One of the hardest parts of growing a business is keeping track of the growing number of contracts. How do you make sure that all of your contracts are up to date without having to spend all of your time on them? Even more difficult.
Legal experts are the best people to be in charge of making sure that a contract is kept. But because in-house legal teams are usually too busy with low-value work, it is usually a good idea for the whole firm to make contract compliance a goal. Contract compliance is a set of checks and procedures that companies use to ensure they are following the law and the terms of the contracts they have signed.
Most of the time, it’s part of a larger contract management strategy, and its main goal is to make sure contracts are carried out correctly, even before and after the agreement is signed.
Often, both internal and external pressures determine what it takes to follow the terms of a contract. Contract managers, leaders in the industry, and government officials can all set these parameters. Their goal is to ensure that the contracting process is fair and safe for everyone involved, no matter who has more power.
Tip 1: Establish a standard contractual process
To ensure that your contractual obligations are met, effective systems are necessary. You will require a consistent contract management method that encompasses every agreement your company engages in if you want to guarantee compliance.
Even though no two deals will be the same, there will be a set procedure that you will follow to carry out the contract, maintain compliance, and manage the agreement. Irrespective of what you are setting up, a good contracting process should have the following steps.
Planning
It is important to plan as much as possible to get your company ready for any agreements they may come across. Create a list of potential resources, stakeholders, and anything else to help you achieve success. Find out what kinds of contracts you’ll be handling, who will be responsible for each stage of the process, and what potential problems you could face.
Auditing
By doing a thorough audit of all of your agreements, you may better understand how your company has managed its contractual obligations in the past. Remember to record any compliance problems that you have experienced in the past.
Putting up a basic structure
After completing the first two steps, you will have a general notion of the structure that the remainder of the contract management process must take for it to be effective. Keeping this in mind, you should provide a framework for any existing contracts and any prospective contracts. It is important to be precise regarding the departments that will be taking action, the resources that each department will be deploying, and the benchmarks for success.
Putting in place technological measures
Eliminating reliance on paper documentation is a significant component of contract management. Find the correct technology to automate your operations, streamline them, and eliminate the possibility of human error. Using software designed for contract management is the logical choice because it will help you in the process of generating, tracking, and monitoring all of your agreements. The ability to automate tasks is one of the many benefits of using the software. This reduces the likelihood of errors being made by humans, but it also frees up a significant amount of time for a company.
Putting pen to paper on fresh deals
You are now prepared to enter into some new contracts as everything is in its proper position. However, do not take that flippantly. There is a purpose behind the length of this procedure. When you sign a new contract, you take on additional obligations and increase your exposure to the risk of not complying.
Managing and compliance
The last step in ensuring that a contract is compliant is to well, manage the contracts by ensuring that they are compliant. You are expected to uphold your end of the bargain by strictly adhering to the stipulations outlined in the contract, as required by applicable contract law and public policy.
Tip 2: Set goals and criteria for judging them.
When a company is growing quickly, it is normal for the contract process to become somewhat disorganized. That is especially true for new businesses, where the legal department is often still being built from scratch.
Still, structure and goals need to be set up early on in the contract management process because if you manage contracts well, you have more chances to improve your revenue operations.
Setting up this framework helps to have an idea of what compliance looks like in your firm as a starting point. Because of this, both the legal and business teams have clear ways to measure how well they are doing.
Next, you should do regular contract checks to ensure these standards are being met and find places where things could be better or where new measures need to be put in place. To do this, you should compare the audit results to the standards.
Tip 3: When you can, automate tasks.
When a business grows, it gets harder and harder to keep track of its legal paperwork. The amount of paperwork that a typical business has to deal with daily can quickly become overwhelming. Service agreements, non-disclosure agreements, contractor statements, and vendor contracts are among the documents in this pile.
Automation is a key part of managing these contracts and other contracts and many other parts of running a business. With the help of different automated systems, a lot of the contract management tasks that used to be done by hand have been turned into digital files. If you send the latest version of a contract digitally, you don’t have to get everyone in the same room to read it and sign it. After both sides have signed the contract, a copy will be sent back to your team right away for a final review and approval.
These solutions greatly cut down on administrative mistakes, like double signatures, and make it possible to manage contracts in a much shorter amount of time. These automation technologies also offer extra features, like cloud storage and real-time collaboration, making managing contracts even easier.
Tip 4: Scrutinize and audit regularly
Actively identifying saving opportunities during the contractual process is good, but imagine being able to retrieve money after a contract has been set in motion. Overpaying is probably the most common non-compliance with to contract. These blunders, although mostly harmless, can sometimes indicate vendor or internal fraud or, in some cases, can be due to non-fraud scenarios, like errors in purchases made due to inadequate record-keeping of volume or other reductions negotiated in the contract.
Your system for managing contracts will start with an audit of what you have already done. Don’t stop there. To ensure that nothing is missed, contract compliance will need to be checked regularly.
Set up a regular schedule for contract audits. Setting up regular audits is a great way to find out if your team members aren’t following the rules before any damage is done. Many mistakes can be caught before they happen, and preventing people from not following the rules can save you time, money, and energy. Find any areas that could cause confusion, both inside and outside the company, and find ways to make them more visible and clear.
Tip 5: Ensure your business is adaptable
No business is a stagnant institution. True, the location might remain the same for years, but varying circumstances like the country’s economy, inflation, and managerial changes both within and without all add up to businesses being very dynamic. At a certain level, contract compliance comes down to adhering to any new laws or regulations that can accompany changes in the organization’s environment. New products are added to the list, updated industry standards, and firms enjoy growth. With those alterations, your firm might necessitate creating new contracts or altering ones that already exist.
Always keep a tab on evolving industry norms and alter your contract management strategy to abide by them. That could mean obtaining additional resources or requesting advice from a compliance officer that serves your business to get your footing. This can be done by reading the fine print before signing or signing a contract.
Conclusion
If you put into practice these tips, you will reduce the likelihood of your company’s contract management becoming a source of frustration and a bottleneck for its operations. Instead, it can become an unnoticeable component of your typical tasks, one that improves your group’s efficiency and, more significantly, your bottom line.
Going to the effort of putting a contract into effect and then deciding not to comply with its terms is a waste of time that comes with additional discomfort. Keeping compliance in mind at each of the contract management process stages should be a top priority. You should avoid getting into legal trouble at all costs, and one surefire method to do so is to ensure that you maintain a high rate of contract compliance in any contract you and your company sign.