What is Contract Data Extraction? How to Automate it with AI?

Introduction

Legal must ensure that the company remains protected and compliant, even if the regulatory environment changes. With extracted, analyzed contract content, legal can quickly assess where the greatest litigation risks lie, what options are available to them in the case of a lawsuit, and which agreements are likely to be affected by pending or effective regulation changes.

Procurement can ‘look’ across thousands of executed contracts to identify preferential terms, conflicting commitments, performance thresholds, spending compliance, and supplier relationship viability. They can also draw connections between certain contract terms and strategic supplier relationships.

Sales cannot deliver maximum revenue without broad insight into enterprise volume commitments, ‘favored’ customer status, delivery terms, and the ability to upsell. They can use extracted contract data at contract renegotiation time by identifying where order quantities were met or exceeded. Using that evidence, they can refine demand projections for the next term of the agreement, increasing volume and price or decreasing the cost to deliver as appropriate.

Finance will find it far easier to manage cash flow with clear access to contract language and obligations – especially when credits or disputes occur. They can also leverage an extraction platform to facilitate reporting, tracking, oversight of minimum and maximum volume commitments, support for audits, and visibility into detailed price books.

Operations & Delivery teams need quick access to obligations such as acceptance and payment milestones, deliverable quality, and policy and regulatory requirements as well as service levels such as uptime, response/turnaround time, and resource availability.

Looking at AI Across the Contract Management Lifecycle

AI contract data extraction benefits cross-functional teams throughout the entire lifecycle of a contract. This starts during the negotiation phase, through signature, execution, and extends through the renewal process.

Companies can query or pull reports that help them quickly find desired contracts and details. They can easily capture outstanding obligations and unfulfilled commitments, as well as those that have been met.

It’s unrealistic to think that a team member would be able to manually go through all contracts looking for this information – either across the portfolio or at the time of signature and system entry. Only technology has the ability to quickly and accurately process the volume of contracts that most enterprises have in place.

Advanced Data Extraction Capabilities for More Established Enterprises

More mature organizations may find that they are prepared to leverage some of the more advanced capabilities of auto extraction:

Extraction of complex services agreements with inconsistent terms and obligations, and highly nuanced service level agreements and rates.
Supplier performance management, including incentives for elevated performance and protections against substandard quality.
Support for mid-term contract alterations and amendments in response to scope changes, updated pricing schedules, and regulatory changes.
The ability of AI to ‘learn’ over time, increasing the accuracy with which it categorizes different types of contract clauses.
Comprehensive language-agnostic extraction and analysis.

Putting it all Together for a Cross-Functional CLM

Modern enterprises need their contracts to support many business processes at once. Unlike systems that are confined to one user group, contract terms and language are critical to the performance of multiple stakeholders.

Effective portfolio management requires insight that is both comprehensive and detailed. When technology is applied appropriately, humans can focus their efforts on high-value, strategic tasks with the support of automation. The better an enterprise understands its contract portfolio and can learn from past and present contracts, the more value it can get from future agreements.

Learn more about how contract analytics works here.