Traditional Contract Lifecycle Management (CLM) software empowers companies to be more efficient, but contract analytics adds a new dimension. It offers powerful insights that help organizations to reduce contract cycle times, identify and manage risk more effectively, improve business decisions, track contract renewals and expirations more efficiently, identify new revenue opportunities, and build upon the organization’s past successes. Icertis Contract Intelligence (ICI) goes beyond merely managing the contracting process – it helps business users to identify and take advantage of new opportunities for creating business value by using AI technology to structure contract data and uncover compelling new insights.
Contract Lifecycle Management (CLM) software promises to increase efficiency and improve control over the contracting process, from the initial agreement through renewal and termination. Today’s AI and machine learning technology opens up new opportunities for contract management, transforming CLM into a value-enhancing investment. Icertis Contract Intelligence incorporates contract analytics to help companies improve vendor performance, evaluate and manage risk more effectively, and accelerate revenue.
What is contract analytics?
As the name suggests, contract analytics uses advanced software technology to extract meaningful information from legal agreements using artificial intelligence (AI). Using natural language processing (NLP), contract analytics parses the language embedded within legal agreements, shedding new light on the salient details that can drive better business performance.
With contract analytics, business users can gain a better understanding of the things that matter most – whether it’s the performance standards that vendors have agreed to adhere to, material risks associated with potential adverse events, the likelihood of default across a portfolio of contracts, or the impact of pending regulatory changes. In short, contract analytics offers a meaningful view of a company’s overall legal obligations and entitlements across its entire portfolio of legal agreements. That enables business users to make better decisions backed by real-world data.
The benefits of contract analytics
Contracts provide the foundation for virtually every modern business relationship. Traditionally, the prospect of understanding the detailed risks, benefits, and obligations of an organization’s contracts has been an imprecise and very detail-oriented undertaking. To understand the company’s risk exposure, for example, attorneys and risk management professionals would need to delve into the details of key contracts, make judgments as to the company’s exposure under each one, and pull together a summary analysis.
Contract analytics is a game changer insofar as it performs a more thorough assessment with minimal human intervention. Here are some of the specific benefits that contract analytics can provide:
Track expiration and renewal dates
Historically, most businesses have relied on manual processes to track contract expiration dates and milestones. If the company is entitled to renew an important contract at or near the end of its expiration, there may be important reasons to take advantage of that window of opportunity. In these cases, an organization could incur significant costs or be subject to further obligations if compelled to renegotiate.
Likewise, automatic renewals may be problematic in the event the company wishes to terminate a business relationship to save money or free itself from obligations stipulated by an existing contract.
Many companies continue to use manual spreadsheet-based systems to monitor contract dates and milestones. Unfortunately, spreadsheets are often prone to problems. Typographical errors, incorrect or misplaced formulas, or simple errors of omission result in important notifications falling through the cracks.
Contract analytics ensures that expiration and renewal dates are captured automatically for every contract the company oversees. As key dates approach, CLM software pushes notifications to the appropriate personnel using predefined workflows, ensuring that important milestones are never overlooked. That gives business users ample time to review all the relevant information and to take effective action promptly.
In an uncertain world, risk management has become more critical than ever. The most successful companies accept that risk is inevitable – but they monitor potential hazards carefully and constantly.
If a key vendor encounters financial difficulties, if important customers default on their obligations, or if external circumstances cast doubt on a trading partner’s ability to follow through on their commitments – it’s important that key decision-makers be made aware of any potential risks as early as possible. That includes understanding the likelihood of such risks, and their potential impact.
Contract analytics provide increased visibility to meaningful risk factors. But, perhaps just as importantly, they provide timely notification, empowering decision-makers to act quickly in the event that risk mitigation measures may be necessary.
Increased visibility to risk is also vital for regulatory compliance. Contract intelligence makes it possible to respond quickly when regulators request information or when legislative or regulatory changes occur. Contract analytics supports the rapid and efficient response to compliance requirements. The Sarbanes-Oxley Act, for example, requires companies to provide evidence of adequate internal controls. The best CLM software makes it easy to get that information quickly.
Improved decision making
Successful contract negotiation requires experience. Unfortunately, even the best negotiators may fail to identify important details until it’s too late. Contract analytics don’t replace human judgment, of course – but they can highlight issues that may pose potential legal or financial risks. In doing so, they provide decision-makers throughout the organization with a valuable advantage.
Contract analytics goes beyond simply reporting what is supposed to happen, giving you insights into what is actually taking place in your biz relationships. By bringing together contractual data with financial information, you can be alerted to situations in which contract terms are not being followed. For example, if off-contract buying is occurring, that can lead to inflated costs, inconsistencies, and violations of contractual terms regarding exclusivity. Contract analytics provides valuable insights that enable your users to respond quickly and decisively.
Use data to build on past success
AI can be very effective at discovering the factors that correlate with success or failure. By collecting and analyzing the contents of legal agreements at scale, contract analytics reveals the elements that drive business value, as well as those that may erode value.
When learning from experience, most organizations rely upon their veteran employees, who typically carry this kind of knowledge around in their heads. Documenting that information or passing along to newer employees can take time and effort. When a company’s most experienced employees walk out the door, that vital knowledge generally goes with them.
Contract analytics offers insights to aid decision-makers throughout your organization, regardless of their experience level. Moreover, because AI can ingest and analyze information at scale, those insights reflect lessons extracted from a broader range of real-world outcomes.
Identify revenue opportunities
As contracts reach their expiration or renewal dates, it’s essential that key decision-makers be aware of the implications concerning revenue and expenses. Contract analytics provide powerful insights to inform business users of the impact of renewals or non-renewals on the bottom line.
With advanced analytics, companies can efficiently and effectively analyze the opportunities that lie ahead. Not only does that help with accurate forecasting and performance management – it also empowers negotiators to make the best possible decisions as they formulate new legal agreements with trading partners.
Reduce contract cycle times
In many organizations, sales teams frequently complain of the delays inherent in complex negotiations, including the laborious process of hammering out contractual details. Companies that can move such negotiations forward quickly tend to be far more competitive than their slower, less agile counterparts. These processes are often plagued by non-productive work delays, leading to slower revenue recognition and potentially even lost deals.
CLM software automates and streamlines the contract negotiation process, keeping track of proposed changes and approvals. A clear audit trail ensures that all parties have a clear record of what has changed, who proposed each edit, who approved it, and when. Automated workflows accelerate the process with proactive notifications that clarify who is responsible for taking the next steps.
A key benefit of automation is the acceleration of sales revenue – but other areas of the business also stand to gain from it. Organizations that can move quickly and decisively in our highly competitive global economy will continue to be a distinct advantage over their slower, less agile counterparts.
Companies that want a competitive edge can achieve a wide range of benefits by using contract analytics software. To achieve greater agility and maximize the value of your business relationships, put contract analytics to work in your organization.
The Icertis Contract Intelligence (ICI) platform uses contract analytics to help companies of all sizes uncover valuable business insights at scale and empower users to realize the maximum potential inherent in their legal agreements. If you'd like to discuss our platform with a specialist, reach out to Icertis today to schedule a free, no-obligation consultation with one of our contract intelligence experts.