5 Contract Management Challenges and how an AI-driven CLM solution can get your organization back on track

8.4.2023

Advances in artificial intelligence (AI), including natural language processing (NLP), cognitive analytics, and pattern recognition, are making it possible to derive maximum value from large volumes of data without drastic increases in headcount and bureaucracy. At Mainspring, utilizing the power of AI means starting with contracts.

An AI-enabled Contract Lifecycle Management (CLM) system standardizes data, automates compliance, and provides total visibility into the entire process. As an organization grows, scaling an AI CLM solution does not require a proportionate increase in team members to keep it running efficiently because AI becomes more efficient over time.

What are the benefits of avoiding contract management mistakes? Here are our top five:

Risk management
Resilience
Scalability
Cost-effectiveness
Transparency

Challenge #1 – Non-visibility of internal spend

Risk: Your organization risks incurring unnecessary late fees and misses out on the opportunity to analyze spending efficiently.

Why you should use an AI-driven CLM:

An AI-powered CLM solution can be used for invoice data extraction. It can scan through invoices and contracts, searching for keywords tied to spend categories. Natural language processing creates a structured data matrix from unstructured documents, linking line item details to costs and supplier names.

AI analyzes spending information, through analysis reporting. Accounts payable teams can have invoice data intelligently processed to ensure payments are made on schedule without incurring additional fees.

Finally, it can process historical data for a more holistic view of your organization’s spending patterns.

Challenge #2 – Risking non-compliance

Risk: As with most aspects of not using an AI-powered CLM solution, managing compliance manually requires more resources for a less efficient, less accurate process.

Why you should use an AI-driven CLM:

An AI-powered CLM solution can intelligently assess payment terms, flag discrepancies between contract and invoice rates, and identify duplicate invoices—it does not require invoicing or contracts to be submitted in a specific format or via a particular online portal.

Your AI CLM system can be configured to recognize regulatory and contractual compliance terms specific to your industry or jurisdiction. Upon identifying these compliance requirements, the CLM system can automatically configure notifications for particular team members, ensuring awareness of all key dates and obligations and even documenting a complete audit trail.

An AI-powered CLM solution can scan every invoice and contract that passes through your organization and aggregate relevant data points into a centralized, structured data matrix through natural language processing. This data can be structured to be imported into any other tool that your organization wants to use for reporting or auditing.

Challenge #3 – Not standardizing and automating contractual processes

Risk: The contracts you draft will take longer and may include unnecessary clauses or conditions that could delay execution or lead to unfavorable outcomes.

Why you should use an AI-driven CLM:

With a repository of contract clauses and best practices already defined by your organization, an AI-powered CLM solution can quickly draft contracts compliant with your organization’s standards. The most efficient way to manage contractual lifecycles is to put every contract through a single centralized system that provides visibility into the process from start to finish.

Using a CLM process guided by AI-enabled technology ensures consistency across the entire process. It makes it easy to instantly identify any contracts with issues that need to be resolved.

Taking a step back and looking at the holistic contract management lifecycle, the benefits of an AI-powered CLM solution positively impact every aspect of the process, from standardizing templates to generating first drafts of agreements to managing the negotiation workflow.

It aggregates all executed contracts in a single location and provides a clear and transparent audit trail. And natural language processing can flag potentially problematic or pertinent contract language.

Challenge #4 – Subpar connectivity with other systems

Risk: You will continue missing out on the efficiencies and advantages that automated content management solutions can provide, causing your sales team members to continue spending time on rote tasks instead of landing their next deal.

Why you should use an AI-driven CLM:

Robust enterprise content management systems unlock unprecedented efficiencies for organizations that can access them. However, inconsistent data and outdated storage and retrieval systems often prevent an organization from taking full advantage of these advances.

AI-enabled solutions can clean up and standardize data to be ready for integration with some of the most potent enterprise solutions in the world.

An AI-powered CLM platform can integrate with the existing tools that your sales team is already using, like Salesforce and Slack. It expands their utility by automating the tasks that your team is already using them for, like generating proposals or contracts that are e-signature ready.

Challenge #5 – Not working towards resilience and risk mitigation

Risk: Not taking advantage of technology. If your organization is not able to take advantage of these benefits, you are missing out on all of the potential cost savings and risk mitigation they provide. The value of your data is buried under its weight, and the most valuable pieces of information may never be surfaced to your sales team members when they need it most.

Why you should use an AI-driven CLM:

The most significant advantage of a robust AI-powered CLM solution is its adaptability. It is not a platform that requires data to be entered in a particular format or a proprietary piece of software that only operates within its manufacturer’s ecosystem. It is designed to meet your organization where it is and be configured to help you fulfill your organization’s specific needs in the most efficient way possible.

Having access to a vast volume of information is only half the battle. You also need to be able to find the data that you need when you need it. And depending on where you are in the deal’s lifecycle, that is an ever-changing need.

An AI-enabled CLM sales solution can quickly parse enormous amounts of data and serve your sales team members only the relevant information to their specific situation, providing clear insights in a fraction of the time.

A properly calibrated AI-powered CLM solution can reduce risk across every aspect of the operations process. It can reduce costs by monitoring global sales trends and providing intelligent historical analysis across every organization’s contract. It can intelligently identify critical dates and terms and turn them into automated reminders to ensure compliance with every contract. And it can parse every new contract for terms and clauses that are not a part of the organization’s standard practices.