Artificial Intelligence Contract Reader: 6 Best Practices for Capturing Insights from Your Contracts

Contracts are critical to how business gets done.  

For information management professionals, the challenge lies in capturing essential data from contracts – relationships, payment terms, and obligations – without missing critical details. 

Conventional approaches to capturing contract information are time-consuming and error prone.  It’s also hard to scale manual data capture processes to keep up with growing contract volumes. 

That’s where artificial intelligence (AI) contract readers come in.  

This powerful technology automates the extraction of key data points from contracts. 

This article shows how AI contract readers work and the benefits that they provide. 

What Is an AI Contract Reader and How Does It Work?

An AI contract reader leverages artificial intelligence technologies such as machine learning (ML) and natural language processing (NLP) to extract essential information from contracts.  

Here’s how the technology works: 

• Ingestion.  Contracts are uploaded into the reader in any format, whether it’s a PDF, Word document, or scanned image.  This ensures that all documents are ready for data extraction.

• Recognition.  Optical character recognition (OCR) technology converts scanned or non-editable files into machine-readable text, enabling the AI to access and process the content.

• Capture.  AI contract readers use predefined rules and sophisticated algorithms to identify and extract specific data points on contracts, such as dates, payment terms, and the parties.

• Output.  The reader exports captured data into a usable format, such as a PDF, or integrates the data into a document management platform or other system for downstream use.

By automating data extraction, an AI contract reader eliminates the inefficiencies and inaccuracies of manual methods.  Its ability to handle diverse formats, accurately recognize text, and export data ensures that organizations can quickly and reliably capture the details they need from their contracts.

The Top Benefits of an AI Contract Reader

Streamlining contract data capture with an AI contract reader offers numerous advantages:

• Efficiency.  Manually capturing data from contracts can take hours, especially when dealing with high document volumes.  AI contract readers reduce this process to minutes, freeing up valuable time for other responsibilities.  In an automated environment, staff can focus more time on strategic initiatives rather than getting bogged down in manual data entry.

• Accuracy.  Manual processes are inherently prone to human error, such as mis-keying data, misreading clauses or overlooking important details.  AI contract readers ensure high precision in data capture, providing reliable outputs and reducing the risk of costly mistakes.

• Scalability.  Managing hundreds or thousands of contracts can overwhelm manual processes.  AI contract readers handle large volumes efficiently, ensuring consistent performance regardless of workload.  This scalability is crucial for effectively managing business growth.

• Compliance.  AI contract readers excel at capturing compliance-related data, ensuring that organizations meet their legal and regulatory obligations with confidence.  Details such as renewal dates, jurisdictional clauses, and audit requirements are identified and extracted, providing a clear and organized view of compliance terms.  This capability helps mitigate risks associated with missed deadlines, overlooked obligations, or non-compliant language.

• Productivity.  Automating manual and repetitive tasks like data extraction allow teams to allocate their time and skills to higher-value activities, improving productivity and morale.

AI contract readers transform the way organizations capture critical data from their contracts, delivering significant benefits across efficiency, accuracy, scalability, compliance, and productivity. 

Key Use Cases for an AI Contract Reader

AI contract readers address the challenges faced by information management professionals.

• Renewal date tracking.  Missed renewal dates can lead to lost opportunities or service interruptions.  AI tools capture and highlight these dates, ensuring timely action.

• Term identification.  Understanding payment obligations is critical for financial planning.  AI tools accurately extract payment terms, eliminating the risk of miscommunication.

• Compliance.  Contracts often include clauses that must adhere to legal or industry standards.  AI tools capture these details, enabling quick checks for compliance readiness.

• Vendor contract standardization.  By capturing standardized terms across contracts, AI contract readers help teams ensure consistency and adherence to organizational policies.

• Due diligence.  During audits or mergers, having organized and accessible contract data is essential.  AI contract readers streamline data capture, speeding up due diligence efforts.

AI contract readers provide targeted solutions to common challenges in contract management, enabling information management professionals to stay proactive and organized.  From tracking critical renewal dates to ensuring compliance and standardizing vendor agreements, these tools streamline business processes and reduce the risks associated with manual data capture. 

6 Tips for Capturing Contract Insights with AI

To make the most of your AI contract reader, follow these six best practices for contract data capture:

1. Organize contracts for easy access.  Before using an AI contract reader, ensure all contracts are properly stored and digitized.  Centralizing contracts in a secure and structured repository reduces inefficiencies and ensures the AI can access all documents seamlessly.  High-resolution scans improve OCR accuracy, ensuring better data capture.

2. Determine your data capture rules.  Every organization has unique requirements for contract data.  Define what data points are most critical, such as renewal dates, payment terms, compliance clauses, or parties.  Configuring the tool to your specific needs ensures the AI contract reader captures the information that matters most to your organization.

3. Train your team.  An AI contract reader is only as effective as the people using it.  Provide training sessions to familiarize your team with the tool’s capabilities, ensuring they understand how to configure it for specific data capture tasks.  Proper training minimizes errors, improves staff productivity, and boosts team confidence in using the technology.

4. Periodically validate results.  Even the best AI tools can occasionally misinterpret complex clauses.  Regularly reviewing captured data ensures its accuracy and highlights areas where the AI might need adjustments. This step also builds trust in the software’s outputs over time.

5. Integrate with your systems.  Captured data is most valuable when it seamlessly integrates with your existing systems.  Ensure that your AI contract reader exports data in formats compatible with your accounting software, contract lifecycle management (CLM) tools, or other systems.  This integration simplifies processes and enhances operational efficiency.

6. Monitor for continuous improvement.  AI technologies are evolving rapidly.  Stay updated on new features or updates from your technology provider that can enhance data capture accuracy or expand the tool’s capabilities.  Regular monitoring and feedback loops with the vendor can ensure your AI contract reader remains cutting-edge and delivers optimal results.

By following these six best practices, an organization can maximize the effectiveness of its AI contract reader and ensure seamless, accurate contract data capture.  From organizing documents and defining critical data points to training frontline users and integrating the tool with existing systems, each step strengthens an organization’s ability to harness the full potential of this technology. 

Conclusion

Capturing contract data accurately and efficiently is key to driving business, ensuring compliance, and mitigating risks.  AI contract readers automate the extraction of critical details and enable teams to focus on strategic priorities.  By following best practices such as organizing contracts, configuring data capture rules, and training staff, organizations can unlock the full potential of this technology.