A company’s value is the sum of its contracts. They establish the terms and conditions under which the company interacts with customers, suppliers, and other stakeholders. With our current period of economic uncertainty, every penny counts more than ever. Yet, companies routinely fail to enforce the terms of their contracts after they’ve been signed, leaving obligations unfulfilled and revenue uncollected.
Why? Because it’s difficult to keep track of the details of every contract when you’re managing hundreds, or potentially thousands, of legal documents.
Difficult for humans, that is.
This is where Artificial intelligence (AI) tools come into play, as they can instantly read, organize, and surface data from contracts. More importantly, they ensure contract terms are enforced, flagging any unfulfilled obligations and risks of losing revenue.
Considering the substantial value that contracts offer a company, it's essential for businesses to utilize the cutting-edge technology at their disposal. Leveraging AI tools can empower your company to extract more value from your contracts — a critical benefit during periods of economic uncertainty.
Why legal teams have been slow to embrace digital transformation and adopt AI
Legal departments have fallen behind as digital transformation has swept through sales, marketing, finance, and other divisions. In fact, word processing programs remain the dominant tool that most legal professionals use daily, and some enterprises still rely on paper contracts.
The complexity, specificity, and critical nature of legal documents have made decision-makers hesitant to adopt — and fund — digital transformation tools for their internal legal teams. In addition, the sheer volume of contracts that enterprises handle makes digitization a complicated, time-consuming effort. So, it’s understandable why organizations often delay these initiatives in favor of time-sensitive priorities.
But organizations are doing themselves a disservice by undervaluing the critical role legal contracts play in business outcomes. Because at the end of the day, legal documents are business documents. Failing to structure and organize them in a way that supports strategic outcomes risks exacerbating inefficiencies and ultimately prevents organizations from achieving results.
How AI can help your contracts work harder for your bottom line
Over the past five years, we’ve seen a greater urgency to streamline contract generation and management in parallel with advancements in AI technology. Businesses that postpone digital transformation in their legal departments risk further exacerbating inefficiencies, like lengthy contract negotiations that drag out the sales process and delay revenue collection.
Many legal departments simply file finalized contracts for later reference. But AI tools can read and interpret the unstructured data (i.e., words) found in legal documents via natural language processing (NLP) algorithms. So, it’s now possible to quickly scan thousands of documents to extract and analyze relevant data to power decision-making.
Operationalizing your contracts with AI technology enables you to:
Close deals faster
AI tools expedite the sales timeline by analyzing similar existing agreements to create contracts that are more likely to be accepted by both parties. Think of it as starting just inches — instead of yards — from the finish line.
In addition, you can save valuable time by using AI to determine whether minor differences in wording or formatting are inconsequential (and should be accepted without delay) or significant enough to warrant pushback.
The same goes for contract revisions: It can take a lawyer a week or more to review each version of a legal document. But AI-powered technology can speed up the process by reading a contract and flagging areas that require human review in minutes.
Ensure compliance
AI can track and monitor the performance of contracts over time, alerting you to potential issues or changes in terms and conditions — as well as opportunities to recover uncollected revenue in the form of late fees and penalties.
This enables you to stay on top of your legal obligations to clients while ensuring compliance with laws and regulations.
Surface insights
AI algorithms can extract data and identify patterns from thousands of complex and variable contracts based on elements like pricing, delivery dates, and liability clauses. With access to comprehensive contractual insights, you can make informed business decisions based on long-term trends and identify risks or opportunities for negotiation.
For example, AI-powered technology can identify contractual details like automatic renewals to keep you updated on the status of your contracts so you’re never caught off guard. As a result, you can avoid getting stuck in legal agreements that no longer align with your business interests.
Demonstrate value
AI-powered contract management tools make it easier to track the volume and types of projects the legal department is working on at any moment. This enables your legal team to create benchmarks demonstrating the value legal delivers to the organization.
Additionally, supported by the accurate real-time data surfaced by AI, the general counsel and C-suite1 can work together to ensure your legal team is adequately staffed and resourced.
Now is the time to invest in digital transformation for your legal department
Getting up and running with AI takes a little time. But it’s important to start now so you can begin uncovering data-driven insights sooner — and the good news is that you don’t have to wait until the AI solution is fully implemented to start seeing results. You can begin by automating less complex or routine contracts and gradually scale from there as time and resources allow.
During periods of economic uncertainty, every company is looking for opportunities to drive efficiencies. AI can help your legal team identify these opportunities and increase its contribution to the organization’s bottom line.
END NOTE
- C-Suite “or C-level, is widely-used vernacular describing the upper echelons of a corporation's senior executives and managers.” Source: Investopedia article titled, What is C-Suite?
ABOUT THE AUTHOR
Anurag’s strengths include driving technology and business transformations that drive positive ROI. He thrives on aligning technology, processes, and people to bridge gaps and improve the bottom-line. As a recognized leader and influential executive, he motivates teams to achieve optimal performance and secure buy-in to move critical initiatives forward.
ABOUT ContractPodAi
We believe that Victory Loves Preparation is the bedrock truth of the legal profession. At ContractPodAi pushes the boundaries of what is possible in legal tech, helping in-house legal teams to be ready for anything. They’ve been the recognized leader for over a decade, having re-invented how Contract Lifecycle Management (CLM) solutions are priced, delivered, and supported.
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