Contracts underpin how businesses connect. They provide the foundation for partnerships to establish trust, and they define the expectations placed on stakeholders.
Technology has caused so many aspects of business to advance in ways that were inconceivable in decades past, and the same can be said for intelligent data extraction with contracts.
We’ll look closely at advances in contract lifecycle management (CLM)—specifically intelligent data extraction—and examine the benefits, the best applications, and the continued advances we can expect in the future.
What Is Intelligent Data Extraction?
Intelligent data extraction is a process using the most advanced AI and machine learning (ML) to retrieve data from source documents with a high level of accuracy. This extracted data can then be analyzed, classified, organized, and utilized by teams with maximum efficiency.
Intelligent data extraction goes a large step beyond Optical Character Recognition (OCR) by optimizing source data and learning to associate information with the user’s database of terms, standards, clauses, and other details needed for consistency.
What Are the Key Innovations of Intelligent Data Extraction?
While multiple technologies underly intelligent data extraction, the following technological components of AI truly revolutionize the process:
Natural Language Processing (NLP)
This is a branch of AI that uses complex algorithms to help computers recognize, interpret, and generate language. The greater field of NLP includes classifying data, understanding language context, translation, intelligent data processing, and information extraction.
Large Language Models (LLMs)
LLMs are the framework that makes it possible to code and develop NLPs. They are systems trained on huge datasets of text in order to develop an understanding of patterns in language and logic.
Neural networks, called transformers, bridge the gap between the massive amounts of data used in LLMs and the algorithms that empower computers to develop artificial communication and insight from this data. This aspect of AI is used to develop intelligent data insights derived from your contract metrics.
Machine Learning (ML)
ML uses all of the functionality of AI algorithms to learn without added programming by analyzing patterns, comparing data quality and accuracy, and using human-assisted training to develop autonomous comprehension. ML is used for image recognition in scanning and extracting data, along with assisting in classifying content.
What Are the Benefits of Intelligent Data Extraction for Businesses?
Every company is looking for ways to scale and compete. The following are several of the top advantages companies can leverage for strategic advantage—thanks to intelligent data extraction.
Save on Costs and Free Up Your Workforce
Intelligent data extraction helps you gain maximum efficiency across your entire business. As a contract enters your contract lifecycle management (CLM) platform, it is analyzed and stored for immediate access. Countless hours of labor are now open to processes that require your workers’ expertise, saving on cost and human resources.
Improve Your Data Accuracy
Without intelligent extraction, data can easily be improperly formatted, misfiled, or miscategorized. With traditional manual scanning of data, human error commonly comes from fatigue. Intelligent data extraction identifies the data you need and makes it easy to see.
Make Decisions Based on Better Data Insights
Extracted data is analyzed using ML, compared to your database of terms, agreements, and clauses, and your supplier relationships. Your contracts are no longer limited to being a source of agreements, but smart analysis from AI can uncover details about your relationships, earnings, supplies, and other data that would otherwise go unnoticed.
Better Manage Your Compliance
Accurately extracted and sorted data helps you stay on top of compliance rules and regulations you must adhere to. Compliance awareness doesn’t just apply to your operation but to all of your suppliers as well. Your contracts provide the foundation of what is expected from partners so you can address any concerns and avoid costly fines for falling out of compliance.
How Does Intelligent Data Extraction Work?
There are many processes involved in making intelligent data extraction work, so it can accurately identify and collect source data from multiple formats and make use of the finalized data. The following are the broad strokes of how this process works.
Identifying the Source
Intelligent extraction has to identify source document data from scanned images or documents in different computer formats, and accurately extract that data into a format that can import to a contract lifecycle management platform.
Intelligent extraction has to verify data as it is being extracted and use AI logic to reconstruct any mismatches from OCR imaging. Data is corrected and analyzed for validation so it can be used by the contract intelligence software.
Using AI to Validate and Process Data
AI and ML are used to qualify extracted data and organize them into searchable text. The extracted data is classified, redlined for important data points, and arranged so that important details like terms, clauses, and vendor standards are easy to find.
Intelligent data extraction systems employ various components and techniques to automate the extraction process, handle large volumes of data, and improve accuracy and efficiency, resulting in structured and usable data for further processing and business applications.
Applications of Intelligent Data Extraction in Contract Management
Next, we’ll discuss some of the specific ways you can put your contract intelligence to work, by leveraging better data visibility, maximizing efficiency, and saving on costs.
Contract Origination and Drafting
Extracted and verified contract data populates your CLM software’s records, saving you time and resources in consistently drafting new contracts that maintain your standards and terms.
Contract Review and Analysis
When you extract and import your contracts, they are indexed so you can easily search data and use AI for deep analysis to uncover hidden, pertinent data, and identify issues with risk, compliance, or vendor terms of agreement.
Eliminate manual data entry and painstaking redundant reviews so you can focus on important data insights and sharing relevant information across your departments and with stakeholders.
Ongoing Document Monitoring
Your contracts are now a living source of terms and conditions, which you can connect to performance, inventory, payments, delivery dates, and anything you need flagged to monitor: it’s all there in your dashboard.
Negotiations Backed by Data
Use the details of your contract terms to maintain those very standards and make sure your suppliers live up to your expectations. Readily available data lets you know what insights can help you negotiate more lucrative terms with partners.
Future Trends and Innovations in Intelligent Data Extraction
The current technology we see in contract intelligence is an indicator that it will continue to scale in synchronicity with advances in AI and ML. Below are a few of the more likely innovations coming in the near future.
One of the major benefits of CLM is the ability to connect accurate contract data to other important forms of data management. Contract details can be tracked and compared to daily business with suppliers and stakeholders, making for better company-wide decisions. These kinds of benefits will likely extend even wider into automated processes via cloud systems, IoT automation and data intelligence, and a widening network of platforms that can integrate and share valuable data.
More Focus on Privacy and Security
AI-based contract intelligence unlocks such powerful insights, data intelligence will require even more attention on cyber security innovations, integrations, and standards. Platforms will develop even more sophisticated administrative solutions to maintain compliance with steepened regulatory hurdles for data protection.
Diverse Extraction Formats
In the same manner CLM platforms change the way we look at the stagnant nature of traditional contract management, AI and ML are transforming our ability to extract data from a wider range of media types.
Whether it is words on physical paper or audio recorded from a meeting, transcribing, data-scraping, and other extraction methods are advancing. The limits to what AI and ML will do to bridge new gaps is hard to imagine, but new innovations will surely make it possible to capture data from any form of text, images, and audio, with growing contextual understanding.
More Efficient Departmental Communication
Today, AI-based CLM platforms help a company’s departments communicate better. This trend will continue with even greater team unification. The future will belong to companies that learn how to tighten processes to scale effectively.
The secret to moving ahead will be the ability for segmented departments to operate quickly on shared data. Using AI and ML to bring contract data to life with administrative privileges for everyone that needs to be included means teams can remain specialized while also working with the most updated information.
Discover What Intelligent Data Extraction Can Do for Your Contract Lifecycle Management
Terzo creates CLM solutions built upon the most advanced AI-powered contract intelligence system. Are you interested in discovering how unifying your contracts into a single environment can unlock efficiency, save you on costs, and provide you data for leveraging contract negotiations?
It’s time to see for yourself and try Terzo’s solutions today.