What is Contract Data Extraction: 5 Key Steps to Implement it
- September 11, 2024
- 15 min read
- Sirion
Introduction
Contracts contain vital information that impacts enterprise operations, relationships with customers and suppliers, and overall profitability. However, while the contract itself is important, it is the contract metadata that truly unlocks its value.
Read more: AI Contract Data Extraction: Benefits to Cross-Functional Teams
What is Contract Metadata?
Contract metadata refers to the structured, contextual information about a contract that goes beyond its core content. This metadata includes essential data points such as the contract title, involved parties, effective dates, obligations, payment terms, clauses, amendments, termination conditions, and confidentiality terms. Accessing and analyzing this metadata allows organizations to effectively organize, manage, and analyze contracts.
By leveraging contract data extraction, businesses can access this critical information, which supports several key functions within an organization and enhances its ability to operate efficiently and make informed decisions.
Benefits of Effective Contract Data Extraction
Here’s a closer look at the key advantages of data extraction:
- Operational Efficiency: Systematic data extraction reduces manual effort and speeds up access to essential information. By organizing contract data, businesses can streamline workflows, reduce administrative burdens, and make quicker, more informed decisions. This efficiency benefits various departments by facilitating faster responses to contract-related queries and issues, ultimately boosting overall productivity.
- Efficient Contract Storage and Retrieval: A well-implemented CLM system centralizes all contracts and related metadata, allowing quick retrieval of information. This capability supports not only legal and compliance teams but also enables procurement, sales, and finance to access contracts whenever needed without searching through dispersed files and emails.
- Automated Data Extraction and Processing: With AI-powered capabilities, a CLM system automates the extraction and processing of contract data, significantly reducing manual intervention. By automating the retrieval of key data points like renewal dates and payment terms, a CLM ensures that Finance and Legal teams avoid costly penalties and missed deadlines.
- Compliance and Risk Management: Accurate contract data ensures that contractual obligations are met and regulatory requirements are followed. Streamlined metadata helps track critical deadlines, renewals, and obligations, thereby reducing the risk of non-compliance and potential penalties. Legal teams can quickly assess the greatest litigation risks, identify response options for potential lawsuits, and determine which agreements may be impacted by regulation changes.
- Facilitated Cross-Functional Collaboration:
Different teams—procurement, sales, finance, and operations—interact with contracts in various ways. A CLM system with comprehensive data extraction enables these teams to access specific data relevant to their roles, improving workflow efficiency and enabling collaboration without bottlenecks. Sales can quickly verify commitment terms, while Procurement ensures that preferred supplier agreements align with company standards. - Strategic Insight for Decision-Making:
With a CLM system, organizations can gain insights from contract data analytics, enabling trend analysis and more strategic decision-making. This capability supports procurement’s negotiation efforts, sales’ upsell opportunities, and finance’s budget forecasting.
Key Data Points to Extract
To manage contracts effectively, focus on extracting the following key data points:
- Contract Parties: Details of all entities involved in the contract, including their roles and responsibilities.
- Effective Dates: Important dates such as the start date, end date, renewal dates, and termination dates.
- Obligations and Deliverables: Key obligations, milestones, and deliverables specified in the contract.
- Payment Terms: Information on payment schedules, amounts, and conditions.
- Clauses and Amendments: Significant clauses, amendments, and special provisions included in the contract.
- Termination Conditions: Terms and conditions under which the contract can be terminated.
- Confidentiality and Indemnification Clauses: Terms related to confidentiality, indemnification, and other critical responsibilities.
The Challenge in Contract Data Extraction
As businesses grow and contract volumes increase, managing contracts through legacy systems presents significant challenges. Legacy systems, characterized by outdated technology and non-standardized formats, create substantial barriers to effective contract data extraction. These systems often lack standardized data fields, making accurate extraction both challenging and time-consuming. Consequently, organizations face increased costs and extensive manual efforts to extract and standardize contract data. This inefficiency results in difficulties accessing critical information, inconsistency in contract terms, costly mistakes, missed opportunities, loss of important documents, and the risk of failing to meet contractual obligations. The outdated nature of legacy systems impedes the ability to gain valuable insights and effectively streamline contract management.
5 Key Steps for Extracting Data from Legacy Contracts
When faced with the challenges of managing contracts through outdated legacy systems, organizations must adopt a strategic approach to extract valuable data effectively. The following five key steps provide a structured methodology to overcome these challenges and ensure accurate and efficient contract data extraction.
1. Align with Key Stakeholders:
Start by collaborating with stakeholders from legal, procurement, sales, and other relevant teams. Identifying the crucial data points needed for decision-making, compliance, and operational efficiency ensures that the extracted data meets cross-departmental needs and supports collaborative efforts. Engaging these stakeholders early helps align the data extraction process with the broader goals of the organization.
2. Define Governance Processes:
Establish clear governance processes to maintain data integrity and consistency. Set standards for data quality, ensure accuracy, and create protocols for handling discrepancies. Effective governance helps preserve the reliability of the extracted data and ensures it meets the organization’s quality standards.
3. Leverage a CLM System with AI Capabilities:
Utilize a Contract Lifecycle Management (CLM) system equipped with built-in AI to automate the extraction of legacy contracts. An AI-native CLM platform can efficiently standardize and extract relevant data, organizing it into a centralized repository. This technology reduces manual effort, minimizes errors, and ensures compliance, making the contract data extraction process faster and more accurate.
4. Integrate Extracted Data into Existing Systems:
Choose a CLM system that integrates seamlessly with your existing systems such as CRM, P2P, GRC, and others. Effective integration supports operational efficiency and enables data-driven decision-making by making the extracted information accessible and usable within the organization’s current infrastructure.
5. Continuously Improve Data Extraction:
Regularly enhance the contract data extraction process by leveraging the advanced features of your CLM system. AI technology adapts to new contract types and formats, continuously improving accuracy and efficiency. Automate extraction processes and update the system to handle evolving contract requirements, ensuring ongoing precision and effectiveness.
How Sirion’s Contract Data Extraction Software Capabilities Can Help
Sirion’s advanced data extraction solutions utilize sophisticated in-built AI technology to enhance both accuracy and efficiency. Our contract data extraction tool is engineered to manage both complex and legacy contracts seamlessly, integrating smoothly with your existing systems.
Additionally, Sirion’s core extraction engine now goes beyond the traditional AI models expanding to GenAI based models as well as multi model sequences which can be configured Eigen’s proprietary technology.
The comprehensive analytics capabilities provided by Sirion allow organizations to gain valuable insights from their extracted data, which strengthens compliance, improves risk management, and supports more informed, strategic decision-making.
Conclusion
Efficient contract data extraction is essential for effective contract management and overall business success. Streamlining these practices positions organizations for sustained success in today’s complex business environment. To experience these benefits firsthand and see how Sirion’s solutions can transform your contract management, schedule a CLM demo today.
