Contracts govern almost every interaction between businesses. Reflect on all the different ways that your business interacts with other people and organizations: The people who buy your solution, the employees who work for you and the technology consulting firm that handles your IT infrastructure. Every single one of these relationships is initiated with the execution of a contract. That can be a lot to deal with. How can a company manage all of these contracts without risk of missing out on accompanying benefits or falling out of compliance?
Contract compliance is a series of checks and procedures businesses implement to ensure that they conform with regulations and the terms they’re bound by. It usually forms part of a broader contract management strategy and seeks to ensure that contracts are executed properly at all stages, including both before and after signing. Before you enter an agreement with any party, you should be thinking about how you’ll make efforts to remain compliant with the terms and conditions. Depending on the subject matter of the agreement, this might end up altering daily operations or be a one-time performance of any single particular action. Whatever the scenario, contract management should be your number one priority after signing a contract.
Why Contract Management Is Essential
How your company creates, executes, maintains, renews and monitors contracts with key stakeholders and service providers is of the utmost importance. Basically, if you are running any type of organization, you’re going to need some sort of an effective contract management system and the secret is in the software.
Contract management software (CMS) and applications that can turbocharge your business and grow with you as you scale are key components to remaining compliant. Custom developed software delivers solutions that integrate seamlessly and propel productivity for your business, while also ensuring contract compliance.
4 Steps to Ensuring Contract Compliance
1. Dedicated Location (Repository)
Your business is going to enter a wide variety of contract agreements. Bringing on new employees, signing or renewing deals with customers and working with vendors are all going to require an official agreement in the form of a contract. Effective contract compliance includes having a stockade of contract examples safely stored in a convenient (and highly secure) location that covers all possible operations of your business. The contract terms and conditions of each individual agreement will ultimately vary in content, but having examples as a starting point is huge for understanding what you need to do to remain compliant.
Before building a bridge to the future, you’re going to have to revisit the past. Part of determining your current issues with managing your contracts lies in closely reviewing your current situation with an audit. Investigate every detail of how your business handles contracts, agreements and other legal documents from creation to execution to management. If you find any issues with how you are complying with the requirements of the terms and conditions within the contract, make note of what the problem is, why your business might be experiencing it and any possible solutions you can implement to avoid it in the future.
Approval must be documented (and really should be a digitized workflow) with service-level agreements (SLAs), alerts and dashboards tracking them. Owners must be defined and trained for each role in the contract approval process and digital signatures should be used for security purposes. Be sure to get approval from all stakeholders, and remember that with each party viewing the contract, the possibility of more changes may arise. If this is the case, be sure to run it by all other parties after each change, including all involved legal entities. Establish a formal, streamlined and repetitive approval process to ensure efficiency and consistency for contract management across the whole organization.
4. Contract Compliance
The last step in the contract compliance process is to properly manage them by remaining compliant. Deliver your end of the agreement by abiding by the terms and conditions of the contract in accordance with contract law and public policy. At this point, you are legally obligated to hold up your end of the deal. To avoid breaching the contract, ensure you remain compliant with all of the terms and conditions listed. This might include making a payment or completing an action by a certain time. Make sure every individual involved knows what compliance looks like and keep an eye out for any misaligned behavior.
Is your current CMS software putting your business at risk of falling out of compliance? We understand the importance of contract compliance and the proper management procedures. At Afidence, we collaborate with your business to help you get farther, faster. There’s nothing more important to us than helping you increase your efficiency, hit your goals and save time and energy all while remaining compliant.