With contracts acting as the lifeblood for most organizations, it should come as now surprise that they are finally starting to receive the love and attention they require to truly shine. In the past, contracts have been treated as a formality, merely a document to sign and store away, never to be considered again. But locked within those countless documents is a wealth of information pertaining to an organization’s business practices, history, processes, revenue, potential, and so much more. The path to uncover this vital information involves a process known as contract analysis.
Contract analysis involves extracting and tracking data from your organization’s contracts in order to gain better insight on how you do business as well as areas that may be improved. For companies with thousands of documents, this may seem like an overwhelming process to undertake. And, truth be told, when performed manually with employees wading through stacks of documents just to find one small piece of information? It is indeed quite cumbersome. However, with the growth of AI and contract lifecycle management (CLM) technology solutions, contract analysis is slowly becoming more and more user friendly. In this article, we will explore a few of the benefits of utilizing contract analysis while also investigating how it may differ from something like eDiscovery.
Benefits of Contract Analysis
Though there are numerous benefits to contract analysis which often vary across different fields of business, three of the most relevant benefits for any organization are extracting data, saving resources, and producing the best versions of your contracts and contracting processes. These three benefits alone can greatly improve both the quality of life for employees at your company as well as the business experience for all clients, partners, and vendors involved.
Most CLM tools offer your organization the ability to create a contract database where all contracts can live together, from legacy agreements to fresh drafts from yesterday. With all this data in one place, it then becomes possible to search through the heaps of information buried within these contracts via contract AI. Whether it’s dates, payment information, client names, or any other feature of a contract, your contract AI will be able to sift through thousands of past and current contracts in order to quickly pull up any that are relevant to your search, essentially performing your contract analysis for you.
Having access to the data that contract analysis pulls allows you to better understand how your processes move and what areas may need improvement. For example, reviewing the dates between the start of negotiations and the actual contract signing will give you an idea of exactly how long your average contract lifecycle is. With that in mind, you can then begin to analyze the individual phases of the lifecycle in order to determine where the hiccups occur and where communication becomes convoluted. Backed by the power of contract data, you can renovate your processes into a well-oiled efficiency machine without sacrificing the quality of your contracts.
Some of the biggest hindrances to workflow and fast timelines are tedious tasks and miscommunications. Contract analysis may provide solutions to both of these time-wasting factors. Tedious tasks like tracking deadlines or searching and replacing certain clauses that need to be changed can be easily automated via your CLM solution. In fact, perhaps one of the most helpful aspects of a contract analysis tool is its ability to track and anticipate deadlines and contract renewals. Missing deadlines can slow down the timeline of a contract immensely and also harm a business’s reputation. An AI-driven tool may be able to provide you with automatic reminders to keep employees focused on the most important tasks. It can also anticipate contract renewal dates so that team members can be proactive about reaching out to customers or vendors to inquire about any changes or updates that need to be made, bettering customer experience and hopefully bringing in more revenue.
Additionally, more time on the hands of your internal employees reduces the amount of outside resources needed to complete tasks. For example, you may be able to avoid outsourcing for more counsel, drastically reducing legal costs by utilizing your own legal team who now have more time on their hands thanks to your CLM solution. You can also circumvent any fees that you would typically pay in the way of eDiscovery services when handling a legal case. As we will discuss later, contract analysis provides you with the ability to search through your own documents and extract the required data without needing to consult a team of legal experts.
Since CLM tools are able to archive a huge amount of data from past contracts, the power of contract analysis allows you to tap into that data in order to learn about your organization’s contracts and identify patterns that make the creation of future contracts much easier. Your AI may hone in on a particular part of a new contract that is in the process of being written and suggest possible clauses for that section based on past contracts of a similar nature. This helps with the creation of templates as well, which can be used to quickly generate new contracts that can move into the revision and negotiation stages much faster.
Writing contracts with the data from past contracts in mind creates three major advantages for your company: speed, unification, and accuracy. With the suggested clauses and templates based on past successful clauses, you can create contracts much faster than if they were all individually crafted for each new business relationship. Unifying the language of your contracts via these suggested clauses is also quite helpful for ensuring that each and every contract meets the quality standards set forth by your organization. And, with the standardization of language comes less mistakes, such as missing or misplaced clauses, which can be a huge hazard when it comes to risk management.
Contract Analysis vs. eDiscovery
Contract analysis sounds pretty great, right? But how does it compare to eDiscovery? Essentially, a large part of eDiscovery involves putting your contract analysis in the hands of a third party, like a law firm or a specialist review group. They will handle the collection, review, and preservation of any data relevant to a current legal case or need. While convenient, a service like this can be quite costly, and saving resources in any capacity is always best practice for most companies.
With a CLM solution in place for your organization, AI systems will perform a huge amount of contract analysis for you by quickly locating and extracting any data relevant to a search input. This data can then be put to use by employees handling the current case without the need for unnecessary interference or resource wasting from third parties. Contract analysis and CLM tools empower you to take control of your own data and use it to fuel the best version of your business and your contracts.