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Download the expert's guide to document automation for Contract OCR

OCR plays an essential role in contract management. OCR contract management helps scan contract documents and images into readable text formats. It provides many benefits for legal and contracts management professionals.

The global optical character recognition market size was valued at USD 8.93 billion in 2021 and is expected to expand at a compound annual growth rate (CAGR) of 15.4% from 2022 to 2030.

It is evident that OCR is not going anytime soon. Instead, it is here to stay for a long time, and the optical character recognition market is only going to increase with each passing year. In this article, we will discuss what OCR is? And what role it plays in contract management.

Before discussing the importance and advantages of OCR contract management, let’s have a look at what OCR is and how does it work?

What is OCR?

OCR stands for optical character recognition, and it refers to text recognition. OCR is used to convert images of handwritten, typed, or printed text into machine-readable text, whether from scanned documents, camera images, or image-only PDFs.

OCR uses a combination of hardware and software to convert physical, printed content into usable machine-encoded text – thus eliminating the need for manual data entry. Additionally, OCR utilizes the techniques of automated data extraction and storage capabilities to save time, cost, and other resources.

If OCR is used in combination with Artificial Intelligence (AI), it can implement more advanced methods of intelligent character recognition (ICR), like multiple language identification or detecting different styles of handwriting.

Read more: OCR for Text Recognition

What is Contracts OCR?

As mentioned above, OCR stands for optical character recognition. OCR in contracts uses advanced software capabilities to convert a scanned contract or document from a picture to an editable and usable data set.

Read more: Cognitive Capture & Data Capture.

OCR plays a crucial role in Contract Management Systems (CMS). OCR in contracts is changing the way CMS has been working in the past. There are generally two types of CMS. One is Contract Management Systems with OCR, and the other one is Contract Management Systems without OCR.

If you are using a CMS without OCR, then you are missing out on the latest technologies. For example, Contract Management Systems without OCR is just like sending a message with a keypad phone. If you want to text “find” on that phone, you will enter “333444663”. On the other hand, if you have Contract Management Systems with OCR, it is like typing “FIND” with your smartphone.

Another example is that Contract Management Systems without OCR will take so much time to search for something in a stack of 500 commercial lease contracts. There are also chances of human error in this. Whereas CMS with OCR will only take a few minutes to do this without any error.

Read more: Everything you need to know about Contract Intelligence

What can Contract OCR extract from contracts?

Contract OCR technology can automate many contact-related business processes. It can extract the following data from contracts:

  • Document Type
  • Image quality
  • Country of origin
  • Contract language
  • Signatures
  • Dates and validity
  • Applicable law
  • Entity count, names, and details
  • Risk keywords
  • Signee count, names, and details
  • Contract clauses
  • And much more

With Nanonets, you can create workflows without using any code and automate any kind of document process. Check out our invoice automation, Account Payable automation, and BPO automation models.

Try Nanonets for free, or book a call with our automation expert!

What are the benefits of using Contract OCR?

There are many benefits of using OCR. Some of them are:

Saves Time

OCR saves time by eliminating the need to enter data manually. This process is much faster as compared to the manual typing of data into the computer.

OCR saves time as it is a fast and quick method to scan documents into your computer. Nanonets can reduce the time to process documents by 80%. Try Nanonets for free or book a call with our automation expert!

Reduces Costs

It is cheaper to use than paying someone to enter data manually. Interested to reduce manual data entries? Try Nanonets for free or book a call with our automation expert!

Easily Shareable Digital Documents

A paper-based form is changed into an electronic form that is easy to store or send by email.

The latest software for OCR can also recreate tables as the original layout.

Read more: Top 10 OCR Software

Higher Accuracy

As human error is evident, one of the major challenges of data entry work is not being able to do this accurately. OCR offers high accuracy while automating data, resulting in reduced errors and inaccuracy.

Nanonets offer an accuracy rate of 95% while processing documents. Try Nanonets for free, or book a call with our automation expert!

High Data Security

There is always a risk of data loss when you are storing huge piles of data on paper. Papers can easily get lost, stolen, or misplaced due to human error or natural incidents such as moisture, pets, or fire. OCR provides superior data security by storing data in digital format.

Improved Customer Service

Quick data accessibility is an essential factor when your customers require certain information. OCR helps in this by providing digitally stored data with flaming speed. This reduces the waiting time for customers, resulting in an improved customer experience.

Read more: RPA in customer service

Disaster recovery

OCR plays a vital role in disaster recovery. When data is stored electronically and will be saved on secured servers, it will remain safe even if an emergency hits. The digitally stored data is easily retrieved, preventing businesses from any discontinuation.

Want to scrape data from PDF documents, convert PDF to XML or automate table extraction? Check out Nanonets' PDF scraper or PDF parser to convert PDFs to database entries!

How does Contract OCR work?

How does contract OCR work?
How does contract OCR work?

We all know that the human brain is more equipped than the computer to distinguish between the inconsistencies present in a written text. Talking about OCR technology, good OCR technology boils down to optimizing a program for pattern recognition or feature detection.

OCR analyzes the patterns of the letters and numbers to convert the scanned image into text. In this way, a computer learns to recognize the text character by character and set of different iterations of a given pattern. Feature detection allows a good OCR technology to recognize even obscure handwritten signatures.

For an OCR to work accurately, it is essential to provide a clear image or the clearest possible version of a document. Blurred texts or marks on the copy can create errors while conversing.

Why is OCR important to contract management?

Public documents, states, municipalities, and regulatory agencies still require paper documents with real ink signatures to process all contracts and documents. Legal teams around the world have to analyze these documents and store them for future reference. But for better efficiency, saving storage space, and better searchability, legal teams are moving towards digitizing these contracts by using Contact OCR solutions, like Nanonets. Poor contract management can only add to problems for legal institutions.

OCR plays a crucial role in contract management. It not only helps in contract management but also automated contract drafting. Moreover, OCR allows you to add or edit essential details in your contracts, such as renewal dates, terms, conditions, etc. As a result, you can limit mistakes and improve accuracy in contracts.

“OCR can help boost your Business’s Contract Lifecycle Management.”

When you integrate OCR into your system, it helps your team become more productive by allowing them to focus on what truly matters. Which, in turn, can minimize the risk of mistakes and damages.

Why use Contract OCR?

Prevent human error

90% of contract management inaccuracies are due to human error.

Human errors are inevitable. There is always a chance of error in the manually entered data. Using spreadsheets, manual data entry procedures and emails is not only susceptible to data leaks but also drastically reduces the efficiency of processes and makes them non-scalable. In order to process legal contracts at high speed, it is imperative to use Legal OCR software like Nanonets. Contract OCR prevents human error by detecting incorrect or misprinted data in your documents. Intelligent document processing platforms like Nanonets can help you categorize and selectively extract data from documents with 99% accuracy.

Try Nanonets for free, or book a call with our automation expert!

Save time and money.

Legal businesses still have contracts in hard copy. It could take a lot of time to change them into soft copies. The OCR technology reduces the time and money that is spent on manually typing data into the system by converting them into editable text in just a matter of minutes.

Save space

Manually storing invoices, receipts, and contract papers can take up a lot of space in your space that is hard to handle. OCR provides you with that space by digitally storing the data in the system.

Make your edits easy.

You can’t change a text if it is printed, and you have to type the whole document again to make the changes. OCR allows you to scan the PDF into editable text and make changes instead of composing the document again. It makes your business more adaptable to changes.

Make your immutable files searchable.

You can’t search and edit specific information if you have piles of PDF files and electronic textual images. OCR technology makes it easy for you to convert those files into searchable, editable text.

Analyze contract easily

OCR combined with AI can help analyze contract documents. You can convert contract documents with OCR into editable formats and analyze them.

Make well-informed, timely decisions.

Using OCR, you can store piles of contract documents in a centralized manner. Being able to access and edit those documents any time you want lets you make well-informed and timely decisions. You can make the most out of the information that, without OCR, would have been lying in scattered documents in those cabinets or desks of your office.

Enhance Security

60% of companies are using email to handle contracts. Using emails, spreadsheets, or online drives is messy and susceptible to a data breach. Contracts are sensitive documents, and in order to enhance their security, these documents need to be saved in either secure cloud storage or on-premise storage units. Nanonets provides both the kind of hosting for its clients.

Want to automate repetitive manual tasks? Check our Nanonets workflow-based document processing software. Extract data from invoices, identity cards, or any document on autopilot!

What are the advantages and disadvantages of using OCR for contract management?

As everything has its fair share of pros and cons, so does OCR contract management. Let’s look at some of the advantages and disadvantages of using OCR for contract management.

Advantages of OCR for Contract Management

OCR contracts offer many advantages for legal and contract management teams. The advantages of OCR contracts are:

Searchable Documents

A document is stored as a scanned or image-based in contract management software. While being just a scanned or image-based document, it is not searchable. Sometimes users may need to search for a certain attachment instead of the whole record. When you use OCR contract management, it converts the documents into text format. After that, the attachment will become searchable.

Reportable Documents

After making the document into a searchable format, OCR makes the documents reportable as well. In a contract management system, saved search within the system is used by employees to make reports or track information, such as tracking contracts expiring in thirty days.

When a scanned or image-based document is converted into a searchable document by OCR, it can now be used to make reports or add data to reports.

Add records to Documents.

While transferring data, the copy-and-paste function of the document can seem very helpful. However, you can not copy-paste a scanned or image-based document. It becomes hard to add the information to the records that are likely to be present in the document attached to the report. When the document is converted, you can easily copy-paste information to add records to documents.

Disadvantages of OCR for Contract Management

  • Contract OCR is not worth doing for a small number of texts.
  • OCR contract management systems can be expensive.
  • The quality of the final image depends on the quality of the initial image.
  • There are chances for the loss of quality of the image during the process.
  • Contract OCRs are not always 100% accurate. Sometimes there can be chances of some mistakes.

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How do Contract OCR Tools work for Contract Management?

Legal teams need OCR software to work effectively in the modern business environment. However, OCR tools are quite relevant to contract management and have great significance in contract management systems.

Many contract management teams store a staggering percentage of contracts on paper. However, if you want to load those paper agreements efficiently into your contract management solution, you need a mode to digitize paper agreements.

As mentioned above, OCR stands for optical character recognition, and this technology is used to convert pictures of text into a searchable, editable format. To do this, you need an OCR tool. OCR tools are software used in contract management to convert contracts into a readable and editable format.

When a contract is scanned, faxed, or even photographed, an image is made of that contract that the word processors and other analysis tools can’t read, edit, search, or analyze. OCR tools help in converting these images into document files so that you can edit, copy and paste from, look for, or merge with other files.

Today, many built-in tools are being added with modern file sharing, file storing, and office productivity solutions. Often SImpleOCR or FreeOCR software is included with Microsoft Windows.

However, these free OCR tools don’t prove to be as effective as other paid solutions can be. Moreover, these built-in OCR tools can sometimes struggle to convert older scans into editable text files. For example, the letter M can be confused with two ‘N’s or misformatted columns. The older the scans, the worse they become to convert.

In this regard, OCR tools were made to avoid such mistakes. Though, sometimes they can be expensive to use. When an integrated OCR tool is included with your contract management, it can take out the benefits of specialized legal OCR tools.

Also, OCR tools use Artificial Intelligence that will run contract analysis. This means legal tools will improve their performance with time. Additionally, they will become more likely to recognize the legal terminologies and the language you employ in your contract documents.

There are many OCR tools available nowadays. We will discuss them later in the article.

How contract OCR improves contract life cycle management?

Improves document management

Contract OCR makes it easy to sort and categorize contracts based on their content. It allows you to organize and associate information more accurately when storing documents. As a result, OCR improves document management and enhances team productivity.

Cuts down on physical storage

7.5% of all paper documents get lost. While this may not be a large number for your day-to-day files, in the case of contracts, it can be catastrophic. Contract OCR technology allows you to digitize and store contracts in a server – thus reducing physical storage and the risk of getting lost.

One of the biggest losses of time is not being able to find a document. Finding a document can take a lot of your time at the workplace. Using contract OCR, you can make your contracts more searchable.

Remote access

Making the contracts and related documents digitized enables you to access them beyond the office. OCR removes these boundaries by making contracts accessible and flexible at any device, anywhere in the world.

Improved reporting

Digitizing data with OCR helps in data reporting. With OCR, you can get a more accurate view of your contract management lifecycle process. Also, you can come to more informed conclusions, resulting in better decisions.

Enhance productivity

Scanning, converting, editing, and searching contract documents with contract OCR enhances productivity. You can perform all these tasks in one go without compromising your time.

Integration into big-data

Contract OCR can help in the integration of scanned documents into the big-data system, which enables you to read client data from contracts, bank statements, and important printed documents.

If you work with invoices, and receipts or worry about ID verification, check out Nanonets online OCR or PDF text extractor to extract text from PDF documents for free. Click below to learn more about Nanonets Enterprise Automation Solution.

What are the different use cases for Contract OCR?

There are different use cases for contract OCR and OCR plays an essential role in contract management. Some of the uses cases for contract OCR are:

Scan & convert contracts

With contract OCR, you can scan documents and text images into your system. Contract OCR converts those documents and text images into editable content. With Nanonets, you can convert your contract d

Read & edit contracts.

It is easy to read and edit contacts with contract OCR. Once the contracts are converted into editable content, you can easily read and edit those contracts and related documents according to your requirements and needs.

Classifying Contracts

Contracts are of different types. If not classified correctly, it can be messy finding any contract in less time. Classifying contracts based on different rule sets by using legal OCR software can help you to find contacts easily.

Contract Management

Contract management is end-to-end management of the contract lifecycle, which includes contract request, authoring, approval, execution, signature, amendments, expiry, data extraction, digitization, and proper storage. Contract management is essential to ensure all your contractual documents are well documented. Legal OCR contract management ensures all your contracts undergo thorough validation, data extraction, and approval processes and are stored after being properly classified.

Contract Data Validation

Contracts contain a lot of sensitive information which needs to be validated by third-party vendors, examiners, and stakeholders. In order for the contract to be valid, it needs to be error-free. OCR contract management ensures that all contract validation processes are standardized and that they go through validation processes.

Workflows for approvals & Contract Processing

It’s tiring to take the paper documents to ten different people just to validate, sign and approve. OCR software with workflow-based systems can be used to automate the entire approval process. This ensures that contracts are processed quickly, efficiently, and accurately.

Contract OCR not only enables you to read and edit contracts but also search contracts and related documents. Once the documents are converted, you can easily search for any content in them. No need to go through that pile of documents sitting on your desk. Search for anything in a go with contract OCR.

How to select the best OCR software for contract management?

With so much OCR software available, it can sometimes become daunting to choose the right solution for contract management. Look for the following qualities in OCR software for contract management.


Accuracy has to be the number one priority when looking for the best OCR software. If an OCR software can’t convert the text in pictures into searchable, editable format accurately, what is the need to use it?

If you miss renewal or invoice details, while doing this manually, this can cost your business a lot of time and money. The best OCR software is accurate enough so that you don’t need to worry about such things. It allows you to efficiently and precisely convert text images.


Speed also counts as an essential factor when looking for the best OCR software for contract management. Often contract managers have to look for high volumes of information to search for specific things. The best OCR software lets you locate and pinpoint party details within a matter of a click.


Contract management can become messy as protocols are likely to change over time. Hard drafts get revised and distributed to store the same version everywhere. However, the best OCR software lets you search for information and access it in a standardized and streamlined manner.

Want to automate repetitive manual tasks? Save Time, Effort & Money while enhancing efficiency!

How is Contract OCR helping Businesses today?

Create audible files

You can change long-form and complex readable documents into audible files so that you can listen to them on your commute or at the gym – thus making you more productive. This technology is also used for visually-impaired or blind people.

Translate foreign languages

There are many advanced solutions available nowadays. Some of them can detect and translate up to 180 different languages.

Automate workflow

Businesses mostly rely on paperwork. They can save time and increase productivity through OCR. They can automate workflow by scanning files, like invoices, and indexing them for easy reference.

Turn read-only files into editable texts.

As the name suggests, optical character recognition can convert read-only files into editable texts so that businesses can edit them, use them in new documents, or search for them.

Achieve faster, more accurate data

By using OCR technology, you can eliminate the need to manually enter the data into the system, which takes a lot of time to complete. You can achieve faster and more accurate data with OCR.

Manage forms

Manually managing forms and questionnaires can take much of your time and effort. With OCR, you can scan the documents, change them into editable files, and take action sooner.


The world is evolving in technology. Revolutionary announcements have become a part of our daily lives. OCR has also become a crucial part of contract management as it provides a number of benefits to contract management. It has become a must-have in contract management.

Contract OCR enables you to read and monitor the contract details more precisely than even the most efficient contract administrator at the organization. Choose from the best OCR contract management solutions according to your company’s requirements and go digital!

Nanonets online OCR & OCR API have many interesting use cases that could optimize your business performance, save costs and boost growth. Find out how Nanonets' use cases can apply to your product.

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