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Pairing Form and Function: A Cross-Functional Business Case for AI-Enabled Auto Extraction
One of the most critical – and significant – challenges a modern enterprise faces is to properly manage its contract portfolio. This includes buy-side and sell-side agreements, in-house contracts and counterparty paper. While contract lifecycle management (CLM) software can effectively contain contracts, that does not meet the extent of a business’s requirements. What companies really need is a platform that can capture the terms and conditions, obligations, service levels, and service data details in all of their contracts and open them to everyone in the enterprise.
AI-driven extraction platforms rapidly transform unstructured contract data into meaningful information that is then organized according to logical taxonomies and stored in a central repository. AI-based auto extraction can reduce the time required to process contracts by 80%, without the cost and error rate associated with human labor.
By leveraging highly efficient AI at the platform level rather than solely within individual processes in the contracting lifecycle, the benefits of extraction can be realized across multiple business processes at scale. This is critical because so many functions and business processes rely upon enterprise contracts to deliver value. Most people naturally think of legal as being dependent upon access to contractual obligations, but sales, procurement, finance, and operations are as well.
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 regulatory 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 leverage extracted contract data at contract renegotiation time by identifying where order quantities were met or exceeded and using that evidence to 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 provide cash flow oversight 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.
Auto extraction benefits cross-functional teams throughout the entire lifecycle of a contract, starting during the negotiation phase, through signature, execution, and extending 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 is 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.
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.
Modern enterprises need their contracts to support many business processes and opportunities. Unlike systems that are confined to one user group, contract terms and language are critical to the performance of multiple stakeholder groups.
Effective portfolio administration 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 their full contract portfolio and can learn from the efficacy and enforceability of past and present contracts, the more value future agreements will be able to deliver.