Contracts are the lifeblood of a business, yet very few companies know how to manage them well.
In fact, inefficient CLM processes cost businesses up to 9% of annual revenue, according to IACCM. Why? Because legal teams are either notusing their existing CLM platforms to their full potential, or worse, managing contracts manually.
But now, there’s a way to automate the entire contract lifecycle so you can protect your time and your money: AI-based CLM software.
Here are three ways AI-based CLM software resolves contract management inefficiencies:
Reduce Compliance and Financial Risk
The more contracts you have in flight, the easier it gets to miss renewal dates, fee increases, or compliance terms with serious financial consequences.
Facebook, for example, saw an immediate stock price plunge, boycotts, and a hefty $5 billion FTC fine after it failed to detect a contract violation by Cambridge Analytica in 2013. This may be an extreme example, but contracts are still the leading cause of commercial legal disputes — which is more than enough to justify the need for better CLM practices.
Unlike traditional CLM platforms, AI-based CLM software allows you to monitor contracts at scale, even after they’re executed, to mitigate revenue leakage or compliance risks.
Here’s how it works:
- Optical character recognition (OCR) converts lengthy contract PDFs into searchable text.
- Machine learning for natural language processing (NLP) uses statistical techniques to predict the locations of important information within contracts.
- Machine learning models scan contracts to recognize and extract metadata — like terms, dates, and clauses — that matter most to your business.
- Contracts are stored in a searchable repository, where you can search for clauses like Indemnification, Limitation of Liability, and Force Majeure to understand what you’ve committed to, and the potential impact they may have if issues arise.
With intelligent CLM platforms, you can also set values for favorable vs. unfavorable terms to avoid blindly agreeing to something that doesn’t make sense for your business.
For example, if you choose Florida law to govern your contracts, but a contract creator tries to change it to California, it will notify the creator and require an additional approval. The final reviewer will then be able to approve, deny, or negotiate more favorable terms with the other party.
Worried that the other party slipped in language without you knowing? AI-based CLM software helps with that, too: When you receive a new contract version, the system will compare it with the previous version to identify any language changes, sparing you hours of having to read it line-by-line.
Be Proactive About Finances
Contracts, even ones with all the correct terms and conditions and whose execution goes seamlessly, are expensive. Managing, negotiating, executing, and analyzing contracts requires a lot of time, money, and additional resources.
AI-based CLM software not only saves you money by cutting the length of this contracting process in half, but also by providing insights on cash flow.
For example, if you need to bring in cash more consistently, you can sort which contracts have longer payment terms — like payment terms of 90 days — and set reminders to renegotiate shorter payment terms when the contract is up for renewal. Or, if you’re spending too much on late fees, you can identify which contracts charge late payment penalties and adjust your payment schedule.
Manually tracking contracts also puts you at risk for auto-renewing unnecessary contracts or disrupting services, both of which can be costly mistakes. Intelligent CLM platforms, on the other hand, send automatic email reminders and show contract deadlines on your dashboard, so you can be proactive about renewals and track your financial obligations across the board.
Streamline Your Contract Management Processes
It takes, on average, 20-30 days for a company to create, negotiate and finalize a contract. But with an AI-based CLM platform, you can finalize contracts even faster.
For starters, intelligent CLM software gives you a holistic view of which contracts are getting drafted, in negotiation, awaiting approval, or awaiting signatures. You can also investigate stalled contracts, or contracts that aren’t completed within a certain timeframe, to identify potential bottlenecks. Do you have several agreements stuck in the awaiting approval stage? You may need to lighten your team’s workload or assign additional approvers.
Additionally, having a cloud-based CLM platform means you can manage the entire lifecycle of contracts from anywhere, anytime without sacrificing compliance. Even better? You won’t ever have to question data integrity or validity because the CLM platform is your single source of truth for contract history. And instead of sifting through thousands of emails to find contract history, you can add comments, attachments, and relevant notes for future negotiations.
These CLM platforms also provide self-service capabilities so legal teams can focus on more impactful work, not busy work. IntelAgree, for example, uses a self-service contract creation wizard to quickly generate new contracts and requests. The contract creator simply has to answer a series of questions approved by the legal team, and the answers will automatically be entered into the contract. If the contract creator tries to add non-standard terms, the favorability ratings will be triggered and an approval will be required. The platform also has flexible user permissions, so you can either give more team members access to create routine agreements — like NDAs — or keep it tightly controlled by legal.
The Bottom Line
Not all CLM platforms are created equal; many have limited functionality, and most lack granular search capabilities. But AI-based CLMs, like IntelAgree, provide workflow automation and a searchable repository so you can shift from painful to profitable contract management.
Want to see IntelAgree in action? Schedule a demo today to see how IntelAgree can help you streamline your entire contract management process.