4 ways AI contract management tools can improve negotiations

Every relationship between a company and its vendors is governed by a contract. When a company has hundreds or even thousands of these contracts, efficiently managing them — from negotiation, to execution, to fulfillment, and renewal — is just as important as signing them. Time is money, and minimizing the amount of resources spent on managing contracts can save a lot of it. In fact, World Commerce & Contracting estimates that poor contract management costs businesses as much as 9% of their total annual revenues. 

As every salesperson, lawyer, and contract manager can tell you, the negotiation phase of the contract lifecycle is often the most prone to conflict, delays, and other bottlenecks that can bring an otherwise efficient process to a grinding halt. But artificial intelligence is proving to be the most effective grease for the wheels of negotiations.

AI contract management tools to the rescue

Over the last few decades, many business operations have become increasingly or entirely digital. Software developers have created a number of contract management tools to help workers with building contract databases, extracting document data, and catching compliance and contract governance issues.

At the turn of the millennium, simple RPAs cut down on repetitive tasks to make workflows faster. Research by Goldman Sachs found that even this type of basic automation can accelerate contract negotiation cycles by 50% in 2003. But in the 2020s, we’re far beyond the limits of RPA. New solutions like Automation Hero are equipped with sophisticated AI that helps users streamline even a lot of the mental work involved in contract management, as well as the manual labor. AI-powered contract management tools are becoming a boon for negotiations, helping organizations:

1. Make proposals based on data

Sales teams can save a lot of time at the negotiating table when they make offers with a proven track record of success. Making proposals informed by data starts the contract initiation process closer to an agreement.

AI contract management tools make it easy to extract specific information from company contracts about past discounts, closure rates, and other pertinent data to build a clear picture about what kind of offer is most likely to work.

2. Start renewal talks early

When organizations track hundreds or thousands of contracts a year, it can be impossible to manually track every expiration date. Contract management tools can extract that information from databases with AI, then send alerts 60 to 90 days ahead of the contract termination date. This lets contract managers plan a renewal strategy before they come to the negotiating table. And regardless how much needs to be renegotiated, the long lead time removes a lot of the ticking clock pressure from the talks.

3. Catch compliance issues

Since AI can accurately extract specific data from contracts, users can leverage it to identify and alert them when important information is missing, such as signatures. Because platforms like Automation Hero also integrate seamlessly with other point solutions, it can catch contract breaches based on data from other departments.

For example, if the platform extracts data from documents held in an organization’s accounting software, it may be able to spot invoices that haven’t been paid on time based on due dates outlined in a contract. Compliance and governance negligence can be useful in negotiations for better rates, since vendors aren’t performing to the standards they agreed to.

4. Get deeper insight into contract performance

Value leakage in contracts isn’t always the result of negligence or mistakes — the type or volume of products or services purchased may have just been unnecessary. Automation Hero can extract data from any document to quickly glean insight into how an agreement with a particular vendor impacted KPIs on market share, growth, and revenue, and help stakeholders quickly decide how to proceed with a renewal. This type of performance insight helps build a case for altering order volume in the next contract.

Negotiations can be time consuming and challenging regardless of how much is at stake. AI contract management tools can help users streamline the mundane tasks that help facilitate productive discussions and even make better use of valuable data.