In today’s fast-paced business world, keeping up with industry standards and staying ahead of the competition is a must. One way to achieve this is through contract extraction automation when dealing with large volumes of transactions.
Contract data extraction involves using special software or algorithms that quickly analyze large amounts of textual data. It can extract relevant information from contracts and other documents necessary for businesses.
This automated process saves time, energy, and money compared to manual contract extraction methods. So, it allows companies to make more informed decisions faster. If you want to know more about this concept, this article will walk you through the basics to help you incorporate it into your contract management process.
What Is Contract Extraction?
Contract extraction is the process of identifying, extracting and analyzing data contained within legally binding agreements and contracts. In the real world, manual extraction from contracts is time-consuming, which are prone to errors. This makes such approach useful in contract management when automation comes into play.
Automated data extraction, powered by AI and machine learning, can accurately and quickly extract structured and unstructured data from contract documents. It can identify clauses that indicate payment terms, expiration dates, specific obligations, and other related details.
Importance of Contract Extraction To Businesses
When you run a business, contracts become indispensable in your transactions to and between between clients, business partners, service providers, and third-party vendors. In short, legal contracts are the lifeblood of business transactions.
Contract extraction is important because it allows you to identify and extract essential data from contracts, such as key terms and other vital details. You can use the extracted information to organize and analyze when you create compliance reports, manage risk, track deadlines, and facilitate negotiations.
The Benefits of Automated Contract Extraction
Automated contract extraction is the way for business owners looking to save time, optimize research processes, and reduce errors. Here are three important reasons.
Here are three important reasons why you should start automating data extraction in your business:
1. Increased efficiency
As mentioned, you get to focus on more important things for your business instead of worrying about human error in collecting important data from your contracts. By using automated tools, you can save time and resources. Automation also allows you to have rapid data retrieval to streamline your workflow.
2. Improved compliance
With automation tools, you can make sure that your documents are compliant with legal and regulatory requirements. The clauses stated in the contract can automatically be extracted and analyzed. As such, you can quickly identify any potential loopholes, risks, or non-compliance issues. Appropriate action can then be taken to ensure your business is protected by the contract.
3. Reduced risk
As we mentioned before, manually going over a contract can be time-consuming and prone to errors. With automated tools, you can reduce your risk of missing out on some of the important information in the contract.
Automating the process of contract extraction also allows you to identify high-risk clauses and provisions quickly. Once these have been identified, you can assess your potential risks and take appropriate measures to mitigate these risks.
How Automated Contract Extraction Works
Automated contract extraction is done through the combined use of machine learning and rule-based approaches. Machine learning algorithms are trained using annotated data to automate the process of learning and extracting data from a contract. Meanwhile, rule-based methods depend on predefined rules for information.
The process for extracting data from a contract usually involves the following steps:
- Text preprocessing
- Entity recognition
- Clause identification
- Information extraction
- Validation and verification
By automating the process, you can encounter little to no errors.
Privacy Considerations and Best Practices for Contract Extraction
Since sensitive and confidential information is being extracted in this process, it’s important to make sure that you use a secure tool. Additionally, there are some practices you need to uphold.
Here are a few things you need to remember:
1. Data minimization: Only extract necessary data from contracts. Avoid collecting excessive personal or sensitive data that has no direct relevance to the purpose of the contract.
2. Use pseudonyms or anonyms: If possible make personal data anonymous or hidden under a pseudonym. This will help protect the individual’s identity and reduce any risk of re-identification. Some things you can anonymize include names, contact details, and addresses.
3. Data security: Always uphold robust security measures so that the extracted data you collect is secure. You can achieve this by doing regular security audits.
4. Consent and legal basis: Before collecting data, see that you obtain the consent of the individual in the contract. Since these documents contain personal and sensitive information, you must strictly adhere to privacy regulations.
5. Data Retention and Deletion: See to it that you only retain the data as needed for the extraction. If the data is no longer needed, make sure that you securely delete or anonymize it for the person’s privacy.
6. Third-Party Considerations: If you are using a third-party service provider to collect data from the contract, be certain that they have the right data protection agreements in place. Do your research before picking out a provider.
These are just some of the best practices when it comes to data collection that you need to prioritize.
Optimizing Workflows with Document Management and Contract Extraction Systems
How does document management software help you with contract extraction? Here are some ways these tools can optimize your workflows:
- Optimizing Workflows: Automated workflow processes ensure consistency, reduce the need for manual intervention, and improve turnaround times.
- Reducing Costs: Document management tools also act as a centralized document repository, which eradicates the need for manual filing of your contracts.
Using Fill To Better Manage Your Business Contracts and Their Data
There are plenty of tools you can use for document management. But when it comes to contract extraction, Fill is a brand that can effectively manage your contracts and their data. The process of data extraction no longer needs to be done manually thanks to our built-in systems.
Request a free demo to see how Fill collects data from your contracts and reap the benefits of this decision in no time.