Quick question: How many contracts did your company execute in the last year? If that’s too far back (which it shouldn’t be), how about the last two quarters? What about how many contracts are currently in effect? Which contracts have the highest value, and how many contain the most up-to-date version of your indemnification clause?
This data might seem like minutiae on a micro scale, but if you zoom out, it becomes clear why data in the contracts that move through your business is essential to staying on top of your game. Having access to contract analytics is a high-performing legal team’s secret weapon.
Why You Need Contract Analytics
Contract analytics is the process of capturing and organizing the data within your contracts to glean insights and make data-driven business decisions. And as legal becomes a strategic business unit that contributes to the bottom line, they need to be just as data-driven as the rest of the company.
Here are some other reasons contract analytics is key:
Legal Departments Are Doing More With Less
As lean legal teams are forced to move mountains with chopsticks, they must be able to do work with the least amount of effort and the most impact. Contract analytics helps legal teams uncover what activities can bring about the highest return — e.g., which contracts to focus on, optimizing redlines — so they can be as targeted and efficient as possible in their effort to provide value to the business.
Deeper Insight Into Your Contracts
While you might have an idea of which contract type is your most common and which contracts have the highest annual contract value (ACV), could you prove it quickly if asked? Having access to contract analytics allows you to access that insight and understand trends within your contract ecosystem, empowering you to make informed business decisions.
Metrics and Measurement
As belt buckles tighten across industries, the legal team’s budgets are getting slashed in the wake. Gone are the days when protecting the company from risk was enough; now, legal teams need to prove their value and earn their budget. Contract analytics provide the data needed to track metrics and Key Performance Indicators (KPIs) against their goals.
How AI Changed the Contract Analytics Game
Most companies, in some way, do a form of contract analysis. For example, your spreadsheet that tracks the contract type, signer, date, clauses, etc., holds important contract data. And when you complete a =SUM function to tally the number of contracts you executed in a year, you are gathering contract analytics. But the spreadsheet can only do so much, and it takes thousands of hours to comb through contracts and collect more elaborate data points, always running the risk of manual error.
AI makes contract analytics a quick and sophisticated process. Contract analytics software with natural language processing (NLP) and artificial intelligence (AI) can read, understand, and organize your contract data even faster than your intern, providing your legal team with more profound insights faster.
It can also sort your data according to what makes sense for your business – e.g., categorizing your contracts by type, renewal date, or clauses. Additionally, it can track how many MSAs you executed in the past 60 days and which contracts are most common and have the highest dollar value. Locating the renewal date of each contract has never been easier.
And the best part? Gathering contract analytics with AI reduces the chances of human error while also correcting the inconsistencies found within contracts. AI helps you identify where language is out of pattern and which versions of an executed contract are missing crucial clauses. Finally, a time-efficient way to update contract errors.
Takeaways
Contract analytics is a strategic asset that helps legal teams decrease risk and increase their bottom line. The data inside contracts can provide powerful insights into business functions and team performance, as well as gaps and blindspots. AI-powered contract analytics software gives your legal team the tools they need to make data-driven decisions that move your business in the right direction.
See LinkSquares AI-powered Contract Lifecycle Management (CLM) in action. Request a demo today.
