Contract management need not always be complex. With artificial intelligence (AI) making its way into this realm, every stage of the contract lifecycle can be streamlined.

From creating the contract and conducting negotiations to performing analysis and getting approvals, AI-based solutions are transforming contract management. You can automate repetitive tasks, minimize human errors, and leverage the data gathered to gain deeper insights.

However, like every tech revolution, contract management comes with its own challenges. Let’s explore some of these and find out how AI can help fix them.  

7 Main Challenges in Contract Management

1. Slow Turnaround Time

This issue is more common than you think. Even if all parties involved want to finalize the contract terms, the process of getting there can feel unending. Over time, the terms become redundant. Constant contract redlining of outdated documents leads to confusion, the contract remains unsigned, and small losses begin to add up.

Introducing AI in your contract management process can put things in perspective. Whether it is initiating new contracts or handling SaaS subscription management (if it is a part of the contract), you can monitor how the contract is progressing in the crucial pre-signing stage. Users can easily track a contract’s status from the first draft to the finalization. Workflows can be customized to make it easier for parties to understand where the process is stuck, what documents need attention, which approvals are necessary, and so on.

As a result, the entire process speeds up, and pending tasks or actions are addressed at the right time by the right people.

2. Budget Confusion

Nobody wants to exceed their budget, but sometimes this becomes unavoidable. The simple fact is contract managers are busy people who work with multiple documents at any given time. Complex renewals or sudden price rises may slip their attention, especially if the parties aren’t aligned. 

However, with an AI-driven solution, contract managers can gain a clear idea of the negotiated numbers and the total spend in real time. They can also prevent costly overlooks and mistakes. Moreover, AI analytics can help identify patterns of overspending and the scope of cost-cutting.

The integration of tools like a balance sheet template or comprehensive FinTech software can help managers consolidate financial data more effectively. This can ensure no critical details are missed.

Managers feel empowered to identify anomalies and changes immediately. They can then take timely action to prevent costs from spiraling while keeping the budget in check.

3. Maintaining Compliance

Violating the contract by not sticking to the agreed-upon terms can land businesses in legal trouble. This can lead to fines, penalties, liabilities, and regulatory issues, especially for industries that need to uphold stringent privacy standards. On the other hand, you may incur losses or be forced to pay for low-quality services if the other party falters.

AI-based solutions can help by including specific built-in clauses in the contract in the required regulatory language. Managers can conduct regular contract audits and generate detailed reports to manage compliance requirements quickly and simply. These systems also come with search functionality so users can easily find all their important documents.

The best part? Even if you’re doing business with companies in different states or countries, your compliance team will always be on the right side of the law.   

4. Losing Track of Document Versions

Picture this: you’ve been working hard at finalizing a contract document only to realize that it’s an outdated version. So, you’re forced to spend the next few days reaching out to all those who have already reviewed and signed the incorrect version to ask them to do it again. In the process, you also waste precious hours digging through old emails or shared drives to locate the correct version.

AI-backed contract management software can help you better organize all the different versions of your documents in one place. Users can use version controls to ensure all parties involved are on the same page. With everyone working on the most updated version, it becomes easy to avoid mix-ups and ensure accuracy.

5. Permissions for Secure Access

When it comes to contracts, it is super important that only the right people have access to confidential documents. It is also crucial to restrict access to certain people to avoid misuse of data. Ensuring this can be trickier than it sounds.

A sophisticated AI-driven solution can simplify the process of providing access and permissions to certain individuals handling specific roles. All of your contract documents are securely stored in the cloud. Managers can ensure that only specific individuals have access to them. You and your business partners can rest assured knowing that your sensitive data is protected and safe.

6. Data Silos

Running from one department to another and chasing people for the same contract-related information can be extremely frustrating. How can you be sure that you’re getting the right information? What if different sources provide conflicting or wrong data? Things can take a risky turn, lead to multiple contract versions, and result in prolonged revision cycles.

AI-powered contract management solutions can effectively break down data silos by linking contracts to important documents such as invoices, purchase orders, and so on. Managers can communicate with multiple stakeholders from a single platform, eliminating the scope for misinterpretations. This can make it easier to refer to the latest data and make quick decisions that benefit your business.    

7. Delays in Signing Contracts

Without all the required signatures, a contract remains null and void. To keep contracts valid, all parties involved need to provide their approvals and confirm the agreed-upon clauses. Contracts with missing signatures can lead to potential delays, postponements, and even legal issues. Further, manual processes or third-party tools can slow things down and cause avoidable human errors.

An AI solution that allows authorized parties to collaborate on the contract documents can help minimize the chances of errors and missed signatures. Integration with digital signing solutions (like DocuSign) can enable individuals to securely sign contracts from any place at any time. Further, these solutions keep track of all activities in any given document. So you’re always aware of who has signed the document and when.   

Conclusion

The integration of AI in contract management systems marks a massive shift while bringing benefits like cost savings, greater efficiency, and more accuracy. However, every new technology poses certain challenges.

It is the responsibility of the parties involved in the contract to harness intelligent technologies to speed up processes, ensure compliance, facilitate data security, and address other related issues. Hopefully, the above information will help your business make the most of AI-powered solutions and mitigate the challenges associated with contract management.     

Published by: Erin M.