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    Blog Image

    Contract Management Automation: How It Works and Streamlines Contracting

    • Businesses can automate contract management processes including contract creation and approval, contract analysis as well as performance tracking.
    • Contract management automation boosts contract visibility and compliance and helps a business realize greater savings and value.
    • It ensures that you have total control of all your contracts.

    November 28, 2022 | Procurement Strategy

    Contract management is a vital part of procurement operations. It involves tracking and monitoring contracts, procurement processes, and contract performance.

    However, many businesses continue to rely on manual, time-consuming practices for contract management. This makes performance tracking difficult, hampers efficiency, and leads to missed opportunities.

    In this post, you will learn how AI-powered technology can help you make the most of a contract by automating your contract management tasks.

    What is Contract Management Automation?

    Contract management automation is the process of automating key contract management processes including contract creation, approval and governance processes, procurement, contract analysis, tracking, and risk and compliance management. The use of contract management automation software increases the speed and accuracy with which companies manage their contracts. It also frees up human resources previously dedicated to these processes and lets employees focus on higher-level functions that require more complex decision-making skills.

    Contract management automation can be implemented in a company’s purchase-to-pay process, in procurement, and throughout the lifecycle of a contract. It is especially critical in procurement, where the goal is to procure goods and services that meet the needs of the organization while also meeting the requirements of its contracts.

    Why is Contract Management Automation Important?

    Contracts play a vital role in the operations of any company. They set the parameters for the business relationship and help to ensure that both parties are accountable for their actions. A well-executed contract management process helps to minimize risk and keeps operations running efficiently. It can also help to make the business more competitive by providing customers with greater assurance that the service or product will meet their needs.

    If managed correctly, contracts can be a valuable source of data for companies. They can be used to track key performance indicators, forecast future demand, and more. An automated contract management process makes it easier to collect, manage, and analyze this data, allowing you to make better business decisions. It also helps to reduce the risk of human error.

    How can AI Help with Contract Management Automation?

    AI-enabled contract management automation software can automate most contract management processes. It can help you to create contracts, track and manage the completion of tasks, obtain approvals, and manage risk, procurement, and procurement analytics.

    Contract creation 

    All contract clauses and related information can be standardized so that they can be auto-generated by the software. AI-enabled software can also be programmed to auto-suggest clauses based on your organization’s needs, helping to ensure that contracts are as comprehensive and accurate as possible.

    Contract risk management 

    AI can help to identify risk, prioritize actions, and take corrective actions when needed.

    Contract and procurement forecasting 

    AI can be used to track contract terms and conditions so that you can better forecast future supply and demand.

    Procurement management 

    AI can be used to automate sourcing and supplier selection to make sure that only the highest-quality suppliers are selected.

    Benefits of Contract Management Automation

    Contract management automation can help to standardize your contract management process and to eliminate human error. It can also help you to improve the speed and accuracy of contract creation and approval, procurement, risk management, and procurement analytics. AI-enabled software can also help to increase the visibility and transparency of your contracts, allowing you to make better business decisions. Here are some of the other benefits of contract management automation:

    Faster contract management 

    Contract management automation allows you to create and approve contracts more quickly, helping to speed up the entire process.

    Greater visibility and transparency 

    AI can help to identify patterns and trends in your contract data. This can make contracts more visible, helping you to make better business decisions based on accurate information.

    Better procurement decision-making 

    AI can help to identify high-risk suppliers and unmet contract terms, making it easier for you to take corrective action.

    Different Stages of Contract Management Automation

    The lifecycle for contract management automation spans the full length of a contract, from the initial contract creation through contract termination. Contract management automation is typically implemented in three stages:

    Preventive Contract Management 

    Preventive contract management is used when a contract is first being created. It is focused on ensuring that all contract terms and conditions are accurate so that the parties will be able to meet their obligations. Preventive contract management tools help to streamline the process of creating a new contract, providing standardized templates and auto-suggesting relevant clauses. These tools also allow parties to work collaboratively on the contract to increase efficiency and reduce the risk of human error.

    Corrective Contract Management 

    Corrective contract management is focused on identifying risks and issues in existing contracts. It brings together information relating to the contract’s original creation, current obligations and conditions, and the parties involved. It also incorporates information on the organization’s assets, such as human resources, inventory, and production capacity. This information can be used to help identify risks and address issues that may arise during the contract’s lifecycle. Corrective contract management tools also allow users to identify patterns in the data to help meet the needs of similar parties.

    Terminative Contract Management 

    The focus of terminative contract management is on ensuring that all obligations are fulfilled, and the contract is terminated in a timely manner. This helps to avoid any legal issues and protects the interests of the parties. Terminative contract management tools help to identify and track which contracts are set to expire, when they expire, and what needs to be done to renew or terminate the contract. This information can also be used to forecast future supply and demand.

    Conclusion

    Businesses must automate contract management to boost contract visibility and compliance, track performance, free human resources as well as derive greater savings and value.

     

    Tags: Contract Management

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