding a new partner and building a new relationship. This is why they are highly valued and should be managed carefully through the contract lifecycle.
Communication is key to maintaining strong contract lifecycle management. AI contract software can help to improve this in several ways.
Predictive AI can spot potential issues before they arise. Traditional contract teams may miss these points of friction. Once the problem comes to light, it may cause a rift in the relationship. With early knowledge, you can deal with the problem before it gets out of hand, which might require legal professionals.
You can also automate routine communications using natural language processing. These communications are necessary tasks, but they don’t add a lot to the strength of the relationship. Automating these interactions frees up your staff for more important work.
On the negotiation side of things, AI can analyze vast amounts of data, summarize it, and give you recommendations to ensure you are the smartest person in the room when it comes to making a deal. If you do get stuck during a negotiation, contract management AI can offer real-time insights and strategies to help you get the best deal possible.
Spend Analysis and Optimization
AI can effectively consolidate spending data from a large volume of contracts, providing a holistic view of the company’s outgoing funds. It will identify trends and look for anomalies to highlight opportunities for future budgets. AI can perform contract reviews with any contract type and consistently carry them out in real-time to be certain nothing is missed.
With AI tools, you can easily categorize your spending and tag it to highlight areas of opportunity. This makes it much easier to identify hidden costs and areas where spending is out of control. Run this AI audit on spending anytime you feel there are opportunities for improvement.
Benchmarking against industry standards helps to show where your company is spending more than the competition and whether this additional outlay is worth it. If you are not receiving equal value for the additional spending, it's time to look at the contract terms again.
Predictive AI can spot disruptive patterns in spending and alert the appropriate person before it spirals out of control. Plus, you can run all of these interactive analytics from your centralized AI contract review software.
Contract Compliance and Risk Mitigation
Falling out of compliance routinely costs companies enormous amounts of money. This often happens without you even knowing, after which you get hit with a hefty bill.
AI can help you avoid this by creating a centralized contract compliance repository that is updated with changing regulations and cross-checked against all active contract clauses. This real-time intelligence continually runs risk assessments to alert staff of any potential issues. Predictive AI will perform scenario simulations to mitigate the risk of even the most unlikely occurrences, keeping you prepared even if the worst should happen.
Best Practices for Implementing Contract AI
Here are some tips for successfully implementing AI for contracts:
Define your objectives.
Choose the right technology to meet these goals.
Invest time in training staff on using AI tools.
Start small with a pilot project.
Monitor the project's success and iterate into other areas of the business once everyone feels confident. Once you are happy with how the systems are working, integrate with existing systems and start scaling your AI operations.
Choose the Right Contract AI Solution
If you're ready to see how AI can identify cost-saving opportunities for your company, contact Terzo today.
One of our financial intelligence experts will talk you through exactly what opportunities are available. We have an AI solution to fit every forward-thinking business — from optimizing contracts and invoices to managing any other financial document with ease.
