What is OCR for Contract Management?
Do you know how OCR is used in contract management? OCR stands for optical character recognition, and it’s used when scanning physical documents into digital format. As such, OCR is essential for digitizing existing contracts into a contract management system, as you’ll soon learn.
- OCR, or optical character recognition, captures text-based information from digital files such as PDFs, MS Word, JPGs, etc.
- OCR is very helpful for physical documents that have been scanned into digital image format
- Contract management software uses OCR to capture and index all the information in a contract so that it is useable digital data
- With OCR, you can easily store and search all of the information in your contracts and supporting documents
What OCR Is and What It Does
Optical character recognition – OCR, for short – is a set of technologies designed to recognize text embedded in digital image files. Sometimes referred to as text recognition, OCR examines image files in JPG, PDF, and other formats with the goal of indexing all text information.
OCR technology is commonly used with physical documents scanned into digital format. The scan is an image file, even if that image is of an all-text contract. To access the information in that contract, OCR software indexes the letters, words, and sentences such as names, terms, values, and more so that all the information is easily searchable. Natural language processing (NLP) and data extraction technology can then be used to extract that information and auto-populate it into an actual record in the software.
How OCR Technology Works
OCR software uses a variety of technologies to “read” process the information contained in each image file. It’s a multi-step process that involves:
- Image acquisition, where a physical document is scanned into a digital image file
- Preprocessing, which trains the OCR system to recognized characters in image files
- Segmentation, which breaks the digital image into smaller logical parts for easier processing
- Feature extraction, which involves identifying and extracting text characters in the image, typically by identifying contrasting light and dark areas
- Classification, which identifies specific characters using pattern-recognition and feature-detection techniques
- Post-processing, which cleans up the final data by reducing noise and other errors
(The following video demonstrates how OCR technology works.)
SOURCE: Aryaman Sharda, via YouTube
How is OCR Used in Contract Management?
Optical character recognition is a key component of most contract management software platforms. Contract management software that does not support OCR should not be used. Just scanning a contract into digital format or uploading one that is already digital isn’t enough. You need to make the information contained in the contract indexable, searchable, and reportable so that it can deliver business value.
This is why OCR for contract management software is essential. Your contract management software uses OCR technology to read digital image files and capture and index all the information into structured digital data. The process typically works like this:
- A physical document is scanned into a digital image file, typically in PDF format.
- The digital file is analyzed by OCR software.
- The OCR software identifies the text from the scanned document and saves it to indexed digital storage.
- Contract management software can also use data extraction and NLP technology to extract that information and autopopulate it in a contract record.
The digital data captured by OCR software can then be securely stored, indexed, and quickly and easily searched.
Why OCR for Contract Management is Important
Contract management software is designed to save time and money and improve accuracy and searchability by simplifying, automating, and digitizing all aspects of the contract lifecycle. It’s essential that all contract documents, whether created on paper or digitally, be part of the system. It’s the information within the contract that’s important, not the document itself.
OCR technology is key to ensuring that all contractual information, no matter how the contract was created, is available in a structured and easily accessible digital format. Here are some of the primary benefits your organization can realize by incorporating OCR for Contract Management into your process.
Makes Scanned Documents Usable
At its most basic, OCR technology turns scanned documents into usable digital data. Without OCR technology, all you have is a collection of physical contracts and images of those contracts. OCR technology captures and indexes the essential data from those contract images and makes them usable.
Enables Quick and Easy Searching
According to various studies, the average employee spends 30-40% of their day looking for documents stored in old-fashioned filing cabinets. By converting key contractual data to digital format, OCR technology makes it much easier to search for and retrieve both individual contracts and key information within those contracts. Instead of physically sifting through reams of paper documents – or manually scrolling through a similar number of image files – all you have to do now is conduct a simple keyword search. Key contract data is stored in a central repository, indexed for fast searching, and easily reportable.
Provides Secure Storage
With all contractual data stored digitally in a central data contract repository, that data can be secured against unauthorized access. User access rules such as permission and authentication settings restrict access only to authorized parties and readily available cybersecurity tools guard against data breaches and cyberattacks. Plus, you don’t have to worry about fire, flood, or other physical calamities; all your digital data is regularly backed up for added protection.
Ensures Deliverable Deadlines
It’s important that you deliver on all your contract deadlines – and that your partners deliver on theirs. It’s difficult to keep track of deadlines when those deadlines are buried deep in physical contracts. By digitizing key contractual information that data can then be put into a contract management system that automates notification of upcoming deliverables. You’ll never miss a deadline again.
When all your contract information is digital, contract management software can regularly analyze that data. You get more robust reporting and actionable insights to help you better manage your day-to-day operations and improve long-term decision-making.
Let Contract Logix Help You Digitally Transform Your Contracts
Contract lifecycle management (CLM) software automates the entire contract process, from request to execution to renewal. Contract Logix’s CLM Platform works with both newly-created and historical contracts to create a secure database of easily searchable information that can harness to deliver your business data-driven insights.
As part for that process, it incorporates robust OCR for Contract Management technology to capture and index the wealth of information in your contracts into usable digital data. We’ve helped thousands of contracting professionals across a large number of industries digitally transform their contracts and processes into an automated, simplified, and data-driven function.
Contact Contract Logix today to learn how our OCR for Contract Management solutions can help you digitally transform your contracts to mitigate risk, increase compliance, and finalize business faster!