The Future of Contracts Management & Procurement AI Tools
Artificial Intelligence-driven technology has been at the heart of news and media headlines in recent years – generating buzz in terms of drones, chatbots, autonomous vehicles, and robots. But let’s not forget about other areas where AI has the potential to make a tremendous impact, like document management.
Filing cabinets – whether virtual or traditional – are still overflowing with vendor agreements, contracts, onboarding materials, and more – which is negatively impacting productivity. According to research, 46% of workers are wasting valuable time on paper-intensive workflows, dedicating over 11 hours per week handling issues related to document management and six of those hours could be easily redirected towards high-value activities with better systems in place.
Beyond productivity loss, problems surrounding contract management can significantly influence customer service and organization for businesses. For professionals who are tasked with reviewing, drafting, negotiating, managing and supporting contracts and documentation on a regular basis, AI-driven tools offer a real possibility for streamlining workflows, decreasing the number of legal staff needed, and automating reviews.
Here’s a look at what’s possible – thanks to AI – and what we can expect to see in the future of contracts management and procurement AI tools.
How Contract Management AI Software Works
Today, AI software technology leverages Machine Learning, Natural Language Processing (NLP), and various data models to bolster efficacy over time. Essentially, these tools are heavily reliant on data, which is used to “train” the software and make improvements as more data is processed.
To perform optimally, AI software used must be fed thousands of contracts and documents as a starting point for defining business rules, setting up term recognition and ultimately having the capacity to understand how to approach contract management tasks.
Today, AI software technology leverages Machine Learning, Natural Language Processing (NLP), and various data models to bolster efficacy over time. Essentially, these tools are heavily reliant on data, which is used to “train” the software and make improvements as more data is processed.
To perform optimally, AI software used must be fed thousands of contracts and documents as a starting point for defining business rules, setting up term recognition and ultimately having the capacity to understand how to approach contract management tasks.
Procurement & Contract Management AI Tools Used Today
Leading providers of AI-driven contract tools, such as Agiloft, Concord and Kira Systems, are configured to give procurement and legal teams the ability to control, collaborate and audit the entire lifecycle of any given contract.
By integrating this type of software into the company’s internal workflow, it’ll provide a single trusted medium for all parties involved in the contract negotiation process to see changes, track timelines, receive intelligent notifications, pull detailed reports and analytics and access a wealth of workflow automation and ongoing management features.
While these tools are not quite advanced enough to provide a truly hands-off system for managing complex contracts and processes, they are still immensely valuable – having the power to redefine how a business handles contract management. Here’s a deeper dive into some of the current capabilities of this type of software.
1 | Greatly Bolsters Risk Intelligence
Keeping track of contract terms, essential dates, important clauses, and key milestones are all pieces of mitigating risk in contract management. Businesses can create a set of rules for the software to automatically notify parties of deadlines and keep track of relevant dates. Because of this, procurement and legal teams no longer need to sift through lengthy contracts and specific clauses to pull data, and instead focus their expertise on analyzing and mitigating risks associated with each individual contract.
AI-driven tools today can process and organize contracts by common clauses, allowing for ease of reference and contract comparisons across multiple documents. AI-driven software can also digest large sets of data to make future predictions, such as potential outcomes of contract litigation – allowing companies to make data-driven decisions that could save the business a significant amount of money down the road.
2 | Actionable Insights for Increased Efficiency
Through AI-powered contract management programs, organizations can gain access to insights needed to ensure they’re maximizing the value of their negotiations. By analyzing the large breadth of information that comes with each contract, it can provide comprehensive reporting, including key performance indicators, milestones, service level assurances and other user-defined parameters.
For example, this type of software has the ability to identify specific contract conditions, like requisite quality assurance regulations or business payment obligations to improve performance tracking, maximize obligation management, enhance compliance and furnish businesses with higher visibility into their contracts.
Traditional contract management is not only time-intensive and laborious, but it increases inefficiency and the possibility for human error. With the ability to automatically extract and report on various information, companies can capitalize on opportunities for automatic renewals, cost increases and better overall organization.
Through the automated analysis of contract metadata and terms using NLP, AI can quickly categorize contracts by client, type, renewal date, risk level, etc. By doing so, teams are furnished with the resources needed to uncover gaps and inconsistencies in existing contracts that need to be rectified.
Additionally, AI can flag contracts that are out of compliance, allowing teams to update crucial language and corporate policies while accelerating the information discovery process for future negotiations and renewals.
3 | Greater Consistency and Accuracy of Contract Review
When handled by staff, contract drafts are often created by copying and pasting from templates, which can lead to missing problematic language or misplacing important sections. AI is highly advantageous in reducing costs and mistakes that result from human error.
Some programs furnish businesses with the ability to define which specific clauses they will accept, reject or require. That means when a new contract is uploaded and reviewed through the software, it will automatically flag any missing clauses or problematic language that requires further review.
AI-Driven tools can also standardize certain provisions and ensure language is consistent across contracts and that language is flagged for updates when legal policies or standards change.
Looking Forward: The Future Potential of Contract Management AI Tools
As technology continues to rapidly advance, so does the potential for AI-driven contract management and procurement tools. The use of AI as it evolves will ensure workflows and team throughputs are operating at an optimal level (and preventing costly errors). While no tool will ever be able to completely replace contract professionals, these programs will help legal and procurement teams maximize their efficacy and focus their efforts on reducing costs, optimizing negotiations and driving revenue in lieu of spending hours upon hours reviewing contract language.
