For an enterprise, negotiations are one of the most demanding aspects of contract management. The long-drawn process of negotiation leads to a loss of both time and money for the organizations. Essentially considered a pre-sign off process, negotiations run parallel with every other stage of the contract process – be it authoring, review, or signing. It can keep the legal team of organizations on their toes. Also, the multiple negotiations cycle, leading to frequent versioning and modifications, can elongate the contract sign-off time. Having an automated process for the negotiation process with complete transparency into versions and AI-led suggestions based on historic data adds value to the contracting cycle.
To streamline contract management, organizations must get their negotiation strategies on target. Once they get this right, the remaining stages fall in line with relative ease. A KPMG research found that inefficient contracting can lead to a loss of 5-40% of the value of a given deal. Moreover, inefficient contracting begins with inefficiencies in negotiations.
To iron out inefficiencies in negotiation policies, organizations need to ask some fundamental questions:
- How does our company manage contract negotiations?
- What tools can we use to maximize the value of negotiations, along with every other stage of a contract’s lifecycle?
- How can we leverage technology to cut short processes like contract authoring, reviewing, and negotiations?
Challenges in the Traditional Contract Negotiation Process
Since negotiations are an integral part of every stage of contract management, the challenges that the process poses begin at the drawing board. For starters, frequent versioning, modifications, and keeping a tab of the most updated version of negotiation terms is a massive hurdle for the legal team. For instance, every time a contract is modified, they need to go back to the negotiating table to plug the gaps. This can happen at any time – be it during contract authoring, review, or during approvals. This leads to a delay in signing the contract as per estimated timelines. In traditional contract management processes, this usually generates reams of paperwork. The result is a negative and tiresome experience for everyone involved, be it customers or employees.
Let’s look at some other challenges that traditional negotiation processes can pose:
Reams of paperwork: Suppose a contract goes back to the negotiating table at every stage of the contract process. In that case, it can result in the contract running into stacks of papers, making them unwieldy and difficult to manage.
Long-drawn review and negotiation cycles: This can be a significant bottleneck if there is no visibility into where contracts are stuck, and no data to aid quick decision-making.
Frequent versioning and modifications lengthen negotiations: Every time the two contracting parties disagree on a point, the contract goes back to the drawing board for versioning or modification; net outcome: long-drawn negotiations.
Probabilities of human error: When you’re manually reading through pages of complex legal documents, errors can happen, leading to losses to a business. That can further lead to agreeing to some negotiating points that may not be in your favor.
Reduced visibility: In an offline world, it’s difficult to manually keep tabs on every small aspect the contract covers and the issues that may not be allowing the negotiation to move forward.
Negative experience for clients: Put all the above points together, and what you create is an unhappy customer experience.
Redefining Contract Negotiations with Artificial Intelligence
Acquiring an AI-powered contract management software helps increase the efficiency of your contract negotiation process, as they’re designed to counter the inefficiencies of traditional procedures. Data processing and AI have made contract management faster, seamless, streamlined, and efficient and can help companies overcome most of the challenges of negotiations.
AI has transformed contract management as it was traditionally known. It has provided businesses with new, path-breaking tools to manage contracts. Let’s look at how it has disrupted the way contracts are authored, negotiated, reviewed, and signed:
Improved negotiations: With AI’s predictive information from historical data and automated workflow, all parties are on the same page as a contract goes through the authoring, versioning, and modification process. The faster the authoring, the quicker the negotiations. Which means deals are closed faster. Legal teams are always updated with the latest version of negotiation terms.
Seamless two-way communication: AI allows for seamless two-way communication between the contracting parties. And effective communication is the key to conducting smoother negotiations and faster approvals.
Enhances visibility and transparency: AI elevates the visibility of modifications, making negotiations faster. Version control helps in keeping track of multiple back and forth of negotiation.
It’s sparked a race for faster sign-offs: Contract management software acts as a document repository. Legal teams can now work in real-time from anywhere. They have ready contract templates, and the entire contract management database of past and present contracts is available at the click of a mouse for negotiations and reviews. This has reduced contract cycle time and added speed, agility, and efficiency to contract management and faster negotiations.
Smart Contract Authoring: AI-enabled CLM solutions help deliver intelligent contract creation by automatically identifying and arranging contracts in the contract library. It also helps tap into past databanks, identify patterns, and suggest suitable clauses. Armed with all this data, negotiations become seamless.
Extract data from legacy contracts: Earlier done manually, AI does this with unprecedented speed and accuracy. On the negotiating table, this information proves invaluable. Also, AI helps tap into past contracts to give relevant suggestions that go a long way in easing negotiating.
Access to 360-degree insights: These insights help organizations derive the full value out of negotiations besides improving the predictive capabilities of organizations and enable smarter interventions in contract authoring and negotiations.
Optimize review timelines: A Forrester Research study found a contract approval cycle can take up to 3 to 4 weeks. A lot of time is lost in reviews while negotiating and signing contracts. AI integrates all functions into a single platform, highlighting clause changes, and facilitating version comparisons. This speed-up review and turnaround times.
Artificial Intelligence powered contract management solutions have made contract authoring, versioning, and modification an organized, seamless, and hassle-free process, thereby leading to smoother and faster negotiations. Stay tuned for our upcoming blog on how Utria’s AI-driven CLM is beneficial for negotiating enterprise-wide contracts.