Top 5 Contract Compliance Tips Your Business Needs

If you run or are planning on running any business, you will have to make a lot of deals for services or supplies. It’s always wise to put these into legal agreements and terms, and you have a contract there.

Contracts are the bulk of relationships in every business, which holds both ends together throughout a transaction. It applies to the employer and employee, the vendor and the customer, the big company or individual client expecting services, and the vendor or service provider.

So basically, contracts are very necessary for your business. However, even more necessary is that the contract terms are complied with and kept to. This part is where effective contract compliance or contract management comes in.

Contract management deals with practices that ensure that the agreements made in drafting a contract are kept up with. Deals on how many supplies are made, the frequency, and the services to be provided, are checked and balanced.

It’s very important to carry out contract compliance practices throughout your business if you want to get yields and returns. It is based on how well a contract was executed and managed that determines how profitable it was to the business and if it’s worth renewing.

Managing your business’s contracts may prove a little difficult to carry out even with the services of a contract manager, and you wouldn’t want the wages paid per contract to have poor returns. So, you need to involve the best practices and tactics to ensure contracts are executed properly and your business grows. 

We’ve developed a few efficient tips your business needs to ensure contract compliance.

Keep abreast with new information and changes that relate to the contract.

Business contracts are mostly linked with different policies and systems that may not just be between you and the second party.  Other bodies or even governmental levels like the state, federal agency, or local authorities may make policy changes that could affect the terms of your business contract.  Or it could be fluctuations in the economy, price rates, or even currency exchange.

If such happens, and you weren’t aware of making the necessary reviews or adjustments to the contract, things may go wrong. The quality of services provided as agreed may decline, or the turn of events may cheat someone one way or the other. 

So, a very important tip for maintaining and ensuring contract compliance is keeping updated with the changes. In the case of any uncertainties, you can quickly review and make new agreements with the contract executor. 

It will help if you put a resources counsel expert or any other employee, business associate, or informant who would be responsible for giving updates or new info on any changes that could affect contract compliance. 

Try to centralise the data collation of the contract.

This aspect involves you taking steps to ensure that the collection of information on all ongoing contracts in the business is compiled in a central data repository. Many types of contracts will be involved in your business, especially if it’s a large one too. And the more the bulk of the data you need to gather, the more difficult it becomes to account for every contract.

So, effective contract compliance demands that performance reports and schedule dates for auditing, ending, or renewing each contract, whether present or passed, can be contained in a central data collection system to keep track more easily and efficiently.

Regular auditing of the existing contracts

When monitoring contract compliance, auditing your business contracts is probably the most important aspect of any contract, before the terms of a contract are often agreed upon, some auditing has already been done to assess the state of affairs in the business. 

Without carrying out the auditing process, you may not be able to properly identify which aspects of the business the contract you need to focus the services of the contract on. The auditing process mostly involves monitoring the Key Performance Indicators (KPIs) and how they reflect on how the contract is executed on both ends.

Even more so, throughout the time length of the contract, you have to make regular and consistent audits to check out the progress of the business contracts. Regular auditing will help you identify any area that has been or may be overlooked and make necessary adjustments.

It’s a good idea to create a routine schedule for auditing the contract so you can be sure it’s regular and consistent. This tip of regularly auditing the contracts in your business will help you point out hints of non-compliance with the contract terms and act on them early on.

Use digital contract compliance systems to do the hard work.

Technology always makes it easy. In managing your business contracts, luckily for us all, we can now include the aid of technology. Contract management software helps you do all the records keeping and tracking, monitoring, and auditing the contract compliance.

Using digital methods of maintaining contract compliance in your business puts you at an advantage compared to the traditional manual record-keeping system. First, you don’t have to employ more labour for record-keeping since the software does all that work, saving your business some costs.

Collecting and accessing data is also faster and more organised using digital contract compliance systems. Plus, you don’t need to use up paper and risk losing any important documents. 

With digital contract management software, you also reduce the risks of making human errors, which would occasionally be the case with human employees managing the contract data.

Remember to always provide yourself with a way out of the contract.

Another very important tip is to keep in mind when negotiating contract terms and to establish agreements that things could always eventually go haywire in any business contract. In such cases, you must protect yourself and your business from losses or incrimination. 

Even though the contract negotiations between both parties went well, you can never be too sure that things will always pan out well for the business or yourself.

It could be a failure to deliver on the part of any contracting parties, a change of policies guiding the contract, or even worse case scenarios, like the death of a party.

So, to take care of any future issues in the contract, make sure to include a “way out” of things In case they take a negative turn. It could simply be a statement in the contract addressing what is to occur in the case of any eventualities.

Frequently Asked Questions

What is the contract management life cycle?

The contract life cycle is a pattern that relates the stages involved in developing and executing a business contract. As the normal life cycle we have for animals, it is the cycle of events that occur in stages from the contract’s inception to the end, whether it be terminated or renewed.

The stages are, most of the time, as follows;

• identifying the need for a contract
• authoring the contract
• negotiating the contract terms
• approval of the contract
• signing and executing the contract
•  contract auditing and report
• making adjustments to the contract
• renewal or termination of the contract

Is it good to use technology in contract compliance and management for my business?

Yes, employing technology in contract management is always the better option than manual auditing methods. Using contract compliance software to manage and track the progress of your business contracts makes things a lot easier for you and is more efficient.

You don’t have to employ unnecessary labour to keep records; at the same time, you avoid the very common human errors with employees. Contract Compliance Tips Your Business

Also, you can easily manage all the contract data from a central place and get alerts for contracts that need renewal or termination or are flagged for auditing. 

What are the risks of poor contract compliance monitoring?

If your contracts are not well monitored or complied with in a business, many things risk going wrong. There would be breaches of contract, under-supplies or poor services and employee performance, and so on. You even risk basic things like missing contract dates for review or renewal. 

Poor contract compliance monitoring compromises your business on every level, and the resources put into the business yield only a few or no returns.