What is AI for Contract Management?
The power to generate and review contracts instantaneously by learning from existing documents has been a seismic shift in many industries, and the legal department is no exception. Artificial Intelligence (AI) can automate the entire contract review process to achieve pitch-perfect optimization and remove the tedious and repetitive grunt work that used to take the time of so many employees.
The world today is a world of data. To process all of it, the world is more reliant on AI than ever. But the legal field has been slow in leveraging AI to handle complex problems like contracts.
Despite the numerous benefits, legal teams have been reluctant to use AI for contract management for fear of losing control, or getting less-precise language than they used to write.
Naturally, trusting machine algorithms with sophisticated legal work takes a little time to get used to.
Now AI-driven contract management has progressed to a point where this concern is easily put to rest. AI is rapidly being adopted across industries, and it is drastically changing the world of digital contracting.
AI uses machine learning (ML) and natural language processing (NLP) to mimic human processes and learn on its own. You can train your AI-powered contract lifecycle management (CLM) tools to:
- Build standardized templates, streamlining the contract creation process
- Analyze data to identify risks, costs, and abnormalities, using NLP to determine the contract type
- Automatically send specific contracts to relevant legal bodies for review, and once approved, get a notification saying they’re ready
- Set reminders for contract expiration and renewal dates so that you never forget them again
- Automatically locate problematic clauses within contracts to allow you to resolve all issues before sending them out
How AI is changing contracts
Contract management for AI has far more potential than just monitoring and reminders. Ironclad’s AI allows you to draft contracts in a completely automated, hands-off fashion by handing all the nitty-gritty over to the AI, allowing you to focus on the important stuff. Contracts powered by AI are far more efficient in every aspect, making for a better experience for you, your clients, and every party involved.
Over the past few years, Ironclad has pioneered artificial intelligence in the field of contract lifecycle management. Working with partners across many industries – including a unique partnership with OpenAI – we’re innovating the way contracts are handled.
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The idea of a machine doing your job is never comfortable – especially when the machine is as powerful as artificial intelligence. But frankly, contract management AI is not so much a replacement for legal teams as tools to be used by them. The advent of AI doesn’t necessarily mean that companies will need fewer lawyers, it simply means that their roles will transform to be less mundane.
Pre-AI, a highly-trained lawyer would spend valuable time doing grammar checks and proofreading standard clauses. Letting the AI handle the boring stuff frees up human resources for higher-level work such as risk assessment and document refactoring. Lawyers can spend their time shaping legal strategies to tackle complex contract problems for higher-priority transactions, improving the firm’s productivity.
Therefore, AI contract management systems can act as tools to focus and heighten the impact of a legal team — it doesn’t mean that they’re being replaced. Incorporating AI for contract management means that you get greater impact and reach for the same resource expenditure, vastly increasing your firm’s productivity.
Benefits of AI for contract management
Aside from relieving you of some of the most boring paperwork associated with your job, AI has a host of other benefits that can transform the look and feel of your contract management system.
AI for contract management brings efficiency back into your organization’s contract workflow. Here are just some of the things they can allow you to do:
- Automate compliance. Contract regulations constantly evolve, making it difficult to manage everything manually. AI can streamline compliance tasks to effectively assist in risk management. Ensure your CLM vendor uses proper encryption to protect sensitive contract data.
- Shrink contract cycle times. Artificial intelligence in contracts can reduce time spent on the entire document lifecycle, from drafting to the review process. Eliminate errors while boosting efficiency.
- Save money. Mistakes can be costly. Your contract management solution will save you money by allowing fewer contract mistakes to slip by.
- Manage large datasets. AI-based CLM tools can analyze big data to recognize patterns, identify anomalies, and optimize business processes.
- Eliminate the most repetitive tasks. Contract development is repetitive by nature, but AI-based tools can handle tasks like information retrieval so you’re free to complete other work.
- Relieve administrative work while boosting organizational efficiency. Lawyers can spend an inordinate amount of time on administrative tasks like drafting and reviewing contracts. AI can remove some of those tasks from your roster.
- Optimize finances. AI-powered contracts streamline workflows to ensure your team is working on the most relevant contracts, effectively reducing payment turnaround.
The rapidly changing world of contract management has made it clear that AI is here to stay. As AI for contract management evolves and incorporates algorithms and analytics where highlighters and fax machines used to be, the process itself must change with the time. Gone are the days when every contract took dozens of labor-hours to draft, review, and review again.
What makes AI so well-suited to revolutionize contracts
Research has found that AI can outperform humans at contract review – and that’s the way it should be.
AI for contract management provides an option that’s better for everyone involved, creates value out of nothing, reduces headaches, and wipes out an incredible amount of inefficiency from the system – is there really a good reason not to use it?
AI for contract management is changing the world of contracting in three major ways: changing the tech stack lawyers use for contracts, changing the contracts themselves, and magnifying the evolution of standards in the industry.
Extending Automated Capabilities
While contract management software has been part of the legal ecosystem for years, it’s usually extremely limited in the scope of its functions. AI-powered contract management takes it further, expanding your contract management capabilities.
Ironclad can, for example, identify and categorize types of contracts from your database into groups based on type and function. It uses pattern-matching algorithms that identify subtle markers and structures in the document to accomplish this industry-leading feat.
You can draft new contracts using existing documents as templates, make predictions based on data within existing contracts, or set up alerts for possible opportunities to renew or re-contract for benefits. AI for contract management makes life easier by placing the management of thousands of contracts in a simple, accessible interface.
Better insights and analysis for decision-making
Contracts powered by AI are easier to read, easier to make, and easier to manage. A single piece of software can now keep track of a billion contracts, parsing them for important technicalities and bookmarking important clauses and dates, and freeing up valuable legal talent for more important work.
AI is changing how contracts are handled by making it easy to perform previously unfeasible analysis, especially in companies with many contracts to process and manage. At the drop of a hat, you can use your AI system to assess risk in your contracts. The system can compare previous patterns and historical data to identify clauses which could be improved and tightened to benefit the client (and the firm), giving you greater control and precision than ever before.
AI is an effective solution for contract management because it lets you do in seconds what would take a team of associates a week. It’s very easy for an AI to mine every ounce of meaningful data from a given database of contracts.
AI contract management is able to deliver the same amount of control a legal team could, with infinitely more power and a great deal more flexibility. AI doesn’t restrict the control you have over your contracts. Instead, AI for contract management increases your productivity by allowing you to find and assess key points in contracts at a second’s notice.
Facilitating Comparisons Among Standards And Analyzing Historical Clauses
A major (if somewhat predictable) benefit of the proliferation of AI for contract management is the standardization of complicated contracts across the industry. AI contract management systems use algorithms to search vast databases for similar and templatized contracts over the past decades. This allows contracts to be standardized to a far greater degree than they have been in the past.
AI technology has been getting better and better at using analytics to identify terms that are too vague, or wording that doesn’t seem exact enough, in an effort to help businesses make the best deal possible. As contracts become more and more AI-based, it’s expected that they’ll become centered around highly routinized, standard-template-based contracts. These could be modified only where needed to suit individual needs and tailored by lawyers with the help of powerful machines.
These analytic abilities mimic the highly-developed skills of lawyers and legal associates who learn to parse documents efficiently and improve on them. Using AI, small, agile teams of lawyers can command vast amounts of contracts and take action on them without having to sacrifice other duties.
This model – handing the due diligence and busy work over to the algorithms but keeping the critical creative work for the people – is the blend of man and machine that keeps you flexible for any client’s needs.
Using an AI service for your contract management will save you lots of time and will help your talent do the jobs you actually want them to be doing. In addition, it can prevent losses and missed opportunities that were overlooked due to human error.
Tips for deploying your AI contract management solution
Imagine a technology that could review the clauses in an NDA for risks in a matter of seconds with nearly perfect accuracy. That’s what AI-powered contract management can do for your team. But it’s not enough to set it loose on all of your time-consuming tasks and hope for results. To fully benefit from AI for contract management, you’ll need a clearly defined implementation plan.
Consider taking these steps before putting a new AI contract management system into effect:
- Assess. Check your current contract management systems, whether manual or automated, and determine where you need improvements.
- Develop an implementation proposal. An AI contract management system will affect everyone in your company, from the lawyers to the accountants. Create a proposal to get the senior leadership on board with implementation, and remember to include internal business associates.
- Build an implementation strategy. It’s crucial to define clear goals whenever your team is switching to any new technological system, AI contract management included. Having a clear strategy will help everyone adopt the new systems with greater ease.
- Choose software. Find contract management software, like Ironclad, and stick with it. Your AI algorithms need time to learn, so resist the temptation to jump ship when the results aren’t as fast as you expected.
- Maintain your systems. Be sure to include a maintenance plan to ensure your AI-based contract management system operates at maximum efficiency.
- Provide training. Make sure every member of your team knows how to use AI-powered contracts within your new system. They should feel confident using the new contract execution processes. Your AI solution works best if everyone is on the same page.
Define a clear scope ahead of time to make sure you intentionally execute your AI-powered system to the fullest. Make sure the knowledge on how to use the system is widely available to maximize the benefits you’ll see after implementation.
Choose the leader in AI contract management
When there are so many AI-powered contract management systems to choose from, all of which promise that they’re the next big thing, it’s important to remember that not all AIs are trained equal.
Ironclad is an industry leader and has been recognized repeatedly as the best AI CLM on the market. Leading investors like Sequoia, Bond, Accel, Y Combinator, Lux, and Emergence, have seen the future – and it’s got Ironclad written all over it.
We use superior AI technology to offer a contract lifecycle management solution that’s years ahead of the rest, providing a real, measurable impact on how teams conduct business.