3 Steps to Improve Your Company's Contract Compliance
Risk & Compliance
A lot of companies struggle to become more efficient, cut costs, and increase their profits. Contract management, in particular, may divert a lot of company resources if it isn’t handled properly. Under-optimized contract management systems may result in improper or inadequate contract compliance, which inevitably leads to wasted dollars.
For example, if a company fails to pay attention to key contract terms and does not perform in accordance with certain provisions; the company may end up liable for damages. Or, a company may spend more than necessary on important supplies because of its failure to take advantage of renewal discounts or contractually stipulated negotiation periods.
In general, a solid contract lifecycle management system boosts productivity, reduces unnecessary expenditures, and allows leaders to focus on other pressing matters. Companies should consider taking the following three steps to improve contract compliance.
1. Store Executed Contracts in a Secure Central Repository
It is incredibly surprising how many companies do not have a clearly delineated document saving and storage procedure, and it is even more surprising how many companies continue to rely on printed filing systems for contract management. These methods of document management increase the likelihood of misplacing items and decrease overall efficiency.
In order to locate contracts with ease, and more importantly, stay on top of contractual obligations, it is vital to create a central contract repository for company contracts. Consolidating these documents in one secure location, ideally a cloud-based service with tagging, indexing, and other useful features, will streamline the contract management workflow and inevitably improve contract compliance.
One of the benefits of utilizing an online contract management system is that most of them provide useful features specifically built for the management of contracts and their milestones. A practical CLM software should make the entire process easier for its users, such as by offering folder and subfolder capability, comprehensive searching, and perhaps most importantly, the ability to create custom alerts.
As soon as a contract is formally executed and added to the appropriate folder in a contract repository, the party responsible for its maintenance should create alerts for any key milestone dates. An automated alert system will decrease the chances of someone forgetting to monitor a contract and reduce the probability of failure to comply.
3. Establish an Internal Contract Review Process
Once contracts are executed and safely uploaded in a central repository, they cannot simply be forgotten until a contract-specific issue arises. Depending on the nature of a company’s contracts, companies should implement a quarterly, bi-annual, or annual internal contract review process. By routinely examining contracts that are housed in the contract repository, companies can ensure ongoing compliance and be prepared for unexpected events such as a potential breach or an audit.
With the right tools and organizational practices, the efficiency of your contract management process will increase and contract compliance will improve.
The Buyer's Guide to Contract Management Software
Quickly identify solutions to your specific contract management challenges.
What Is Contract Management Software? (Part 1 of 2)