As contract complexity and volume grow for evolving businesses, managing contracts efficiently is more critical than ever. Thanks to almost lightspeed developments in artificial intelligence (AI) and optical character recognition (OCR), contract management software has taken a giant leap forward. AI-powered OCR technology is revolutionizing how companies read, extract, and manage data from their contract documents. This article explores the tremendous and positive impact of AI and OCR systems in contract management - highlighting how these technologies streamline processes, enhance accuracy, and save valuable time when extracting data from digital texts.
What is OCR in AI-Based CLM?
At its core, OCR with AI-based CLM refer to the integration of optical character recognition algorithms and artificial intelligence to improve the capability of contract lifecycle management software to recognize text within images or scanned documents. This technology doesn't just see the text; it understands it, enabling more sophisticated data extraction and interpretation of digital documents or scanned text from originally black-and-white printed documents.
The Power of AI-Powered OCR for Contracts
AI-powered OCR tools for contract management go beyond traditional OCR capabilities by incorporating contract AI and OCR algorithms. Leveraging machine learning within contract software, the computer vision (OCR engine) technology enhances the accuracy and efficiency of text recognition. This AI-based OCR can handle complex layouts and numerous different types of common and niche/industry-specific contracts and other legal documents.
Text detection within OCR solutions can detect critical information and categorize it as easily searchable and manageable metadata. Such contract metadata include:
- counterparty names.
- email addresses and phone numbers.
- locations.
- key dates.
- personally identifiable information.
- payment card information.
- sections and clauses.
- these metadata and many more.
While this document feature extraction and post-processing is great on its own, contract management software's OCR works wonders with machine learning.
Documents and images processed via contract management software OCR are sent for machine learning for an evermore intelligent metadata and clause recognition process. This recognition includes a numerical expression of confidence that the system has in its categorization of certain clauses and sections (a number that increases as contract complexity and volume grow).
This feature encourages business growth; the more contracts are introduced, the stronger the OCR feature and the AI become. This instance is just one of many ways contract management software retains increasingly stronger machine learning - with other ways including the introduction of many different types of classified clauses that are actually used by leading legal professionals.
Benefits of AI OCR in Contract Management
Now that we know its purpose, let's take a closer look at how contract AI OCR transforms contract management together.
- Automated Data Extraction: As has been touched upon, AI-powered OCR software can automatically read and extract key information from contracts, such as dates, names, and financial terms, with little human intervention. But why is this important? Well, it decreases instances of devastating human error at such a primary and fundamental stage of a contract's management.
- Intelligent Contract Analysis: Beyond simple extraction, OCR artificial intelligence can classify documents on a rules-based sentiment, identify clauses to create metadata fields for them, and even assess risk according to pre-set parameters.
- Seamless Integration: Contract management software with OCR and built-in AI can easily integrate with other contract management tools and systems, ensuring a smooth workflow and enabling comprehensive contract lifecycle management. These can include document management systems, ERPs, CRMs, and many others.
- Time Savings: AI OCR technologies automate the tedious task of manual data entry. OCR reading processes that used to take hours can now be performed in a matter of several minutes, freeing up valuable time for more strategic tasks.
- Improved Data Accessibility: OCR and AI together transform static documents into searchable, editable, and analyzable digital content, making it easier to find and use information stored in contracts. Clauses, sections, and metadata extracted from contract documents can be searched in real time - complete with comprehensive audit trails, search suggestions, and helpful links to valuable information.
- Cost Efficiency: By automating the data extraction process, organizations can greatly decrease labor costs and the financial impact of human error in contract management.
Real-World Applications
Companies across various industries are leveraging OCR with AI in contract management to:
- Automate Contract Onboarding: Organizations can quickly convert physical contracts into digital formats, making them ready for analysis and storage. What's more, they can be quickly retrieved, archived, or destroyed.
- Enhance Compliance Monitoring: Teams can be quickly alerted of non-compliance and collaborate on either completing the necessary next steps or modifying contract terms and conditions accordingly. Workflow automation and task escalation essentially ensure that no task gets by the company anymore.
- Streamline Contract Renewals: Parties use AI-based OCR to monitor contract expiration dates and initiate renewal processes, ensuring no contract falls through the cracks. Alerts and rules around contract renewal dates and other key dates can be set well ahead of time - ensuring well-preforming contracts are renewed and vice versa.
- Standardize Contracts: An organization trying to build its clause and language library can benefit tremendously from extracting clauses from real-life contracts and retaining them. Additionally, introduced contracts can have metadata extracted and merged with pre-approved templates so that all contracts have the desired formatting and key items included.
The Future is Bright with AI and OCR
The integration of OCR and contract AI is just the beginning. As these technologies further evolve for new use cases, we can look forward to even more sophisticated contract management solutions. From predictive analytics to fully autonomous contract negotiation bots, the potential for AI in OCR to transform contract management is boundless.
However - in the interest of keeping things grounded - AI-powered OCR in contract management is not just a far future vision but an available reality that offers tangible benefits. By embracing this technology, companies can enhance their contract management processes, making them more efficient, accurate, and cost-effective. As we look to the future, the role of OCR artificial intelligence in reshaping business operations continues to grow, promising a new era of efficiency and innovation in contract management.
To learn about how to get started with OCR, contract intelligence with machine learning, and almost countless other in-demand features, book a free demo of CobbleStone Contract Insight® today!
*Legal Disclaimer: This article is not legal advice. The content of this article is for general informational and educational purposes only. The information on this website may not present the most up-to-date legal information. Specific guidelines on unilateral contracts are governed by state law. Readers should contact their attorneys for legal advice regarding any particular legal matter.
