Lots of businesses have heard of contract analysis. The problem is, few actually understand how to analyze their contracts effectively.
This Juro deep dive explains what contract analysis is, who’s responsible for it and the most efficient way to perform it. Read on to find out more.
Contract analysis definition
Contract analysis is a process whereby companies examine and extract actionable insights from legal agreements by reviewing and analyzing them. This can be achieved manually or automated with contract analysis software.
Regardless of how you approach it, contract analysis involves tracking important contract data and values to better understand your contracts. This can mean anything from identifying friction points within the contract workflow to calculating the cost of missed contract renewals.
Contract analysis vs contract review
We know what you’re thinking. The process described above is called contract review, right? Well, no.
Contract analysis and contract review both involve looking closely at contracts, but they’re completely different processes.
Contract analysis is different from contract review because contract analysis largely occurs post-signature, whereas contract review happens before a contract has been signed.
Another difference is that contract review involves checking and approving specific terms within a contract. By comparison, contract analysis means extracting and reviewing data from contracts, usually in large quantities.
The data generated is often called 'contract analytics'. Contract analytics can be used to create meaningful business insights and identify significant patterns within your contracts. To do this, the data is often presented in a digestible format for legal and business teams, making these important data points easy for them to understand.
Who is responsible for contract analysis?
Contract analysis is typically performed by contract managers or contract specialists. However, it can be carried out by anyone within the organization that has an interest in understanding this data.
This includes finance managers that want to project revenue more accurately or legal teams that want to identify pain points in their existing contract process. It could also include procurement teams that are keen to track obligations and costs.
Contract analysis can also happen in the background, rather than being carried out by certain individuals. However, businesses will need to automate the process for that to be possible.
What are the benefits of contract analysis?
We now understand exactly what contract analysis entails, but is it actually worth it? There are countless benefits of conducting this kind of analysis. Let’s explore some below.
🧠 Better decision making
The best way to make better decisions in the future is to look at what has and hasn’t worked in the past. Effective contract analysis enables you to do just that. By comparing the performance and contents of contracts using a contract analysis tool, businesses can evaluate the best approach to apply to similar contracts in the future.
This is particularly useful when analyzing redlines and contract negotiation data. By reflecting retrospectively on the way negotiations were performed and understanding where friction points occur it’s far easier to identify any past mistakes and adapt your processes for better results.
🔍 Improved visibility
Instead of leaving contracts lying around in shared drives to collect digital dust, contract analysis ensures that important information is captured and shared. By converting jargon-heavy legal agreements into clear and actionable data, all departments have a better idea of what’s going on in legal and where they can help.
This is a stark contrast to the usual way that contracts are stored as they’re usually scattered across shared drives and remain unsearchable.
💰 Identify new opportunities
Another benefit of contract analysis is that it makes it easier for legal and business teams to identify new opportunities to capture revenue and reduce risk. Without the opportunity to reflect critically on executed contracts, these opportunities would likely be missed.
When growing your business it’s all about moving the needle. Fortunately, your contracts contain a wealth of information on how you can do just that.
⛑️ Risk mitigation
Just as contract analysis enables businesses to identify opportunities, it enables them to identify risk too.
For example, if business contracts with certain types of companies frequently encounter friction with certain clauses, including these can create risk. If the terms can be tweaked slightly to reduce this risk, you can increase the chance of signing and reduce the time taken to sign.
Similarly, if the contract analysis tells you that there’s an increasing amount of churn with particular customers, it could be a sign that they aren’t being served as well as they should be. This is something that’s better addressed early on, and contract analysis helps to identify these red flags earlier.
How does contract analysis work?
Contract analysis sounds great. But how does it work, and which tools do you need?
The contract analysis process is a broad one, and it can vary between different businesses. However, contract analysis is typically performed in one of two ways: through automation or through a manual process.
A manual contract analysis process typically involves conducting an audit of contracts and extracting the data from them. This is usually done by reviewing each contract individually and inputting the contract data into a contract management spreadsheet of some sort. This process is repeated until all contracts have been analyzed, and it continues as new contracts get signed.
But, as you can imagine, this process can be incredibly time-consuming for businesses managing large volumes of contracts. That’s where automation comes in.
How can contract analysis software help?
Contract analysis software can streamline this extraction process and automate the workflow used to move data across from contracts into spreadsheets. One of the most popular tools used to do this is AI contract analysis software, which relies on artificial intelligence to complete these processes. This is also sometimes called contract AI.
The problem is, contract analysis software powered by AI typically comes with a hefty price tag. This is true of most AI-led contracting tools.
If you manage your contracts effectively from the offset and build contracts as structured data, AI analysis tools aren't necessary.
Instead, by adopting a more affordable and comprehensive tool like Juro's contract automation software, legal and business teams can:
- Build contracts as structured data: Contracts are created as structured data from the off, meaning you no longer need to wait for data entry before you can track them
- Create customizable dashboards: Juro users can filter and view all of their contract data at a glance using Juro’s customizable dashboards
- Set renewal reminders: Juro users can set automated contract reminders to ensure fewer missed contract renewal deadlines pass without action
- Query contracts in seconds: Juro’s powerful search functionality makes it quick and easy to run reports based on fields and tags without leaving the platform
- Set user permissions: Juro users can decide who has access to which contracts and when, enabling legal and business teams to store contracts and their data securely
All of this enables companies to analyze their contracts, but at a fraction of the price.
Ready to generate contract analytics?
Looking to gain value from your contracts post-signature? Juro’s all-in-one contract automation software is well equipped to help growing businesses manage and analyze contracts at scale. Fill in the form below to find out more.