How generative AI in contracting can boost your bottom line

As enterprises navigate today’s rapidly evolving business landscape, a familiar adage comes to mind: innovate or stagnate. Artificial intelligence (AI) has emerged as a transformative force, with 64 per cent of companies expressing optimism about its role in boosting productivity. This statistic serves as a barometer for the growing confidence businesses are placing in AI. 

 

Generative AI in particular is emerging as a practical and invaluable tool in streamlining contract management and directly impacting business performance. Here are three ways Gen AI in contracting can boost your bottom line:

 

Providing enhanced productivity 

 

Respondents to a survey of legal departments across industries reported that implementing a CLM with generative AI capabilities can bring a significant increase in efficiency, and that the technology can reduce contract signing delays caused by staff shortages and heavy workloads. Additionally, internal delays are mitigated by almost 10 per cent, demonstrating the immediate impact on productivity. Gen AI brings a revolutionary approach to contract creation, review and analysis. Leveraging AI-driven templates and recommendations, these tools streamline and accelerate these complex processes.

 

One key feature of Gen AI is its use of AI-driven contract templates. These templates are not static but evolve based on real-time data, adapting to legal nuances and industry-specific requirements. Moreover, Gen AI goes beyond mere templating, offering intelligent recommendations during the review and analysis stages. Its algorithms analyse vast datasets to provide insights and suggestions, enhancing the decision-making process for legal professionals. This innovative integration of AI not only accelerates contract-related processes but also enhances their quality and accuracy, marking a significant leap forward in the field of legal technology. 

 

Building efficiency and cost reduction 

 

Exploring the financial ramifications of integrating Gen AI technology into contract operations is crucial. According to findings from McKinsey & Company, major corporations may face a 2 per cent projected loss due to unmet commitments. For a business with an annual expenditure of $2 billion, this equates to an accumulated annual loss of $40 million. Compounding this issue, teams without automated agreement methods are 75 per cent more likely to miss contractual obligations. Fortunately, these challenges are resolvable as Gen AI automates routine tasks, accelerates time to signature and brings better management of contractual obligations.

 

Infusing Gen AI into contractual processes contributes to a healthier bottom line by automating routine tasks. This enables employees to redirect their focus towards strategic initiatives, propelling the business forwards instead of being bogged down by administrative work. Moreover, this improved efficiency has a positive ripple effect, creating a less stressful experience for clients and vendors.

 

Leveraging Gen AI during the contract process facilitates a faster time to signature, fostering better customer relations and simplifying the negotiation process for all parties involved. Additionally, Gen AI’s ability to reference previous contract terms ensures consistency throughout agreements, further expediting the overall process. This feature not only reduces the likelihood of errors but also contributes to the speed and reliability of the negotiation process and aids in better relationships with vendors and customers, reinforcing Gen AI’s role as a valuable asset in optimising contractual processes.

 

If the contractual obligations of customers, suppliers or your own business are mismanaged, it can be a major drain on resources. It’s important for companies to make sure they’re not overpaying or being underpaid. Gen AI can extract clauses that they can tie into automated tasks and key dates for tracking and management (such as renewals or price escalations). These tasks, dates and tables within the system can be used to track many different types of contractual obligations.

 

Bringing a competitive advantage  

 

According to Forbes Advisor, 64 per cent of business owners are optimistic about the transformative potential of AI in bolstering customer relationships. This outlook underscores the increasing recognition of AI as a powerful tool for enhancing customer experiences. 

 

In a market where a single negative service encounter prompts 61 per cent of customers to contemplate switching to a competitor, businesses are compelled to prioritise the simplicity and convenience of processes, especially in critical areas such as contract management. The prevailing sentiment is clear: in a competitive landscape, businesses cannot afford to underestimate the pivotal role of AI in fostering positive customer interactions.

 

Technological advancements are reshaping industries, and businesses without the integration of Gen AI technologies risk falling behind their competitors. Gen AI is not merely a trend; it’s a disruptive force that has the potential to redefine markets and reshape consumer expectations. Failure to embrace and integrate Gen AI into business processes may result in missed opportunities, inefficiencies and, ultimately, a lag in competitiveness. As the business landscape evolves, Gen AI stands as a critical differentiator that can propel organisations forward or leave them struggling to catch up.

 

Looking forward 

 

Artificial intelligence is poised to transform numerous sectors, projecting a substantial annual growth rate of 37 per cent from 2023 to 2030, according to findings from Grand View Research. This swift expansion underscores the escalating influence of Gen AI technologies.

 

The rise of Gen AI means companies can immediately reap the competitive benefits of a more efficient, cost-effective and competitive contract process. Gen AI provides an immediate remedy to problematic manual processes while strategically paving the way for a more robust CLM system, should the needs of your business require such a transition.

 

Despite apprehensions surrounding the utilisation of AI, the majority of customers maintain trust in businesses that integrate AI technology. When companies employ AI in a responsible and transparent manner, they not only retain consumer confidence but also leverage the potential of AI to enhance customer experiences. 

Investing in Gen AI-assisted contract operations offers immediate value for start-ups, scale-ups and established enterprises alike, proving to be a worthwhile expenditure.

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By Sarvarth Misra, CEO and co-founder, ContractPodAi