Contract lifecycle management (CLM) and Contract Intelligence: integrating AI for enhanced business efficiency

Contract lifecycle management (CLM) is a time-consuming but essential process, vital for reducing compliance risk, ensuring accurate billing and minimizing revenue loss. For many organizations, CLM is a manual process, and requires some specialist legal knowledge to unpick complex documents and interpret clauses correctly. This can mean that crucial opportunities or important dates are missed, or that inaccurate understandings of contracts result in overpayments.

AI technology can help to streamline the process of contract lifecycle management, making data accessible and visible across the business, and making it easier to capture opportunities and reduce risk. In this post, we explore how AI integration transforms contract lifecycle management (CLM), boosting business efficiency and decision making.

What is contract lifecycle management (CLM)?

The process of contract lifecycle management (CLM) monitors an organization’s contracts from their creation through execution, and onto renewal or termination. CLM is a broad term, and covers a wide range of activities, from specifying and negotiating contracts to managing compliance, monitoring performance, and more.

CLM helps organizations streamline their contract management processes, reduce risks, improve compliance, and gain visibility into their contract portfolio. By implementing CLM, businesses can optimize contractual relationships, ensure legal and regulatory adherence, and achieve strategic objectives more effectively.

How does the contract lifecycle management process work?

Contract lifecycle management (CLM) is a structured approach that involves several stages to manage contracts efficiently:

Contract request: When there’s a need for a new contract or an amendment to an existing one, a contract request is initiated.

Drafting: An initial contract draft is created outlining key terms, conditions, and obligations for both parties.

Review: The drafted contract undergoes review by relevant stakeholders, including legal teams and subject experts.

Redlines: During the review process, changes or suggestions are made to the contract. These modifications are marked up using change tracking tools which “redline” changes to the original document for further review.

Negotiation: The parties involved in the contract discuss and negotiate the proposed changes until they reach a mutually acceptable version.

Approvals: Once negotiations are complete, the contract is forwarded for approval from key decision makers such as senior managers or the board.

Signatures: After the contract is approved it is signed by all parties involved.

Storage: The signed contract is stored in a safe location for future reference.

Abstraction: Abstraction involves extracting key data points from the contract into a separate database, allowing for easy analysis and comparison of multiple contract documents.

Querying/interrogation: Users can query or interrogate the abstracted data to identify trends and uncover potential areas for improvement.

Audit: Regular audits are conducted to ensure compliance with contractual obligations.

Additions: If required, amendments or additions can be made to the contract during its lifecycle. These changes follow the same process as the initial drafting, review, negotiation, and approval stages.

Performance monitoring: Ongoing monitoring of contract performance against KPI’s is essential to ensure that both parties meet their contractual obligations.

The role of MRI Contract Intelligence in enhancing CLM systems

The most popular method of managing the CLM process is workflow automation – keeping on top of each step of the process with automated tasks and prompts for team members. With MRI Contract Intelligence, AI technology can significantly enhance the process, for improved levels of automation, efficiency, and risk reduction compared to current best practice.

Contract Intelligence’s AI technologies are able to efficiently abstract the key terms and clauses from even the most complex contract documents, presenting data in a standardized format ready to pull into billing systems or other platforms.

In doing so, Contract Intelligence reduces teams’ workloads while ensuring a high level of consistency and accuracy, and providing a clear audit trail so users can compare data to the original contract wording in just a few clicks. By leveraging Contract Intelligence, organizations can easily stay on top of key dates such as contract renewal periods or break clauses. It also allows them to use the data to make better strategic decisions and unlock value from the contracts.

Contract Intelligence also streamlines the process of querying and interrogating contracts. With large language model (LLM) support, users can analyze contract data using everyday language, making the process of understanding and interrogating data much simpler and more intuitive, and making it easier for teams to identify inconsistencies, opportunities, or potential risks.

Integration of AI in CLM and contract intelligence systems

By integrating AI, CLM systems can become far more than just tools for managing contracts; they become strategic assets that can drive real business value.

With advanced algorithms that make complex contractual clauses easy to understand, they increase transparency and reduce the risk of human error. With powerful natural language analysis tools, they can support enhanced decision making and help to drive progress towards wider business objectives.

By integrating AI into the CLM process, businesses could more easily spot opportunities, such as break clauses which allow them to exit unfavourable contracts. They could also more effectively stay on top of clauses around price variations or penalties, ensuring that they comply with the terms they’ve agreed to and that they receive fair treatment from suppliers too. By comparing similar contracts side-by-side, AI can help to spot opportunities for negotiation, or help to inform strategic decisions around supplier relationships.

How Contract Intelligence from MRI Software can help

Contract Intelligence is MRI Software’s AI-powered data extraction and analytics platform. Trained on a specialist database of over a million corporate and legal documents, Contract Intelligence can accurately identify and abstract key clauses ready for export into your preferred data platform, without the need to manually review contract documents.

With powerful AI-powered reporting features, MRI Contract Intelligence can quickly create custom dashboards and reports and identify anomalies, allowing you to extract powerful strategic insights from your organization’s contract data. Find out more about how MRI Contract Intelligence works.