Why your Business Needs Efficient Contract Analysis
Today, contracts are considered to be one of the most valuable tools in the business. However, many companies tend to focus on drafting and negotiating terms and then file them away after they’re signed. But, this is an unproductive practice because proper contract analysis will yield useful insights that lead to improved future contracts.
Contract Analysis Definition
When you analyze a contract, you essentially break it down into simpler components to better understand its obligations, terms, benefits, monetary aspects, and other information. Contract analysis can either be conducted comparatively or stand-alone, both giving you insight into the agreement. Therefore, it’s vital to perform regular analysis if you want to prevent mistakes, avoid risk, and draft beneficial contractual terms.
Why Does Contract Analysis Matter?
Since contracts include all details of a business agreement, an in-depth analysis will open more doors for improvement and more beneficial deals with your current and prospective partners. Additionally, contract summaries and reports will help your team to make well-informed business decisions. Therefore, proper analysis of agreements will add value to your company’s profit margin because contracts are the foundation of your business partnerships.
The Consequences of Not Performing Contract Analysis
When your business negates analysis, your agreements may contain errors that diminish your business profits. Many of these issues can easily be prevented when you have substantial contract visibility and oversight.
For example, when you are negotiating a deal, and you don’t have a contractual summary that’s easy to understand, you are put at a disadvantage because you cannot argue for a beneficial agreement when you don’t even fully grasp what the deal entails.
Other consequences of not performing contract analysis include:
- Vague clauses that are ineffective
- Lack of protection against termination effects and liabilities
- Inadequate insight into vital contractual terms and obligations
- Missed deadlines
- Unproductive contract management and review processes
- Deals that do not optimally benefit your company
- Inefficient risk management
As you can see, the consequences of omitting analysis can be detrimental to your business’s success. Furthermore, mistakes are still likely to occur in your agreements if you do not implement an automated contract analysis software.
The Valuable Benefits of Smart Contract Analysis
Even if you think that your manual analysis process is airtight, you are likely still overlooking mistakes because of human error. However, automated contract analysis will enhance your review process, providing greater visibility. The software works by using artificial intelligence contract analysis that learns from your company’s data to quickly eliminate mistakes, identify risks, and provide valuable insights.
Let’s dig deeper into the benefits that smart contract analysis has to offer:
Find draft mistakes and avoid repeating them
You should always try to learn from your mistakes, but what if you aren’t even aware that you’re making them? A contract analysis platform will help you identify errors so you can avoid making them again in the future.
In addition, it will find agreement issues such as unspecific clauses, lack of protection against breaches, and contradictions with pre-existing agreements. Therefore, your business will significantly benefit from a smart contract analysis tool by preventing past mistakes from occurring again.
Help to identify risky outdated terms
Agreements are constantly evolving and improving, so chances are an outdated template will not be beneficial to your business. For example, laws are created and made obsolete, the political climate changes, and the economy fluctuates; your previous agreement terms were likely influenced by these factors, meaning they may be outdated.
When you use a contract analysis platform to identify and eliminate risky outdated terms, you can be sure that your agreements are always tailored to fit today’s standards.
Discover solutions to other business problems and challenges
When you administer regular contract analysis and review, you will be better equipped to identify more productive business practices and different ways to optimize your entire contract management process. Once you know how various contract elements impact their performance, you can solve business problems that occur during an agreement’s lifecycle.
Additionally, an efficient analysis will provide insight into patterns that led to your most successful deals.
Identify compliance issues on both ends of the agreement
Since artificial intelligence contract analysis provides advanced insights, reports, and a notification system that alerts you about upcoming deadlines, it helps you ensure that compliance is upheld by you and the other party. Additionally, automated analysis ensures that your agreements are legally complacent and follow up-to-date regulations.
Valuable insights that help improve your contract and business strategies
Analytical reports help you determine which strategies are beneficial and which ones need improvement. By using contract analysis software, you will receive valuable insights that can boost the productivity of your contract and business strategies. When you improve your strategies, your company will reduce costs, become more efficient, improve client relations, and more.
How to Easily Implement a Smart Contract Analysis Tool
Contract analysis is essential to every company as it improves agreement performance through greater visibility of obligations, risks, and advantages. However, not every company has switched to an automated analysis platform despite its ease of use and simple start-up.
If you want to begin using AI analysis tools in your business agreements, you can start using the software on low-risk agreements with standard terms. By doing this, you can get a feel for the tool’s capabilities then confidently move forward and use it with more advanced deals.
The role of artificial intelligence in contract analysis
Artificial intelligence is proven to be a great help with analyzing contracts. Intelligent tools will automatically ensure that your forms are complacent, up-to-date, beneficial, error-free, and not too high risk. By automating these tasks, you can be sure that your agreements are the best they can be while minimizing the time and costs of manual analysis.
Therefore, by using AI contract analysis, you can dedicate more time and resources to tasks that are more advantageous to your business, such as improving client relationships and expanding your operations.
Using contract management and analysis software to improve your agreement analysis
Most contract management software has the capability of analyzing your agreements for you. If you already use a CLM platform to draft and manage your contracts, you should also use it to analyze them. The software will provide you with advanced insights, reports, and trends that can be used to improve the terms of future agreements. Additionally, you can access your CLM platform’s analysis tools for free, meaning that there’s no out-of-pocket expense required to boost your analysis strategy.