Why Contract Compliance Can Make or Break Your Business
Risk & Compliance
Contracting and compliance are integral and intertwined facets that take up a significant amount of resources for most companies. The key to keeping things on track and avoiding costly issues is to institute a coherent management plan. Both contracting and compliance matters require diligent oversight, and periodic internal audits can help companies to identify potential lapses before they become much larger complications. Although it is wise to stay on top of all of a business’s operations, contract compliance, in particular, cannot be overlooked, as the consequences may prove catastrophic. Here is why contract compliance can make or break your business:
Avoid Unnecessary Expenditures
Depending on who the other party is to a contract, failing to comply may lead to the imposition of some very expensive fines, penalties, and/or damages. Government contracts are particularly susceptible to compliance issues, but that does not mean that private agreements will not be subjected to federal, state, or local mandates. In addition to the direct costs associated with failing to comply, there could be plenty of other financial implications that are much harder to measure directly. Rather than have to find out what kind of money that would entail, it is best to ensure that a solid management system is in place, along with rigorous review processes to make the appropriate corrections.
Retain Clients and Business Partners
An additional financial issue that may arise relates to loss of reputation and the ensuing severance of existing relationships. Not many companies are going to want to do business with a firm that does not commit to or respect the importance of adhering to compliance mandates and protocols. Granted, it may just be the governmental partners that end the business relationship, but those arrangements can be rather lucrative, so that is a substantial loss. And, others may learn of these breaches and terminations, and thus may subsequently decline to do business with a company as well.
Stay Away from Courtrooms
As with virtually any business transaction that goes south, there is a good chance that a lawsuit will be brought to rectify the wrongdoing. It is pretty common knowledge that extensive and expensive lawsuits can be, and often are, the death of a business, especially those with modest resources. There is a far too prevalent misconception that the advice of legal counsel early on in a contracting relationship is unnecessary. However, as with many things, it is almost always better to spend the money up front to ensure that things are done properly than to wait until an issue becomes so complex that even more money and resources must be devoted to extricating the company from the sticky situation.
Keep the People Happy
At the end of the day, most people want to work for a profitable, well-run business that is run by inspiring leaders with a similar vision who promote a positive work culture. To achieve this feat, companies must ensure that every aspect of its operations has the right team members committed to the task and that those folks are afforded all of the requisite skills and tools to perform effectively. Thus, to prevent contract compliance issues from disrupting the company’s efficiency, productivity, and profitability, it is critical to put together a solid contract team, respect them as important partners in executing the company’s strategic plan, and provide them with the technology and resources that they need to keep the entire contract portfolio in perfect shape.
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