How to deliver better business outcomes with AI-powered contract management
It’s no secret that efficiency is key to a strong in-house legal function. However, with more than half of corporate legal departments perceived as roadblocks which slow businesses down (ACC 2023 Legal Technology Report for In-house Legal Professionals) there’s still work to be done.
Fortunately, the way that we think about productivity within the legal landscape is changing – and any serious conversation about optimizing efficiency is now likely to include consideration of AI. However, under the pressure of tight budgets, and with a rapidly increasing number of sophisticated AI products on the market, it can be tough to know where to begin your journey.
Read on to learn why and how introducing simple and practical AI-powered contract management tools into your legal function can unlock efficiency wins and better outcomes for your business – without unnecessary complexity, cost, or risk.
Why start with AI-powered contract management?
For any legal team looking to dip their toes into AI for the first time, contract management is the obvious place to start. Because it works by identifying patterns in large datasets, machine learning is perfectly suited to the density of contract workflows – and with Gartner predicting that a quarter of first draft contracts in corporate legal functions will be AI-generated by 2026, this is an area ripe with potential.
As a central point of workflow between legal and the rest of the organization, contract lifecycle management is also key to the overall efficiency of your in-house legal function. Whether you’re a multinational or a more modestly sized operation, it’s likely that you process large volumes of contracts every year – and holding up the progression of deals will always mean taking a hit to your revenue stream.
While inefficient contract management can come with hefty legal and financial risks, significant opportunities lie on the flip side. According to the aforementioned ACC report, Contract Lifecycle Management systems (CLMs) are consistently rated as the most effective form of technology for legal teams looking to optimize their workflows – and automation is a key driver behind their rising popularity.
With respondents in the ACC report citing the ability to automate contract requests and use AI tools to streamline the contract review process as among the top reasons behind their satisfaction with their wider CLM systems, it’s clear that AI is becoming a compelling reason to invest in contract management technology. The question, simply, is where to begin.
AI-powered contract management – key considerations
Contract AI tools present a significant opportunity to enhance not only your legal contract lifecycle, but also wider outcomes across your business – as long as your technology fulfills some essential requirements. If you are on the hunt for an AI-powered contract management solution, here are several key considerations:
Practicality and ease of use
When investing in contract AI tools for the first time, practicality and ease of use are everything. While the most sophisticated and complex AI solutions can look tempting, the reality is that few small to medium sized businesses have the time, money or expertise required to adopt and use these systems – and even fewer actually have a business need for their advanced capabilities.
Starting out with well-established, simple and practical contract AI features – which we’ll dive into later on – is a sure-fire way to unlock measurable benefits for your business from the outset without unnecessary time or cost. This approach will give you a foundation which can be built on further down the line as AI technologies evolve.
Security
Contract AI systems rely on collecting and processing large amounts of data. When choosing an AI-powered contract management solution, it’s critical to ensure that the technology aligns with your internal security policies and meets external regulatory requirements to avoid putting your business at risk.
For the most sustainable and robust level of data protection, it’s worth considering investing in a solution which handles other elements of your legal workflows (such as matter management and spend management) alongside your contracts. With 34 percent of respondents in The 2023 In-House Legal Technology Report flagging information security as the biggest pain point inherent in point solutions, the heightened data risks which come with joining the dots between systems can be avoided by simply managing everything in one place – for example, through a comprehensive legal workspace.
Once you’ve invested in a solution which is practical, easy to use, and secure, it’s time to put it to work so you can start to realize its impact.
How AI-powered contact management delivers better business outcomes
Here’s how AI-powered contract management can help you deliver better business outcomes for your organization:
Accelerate contract cycle times
From drafting, review and negotiation to approval and execution, the contract lifecycle is a multi-stage process – and each must be worked through with care to ensure that key deals achieve their commercial objectives. The more streamlined this lifecycle becomes, the faster contracts which are critical to your wider business can be executed.
If your CLM includes an AI-powered contract data extraction tool, this can be used to quickly identify contentious or high-risk clauses during the review stage without wasting time trawling through pages of standard terms. Any queries or sticking points which remain can also be addressed quickly if you can take advantage of an AI contract assistant functionality. This can be used to answer technical queries about detailed clauses, or to generate a useful summary of the contract itself if required.
Use of these simple AI-powered tools facilitates smoother collaboration with internal and external stakeholders, which in turn accelerates the contract lifecycle, ultimately getting contracts through to completion more efficiently. When utilized as part of a legal workspace solution like LawVu, the impact on turnaround can be dramatic.
“In paying attention to the usage data in LawVu, we’ve reduced our contract review response time by five days. We were at 15 to 20 days from sending it to resolution. Now we’re telling people it’s 10 to 15 business days to get a contract through the lifecycle. That’s awesome.” – Scott Millea, Associate Counsel, Northern Tool
Strengthen data-driven decision making
When it comes to decision making, your ability to make the right call is only as strong as the data that you have at hand. The more historical data you have at your disposal from your contracts, the easier it becomes to identify and report on trends and identify areas for improvement.
If your CLM has an AI-powered bulk upload feature, this can allow you to import legacy contracts into your system, creating a rich data repository and single source of record from day one. This can be drawn upon from the outset to inform strategic decision making.
When it comes to the review or post-execution stage of a contract, AI-powered contract extraction can also be instrumental in building up your repository, giving immediate visibility into key dates, parties, and termination clauses which will be crucial to ensuring that your team meets their contractual obligations in the future. If your AI-powered contract extraction allows you to customize each AI extraction field, you’ll be able to access the information you need even faster.
Reduce business risk
As the nucleus of your commercial relationships, your contracts are a potent source of vulnerability to financial and legal risk. No matter how many times you check and double check, that one missed detail in a clause can cost your business big – whether it comes in the form of penalties for breach of contract, jeopardizing stakeholder relations, or compromising lucrative deals.
A lot of these risks can be alleviated with the assistance of contract AI tools. For example, an AI bulk upload functionality allows you to automatically gather all of your contracts together in one place, eliminating the risks inherent in manual data entry and in storing contracts across different systems from the outset of the contract lifecycle.
AI data extraction lets you understand the content of your contractual documents quickly, putting you in a stronger position to assess the risk factor of the deal in question. And the reduction in time spent on manual revisions prevents procedural bottlenecks which can otherwise result in lost revenue for the business.
More time for strategic work
It’s one thing to improve the efficiency of your contract lifecycle – but it’s what you do with the time gained as a result which can really make all the difference to your business.
Whether it’s thanks to time saved reviewing complex or unfamiliar contracts with the help of AI-powered contract data extraction, or efficiencies gained from importing legacy contracts via AI-powered bulk upload, every minute saved on manual input to your contract workflow is time which can then be better spent on higher-value, strategic work.
Finally, the elimination of all of these small but significant inefficiencies within your daily contract work (or, in other words, your legal waste) can have a surprisingly high knock-on effect on the cost of your legal function. Every minute saved adds up to quantifiable savings for your legal team – as well as your business’s bottom line.
Enhance the reputation of legal
For in-house legal teams that are successfully utilizing simple AI-powered contract management tools, the cumulative effect of all of the above factors will begin to create a legal function which is integral to keeping the business moving efficiently.
Unlocking quicker cycle times, freeing up capacity for strategic thinking and risk mitigation, and developing a robust data repository all allow your legal team to have real impact on the business and to showcase the value of what you do – as well as positioning your team to be taken seriously when it comes to resourcing and strategy decisions.
Ready to learn more about AI-powered contract management?
When you consider the myriad of proven benefits that contract AI can bring to the legal function, it’s clear that smart use of these tools has the potential to make legal the hero of your business. By sticking to simple practical features, you can unlock big wins without compromising on risk.
Learn more about how AI-powered contract management can help optimize the efficiency of your legal function and deliver better outcomes across your organization here. Or, if you’re keen to see LawVu’s AI-powered contract management in action, click here to book a demo.