Knowing your contract lifecycle process’s performance is important for every business. Contract managers, legal teams, and business executives are always expected to answer the following questions:
How are our contracts performing?
What are the bottlenecks in our contract management process?
What is our risk exposure?
Analyzing and assessing contracts is the way to answer these questions. Contract analysis helps gain insights into contractual performance, measure deviations, and derive strategies. If you are wondering how to analyze your agreements, you are at the right place.
In this blog, we take a deep dive into how contract data can be analyzed, what the process is, and how businesses can solve the complex challenges of manual agreement analysis. Let’s begin.
Understanding 101s of Contract Analysis
Let’s start with the basics—understanding what agreement analysis is and how it is different from reviewing a contract. This section answers these two questions.
What is Contract Analysis?
Contract analysis refers to the process of assessing and examining an organization’s agreements and driving valuable insights from them. This process helps gain an analytical overview of contracts such as contract values, key dates, risks, and liabilities.
The analysis is a part of the bigger picture—contract performance management—which deals with optimizing an organization’s contractual performance.
Agreement analysis is commonly confused with contract review. While both processes involve assessing contracts, there’s a vast difference between the two. The coming section sheds light on this difference.
Contract Analysis vs. Contract Review: What’s the Difference?
| Aspects | Contract Analysis | Contract Review |
| Purpose | To gain insights into CLM performance. | To ensure the contract’s legal accuracy and negotiate better deals. |
| Focus | Identifies patterns, risks involved, and performance metrics. | Checks individual clauses, terms, obligations, and legal factors. |
| Scope | Involves assessing multiple contracts across a time period. | Limited to an individual contract. |
| Outcome | Strategic insights on contract performance. | Ensures legally compliant and favorable contracts. |
| Example | Analyzing a company’s contracts to assess risk exposure. | Reviewing a vendor contract for legal accuracy. |
So while analysis focuses on achieving insights from contracts, reviewing centers around ensuring contracts’ compliance and favorability. However, why should an organization analyze its contracts? Keep reading to find out.
6 Reasons Why You Should Analyze Your Business Agreements
Wondering how analysis can be useful for contract management? Check out these benefits:
📅 Helps Track Obligations and Key Dates
If questions like “How much payment is due from my clients?” and “How many of my contracts will expire this quarter?” strike you now and then, you are taking a chance with your contractual obligations, possibly missing a few. Analytics help solve this problem by extracting, visualizing, and reporting key contract obligations—ensuring your agreement commitments are fulfilled.
🧠 Improves Decision Making
Analytics help improve future contracts by giving contract managers, business executives, and other stakeholders insights into current contract performance. The actionable insights serve as grounds for strategic planning—enabling organizations to make informed decisions for their CLM processes.
💰 Promotes Cross-Selling
Contract analytics help maximize sales by enabling organizations to cross-sell their products and services. By understanding consumer behavior, deal patterns, and market demographics, brands can discover new opportunities to cross-sell their offerings.
⚖️ Ensures Continuous Legal Compliance
With continuously changing business objectives and regulatory laws, contracts need to be updated. This is especially the case with organizations operating in regulated sectors like healthcare, fintech, banking, and legal. Analytics helps detect and rectify incompliant contracts—using outdated language, missing new laws, and containing legal loopholes to derisk them.
🤝 Improves Negotiation Power
The insights derived by analyzing contracts help improve the contract negotiation process. Processing historical contract data enables contract managers to locate the most profitable contracts. Replicating the contract language, terms, and clauses of these particular contracts is useful for improving negotiation stance and growing business revenue.
Smart contract management software like HyperStart CLM not only processes contractual obligations but also helps track them. The smart alert feature helps ensure you never miss a renewal deadline or payment again.
🔎 Elevates Contract Visibility
As per a 2023 report by World Commerce and Contracting, 48% of organizations investing in their CLM processes are doing so for better contract visibility. Analysis helps turn stacks of contracts into organized information. By extracting and processing important terms, businesses get access to actionable data.
These are the key benefits of analyzing legal agreements. Now that you know why analyzing contracts is a good idea, let’s discuss how contracts can be analyzed.
Turn Contracts Data Into Insights
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Methods and Processes of Analyzing Contracts
There are two key ways to analyze contracts: manual analysis and using contract analysis software like HyperStart.
In manual analysis, agreement documents are individually analyzed by professional contract analysts. These analysts manually assess each clause to identify data points. The data is then evaluated against contract management KPIs to measure CLM performance.
In automated analysis, contracts are fed to the contract analysis software. The software analyzes these legal documents, extracts important information, allows you to search with custom AI filters, organizes them in columns, and presents them as visualized data. Contract managers then use this data to calculate contract values, performance, and risks.
Which of the approaches is suitable? As per a 2023 report by World Commerce and Contracting, 38% of organizations use contract analytics and automation tools to assess their contracts. This means that 62% of organizations still analyze their contracts manually.
Manually assessing agreements comes with many challenges like oversights, contract complexity, and time requirements. The coming section sheds light on these challenges and how software helps solve them.
7 Common Challenges of Manual Contract Analysis and How Software Can Help
The manual analysis process is prone to human errors and loopholes. Analysis tools provide analytical insights with minimal effort. Let’s find out how.
Challenge #1: Inconsistency in Agreement Formats
The problem:
Different contracts drafted by different legal personnel vary in format and structure.
With the change in business objectives, applicable jurisdictions, and laws over time, similar types of contracts (for example, employee NDAs) may vary in clauses and terms.
Legal teams are susceptible to human error, inconsistencies, and missed critical terms.
How software helps:
Machine learning algorithms normalize different agreement formats into standard and structured formats.
This normalization eases contract data extraction as now the analysis does not require deciphering the original contract format.
The software also indexes and categorizes contracts for quick retrieval.
Challenge #2: Large Contract Volumes for Processing
The problem:
Manually reviewing thousands of contracts is tedious and overwhelms the analyst team.
Maintaining analytical consistency across a large volume of contracts is challenging as legal teams have to deal with a large number of contracts.
How software helps:
Software helps conduct effective contract analysis through automation. This way, even extensive contract volumes can be analyzed within minutes.
Contracts can be prioritized based on criteria like risk, ensuring critical documents are reviewed first.
Legal teams can speed up the review process and maintain consistency across all contracts.
Challenge #3: Difficult to Understand Contract Language
The problem:
Different legal personnel use different contract language to draft agreements—leading to language inconsistencies.
Non-legal teams are at a constant risk of misinterpreting the contract language.
Dense language and jargon in contracts make agreements difficult to interpret.
How software helps:
The software uses natural language processing modules to simplify complex legalese.
AI models effectively translate complex terms into simple information that even non-legal teams can interpret and utilize.
Challenge #4: Limited Analysis Customizability
The problem:
A standardized one-size-fits-all analysis approach is likely to overlook critical issues and contract flaws depending on the agreement’s context.
Manual analysis results are usually standardized and may be ineffectual for non-legal teams, for example, finance and sales.
How software helps:
Automation offers great customizability in templates, visualization, and filtering.
Targeted analysis based on specific clauses, terms, or compliance issues maximizes benefits for all teams, enabling them to leverage data relevant to their operations.
Challenge #5: Possible Negligence and Human Errors
The problem:
Human errors such as overlooking critical details are common in manual analysis.
Inconsistencies in review standards can lead to inaccurate assessments.
Negligence in contract analysis leads to incompliance, legal disputes, and lawsuits with counterparties.
How software helps:
As per a World Commerce and Contracting report, AI contract analysis is 98% accurate (against human analysis is 92% accurate) and offers comparatively reliable results.
Automating redlining helps flag faulty clauses for shortcutting contract review time by 75%.
Advanced artificial intelligence models like HyperStart’s AI have 99% accuracy.
Challenge #6: Resources Required for the Analysis
The problem:
As per Salary.com, the salary of a contract analyst ranges from USD 48,067 to USD 83,727.
The complete cost of hiring contract analysts, legal experts, and infrastructure doesn’t justify the returns.
How software helps:
Most contract management software comes with built-in analysis functionalities.
Software solutions extract data from all your contracts and turn them into insights automatically—thus saving organizational costs.
The software can accommodate growing contract volumes.
Challenge #7: Analyze Continuously or Have Outdated Contract Data
The problem:
Manual analysis is conducted periodically. It can be monthly, quarterly, or even yearly for some organizations.
Decisions may be based on inaccurate or outdated information due to lag in updates.
How software helps:
Analytics software reviews contracts in real-time, thus providing dynamic data on contractual performance.
The data gets updated with every newly signed contract. This enables contract managers to access freshly updated data with the latest insights at all times.
Get Real-time Insights Into Contract Performance
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So far we have identified the common challenges of analyzing contracts manually and have explained how automated solutions address these issues. If you are looking for efficient, accurate, and feature-rich software to analyze your agreements, HyperStart is the best choice.
Let’s explore the unique features of HyperStart that can help you analyze your contracts.
6 Features of HyperStart’s Contract Analysis Software
HyperStart offers a comprehensive suite for end-to-end contract lifecycle management. Here are a few features of HyperStart that help gain adequate contract visibility and analytics.
Feature How It Works Bulk-import Contracts Maintain a Single Source of Truth by bulk-importing contracts from multiple sources including Gmail, Salesforce, One Drive, and Google Drive. Automated Metadata Extraction Automatically extract key contract terms, dates, and important information from your documents with 99% precision. AI-powered OCR Use Optical Character Recognition (OCR) to convert unstructured data from paper contracts into searchable information. In-flight Dashboard Visualize your contractual data with interactive charts and graphs. Custom Views Customize columns, views, and filter views using your repository. Empower stakeholders with the information they need. AI Review Get AI to review your counterparty papers and identify risky clauses. Manually review AI-flagged clauses and save your business time and contractual risks.
These are a few key features of HyperStart. With these advanced features at your disposal, the software helps make your contracting process analytical, efficient, and optimized.
Analyze Contracts Smartly with HyperStart CLM
Analysis helps reflect on your CLM strategies and forge a path for future contracting processes. By analyzing contractual performance, you can make informed decisions regarding your CLM strategies and ensure compliance for your organization.
Using a smart contract management solution like HyperStart CLM will assist you in achieving these objectives. Be it managing contracts on a day-to-day basis or turning contracts into data-rich insights, HyperStart CLM is your reliable solution. Leverage HyperStart’s smart AI and machine learning tech and turn contracts into insights. Here are a few highlights of HyperStart:
99% accurate AI engine
80% less contract admin time
5x faster contract TAT
$20 saved per contract
Still in doubt? Book a free demo today and see for yourself.
