Did you know there's a treasure trove of useful contract data hiding right in plain sight?
It's data that can unlock new avenues for growth, streamline operations, and even give you a competitive edge.
The challenge, however, lies in the complexity and time required to extract these insights manually. But contract management software can help you analyze all the information hidden in each and every one of your contracts — and actually use it.
With contract analytics, you can transform dense contract text and metadata into actionable insights. Not only will it make managing contracts easier but it will turn your documents into strategic leverage that can help you grow your business.
Contract analytics is the process through which businesses can turn their contracts into actionable insights by extracting key data points from contracts, analyzing this information, and then using it to make informed decisions.
It's about much more than knowing what your contracts say. Contract analytics involves leveraging contracts to drive growth, mitigate risks, and find opportunities that might have been hiding just below the surface.
Just like in statistics, a low volume of contracts may not provide actionable insights because it is difficult to draw meaningful conclusions from a small sample size.
With a low volume of contracts, it is difficult to identify patterns and trends that can be used to improve contract management. It’s even more difficult to identify risks and opportunities that could have a significant impact on the business.
Simply put, the more contracts you have, the more comprehensive view you can get of your contracting practices.
While there’s no specific number, businesses should consider the volume of contracts they have before diving into analytics. If you don’t have a ton of contracts, you may consider focusing on perfecting other contract management strategies, like fine-tuning your intake procedures or improving your contract review process.
No matter how many contracts you have, you can use contract management tools to monitor and report on data. You’ll still gain insights now and set yourself up for success with large-scale analytics later.
When you have a solid foundation, not only will you be able to build a scalable contract management process, you’ll also be able to use contract analytics to its full potential.
The real power of contract analytics lies in its three foundational pillars: data extraction, analysis, and risk identification. Together, they form a solid framework that enables businesses to dive deep into their contracts and highlight opportunities to grow their business.
The first step is to pull critical information from your contracts. This includes information like:
Contract management software with AI can help streamline this process with the help of optical character recognition (OCR) technology.
Here’s how it works:
OCR technology captures the text from contracts, whether they’re screenshotted images, PDFs or Word files, and converts it into a digital format that can be processed by AI. This is important because AI needs to be able to understand the content of a document in order to analyze it and make decisions.
When the text has been converted into a digital format, AI can be used to extract key information from the document, such as the contract terms, the parties involved, and the dates of execution. This information can then be used to create a structured database that can be easily searched and analyzed.
One thing to keep in mind is that you will always need to review the data that AI has pulled.
Once data is extracted, the next step is to analyze it.
This stage interprets the extracted information to uncover trends, opportunities, and potential risks hidden within your contracts.
Analysis should cover metrics like:
By evaluating these metrics, you can get a better idea of how to improve.
If you notice that time to execution is slower than industry benchmarks, for example, you can investigate the bottlenecks in your contract process and implement more efficient review cycles or automation tools.
Or, if you see a decline in the average monthly value of your contracts, you might reassess your pricing strategy or explore new markets to ensure you're maximizing contract value.
This analysis helps not only pinpoint areas for immediate improvement but also strategize for long-term growth.
By understanding the underlying trends and patterns in your contract data, you can make informed decisions that drive your business forward.
Early risk identification through contract analytics equips businesses with the foresight needed for proactive contract management and effective mitigation strategies. This process shows potential areas of concern, such as noncompliance, financial liabilities, and other contract-related risks, allowing businesses to address them before they escalate.
Here are steps to incorporate into your risk identification process:
Following these steps not only protects your business from potential legal and financial pitfalls but also supports more informed strategic decision-making.
Analytics isn’t just about finding risk; it can also help you spot opportunities for growth.
By digging deep into your contract data, you can uncover valuable insights to propel your business forward.
Each of these opportunities contributes to immediate revenue growth and lays the groundwork for long-term business expansion and success.
Contract analytics is more than a tool for managing risk — it's a catalyst for small business growth. By harnessing the power of data-driven insights extracted from your contracts, you can unlock new opportunities, enhance efficiency, and sharpen your competitive edge.
Here's how to leverage contract analytics to propel your business forward:
Identifying and eliminating bottlenecks in the contract creation and execution stages is crucial for streamlining operations and unlocking growth opportunities. Contract analytics can help identify where issues arise, such as inconsistencies in contract creation or data gaps in the extraction process, like missing contract types or dates. This can lead to reduced bottlenecks and better contract management overall.
Contract analytics plays a pivotal role in this optimization process by providing the insights needed to make informed decisions quickly and with greater intelligence.
Using contract analytics, you can identify where delays are happening — be it in drafting, approval, or execution — and streamline these processes for quicker turnaround times.
An essential part of this optimization involves monitoring contract end dates and renewals.
This proactive approach secures your contractual relationships and opens the door to better terms and opportunities for growth.
Identifying process problems in contract management is crucial for ensuring efficiency and optimizing operations. Contract analytics can help identify where issues arise, such as inconsistencies in contract creation or missing information. This can lead to improved processes, reduced bottlenecks, and better contract management overall.
Contract analytics plays a pivotal role in this optimization process by providing insights into various aspects of contract management. By monitoring contract end dates and renewals, you can ensure that contractual relationships are secured and opportunities for growth are not missed.
This proactive approach not only helps in maintaining compliance but also enables organizations to negotiate better terms and conditions during contract renewals.
Knowledge is power. When you go into a contract negotiation with a clear understanding of how your contracts are performing, you can negotiate better terms.
If analysis reveals that a client frequently pays invoices late, for example, you could negotiate terms that include late payment fees to encourage timely payments.
Or, if you've experienced issues with product quality from a supplier, you could introduce quality assurance clauses that specify standards and include penalties or rights to return goods that don't meet those standards.
This capability not only leads to more advantageous outcomes but also bolsters contract compliance and performance across the board.
But it doesn’t stop there.
Creating templates based on the most successful contracts can streamline the drafting process, ensuring consistency and reducing the time from initiation to signature.
This approach improves the quality of new contracts and enhances overall contract management practices, making them more efficient and effective.
Streamlining operations and reducing costs are major benefits of contract analytics.
Here are some steps you can take to help cut costs and streamline operations using analytics:
Leveraging contract analytics in these ways will allow you to streamline your operations and reduce costs while enhancing your overall contract management strategy.
Enhancing decision-making with data-driven insights through contract analytics involves defining and tracking key performance indicators (KPIs) relevant to the business's contract lifecycle and overall performance.
Here's a list of KPIs and how they can enhance your decision-making:
KPIs like these allow you to unlock valuable insights into your contracts’ performance, facilitating better strategic decisions, improving operational efficiency, and fostering long-term business growth.
ContractSafe is one of the best contract management software out there. It makes contract analytics simple and effective. Its intuitive design and industry-leading suite of features ensure you’re equipped with the tools you need to grow your business.
Here’s what you get:
With ContractSafe, you can harness the power of contract analytics to scale your business, uncover new opportunities, and make better decisions.Want to give it a spin? Try it out now for free.