How Contract Management Software Supports Contract Compliance Audits

Favorable commercial agreements fall short of their reputation if no one keeps their end of the deal. That is why any successful business partnership must prioritize compliance. One easy and quick way to do that is by performing regular contract compliance audits. It allows organizations to spot any inconsistencies in the procedure or contract.  

Compliance checks must reach wider, dig deeper, and act faster to ensure your contracts are thorough and identify any areas of non-compliance. With its cutting-edge tools, contract management software empowers companies across all industries to return value to their bottom line. They ensure that the deals companies negotiated are the ones they received.  

What are contract compliance audits? 

A contract compliance audit verifies that the performance and invoices correspond to the terms of the contractual agreement. Regular audits can be a powerful tool for organizations to establish transparency, accountability, and productivity in the contract management lifecycle. Consequently, the contracting process remains fair and secure for all parties.   

It helps enterprises identify and clarify the roles, responsibilities, and potential risks involved in the business relationship. Businesses can ensure compliance for large volumes of contracts using compliance audits conducted through contract management software without the process taking up all their time. However, the contract compliance checks vary depending on the industry size, service, and objective. The following steps make up a typical auditing procedure:  

Audit objective: Setting the goal and the parameters of the process for the entire team is the first step of the contract compliance audit. Having an idea of what you are looking for and how long it will take can prove beneficial. 

Review process: After establishing the objective, the organization goes through the entire contract management lifecycle to look for areas of non-compliance. The review process includes active contracts, transactions, and workflows.    

Resolve issues: Soon after identifying the areas of non-performance, inaccurate billing, and process bottlenecks, you should take steps to address the problems. It saves the company from reputational and financial damage.   

Recommendations: Once the organization oversees and analyzes the entire operation, it is time to make suggestions to improve the contract lifecycle and workflows to avoid making the same mistakes in the future. 

Why do you need contract compliance audits? 

Organizations must guarantee the absolute reliability of their contractual agreements to establish and maintain successful business partnerships. For expanding enterprises with countless suppliers and vendors, consistent compliance checks are the best way to ensure that all parties conform to regulations and the terms outlined in the contract.  

Contract audits are the most appropriate way for enterprises to find areas of non-compliance. They can identify deviations from organizational standards, laws, and contractual terms, such as over-billing, late deliveries, and low-quality goods. Moreover, audits allow businesses to compare contractual terms with invoices from vendors and suppliers to ensure billing accuracy.  

Businesses must recognize and assert their contractual rights to maximize the benefits of a commercial relationship. Timely compliance checks ensure that business teams remain consistent in their approach to contractual obligations and that they are always aware of what they stand to gain from the agreement.  

What are the benefits of performing contract compliance audits? 

Contract compliance audits can help your organization's diverse divisions, including procurement, finance, and business. Determining what compliance looks like for your organization enables the legal and commercial teams to evaluate their performance using specific metrics.  

• Improve business relationships 

In many cases, contractual regulations and clauses are a means to promote trust between parties. Compliance checks signify total transparency for all parties involved in the contracting process. Organizations that take the lead in identifying and disputing potential issues with the operation are much more likely to have partners' trust. Companies Contract compliance audits enable enterprises to build more productive business relationships by enhancing and clarifying contract language and fostering better communication among stakeholders and teams.  

• Evolve business operations 

Firstly, the party's failure to adhere to compliance standards puts the entire business operation at risk. Businesses must assess the effectiveness of related internal controls and processes to address inconsistencies in the contract management lifecycle. Contract compliance audits enable enterprises to set objectives and benchmark early in the contract management process to pinpoint operational risks and opportunities. They also allow organizations to verify the data reported by third parties.  

• Cost savings 

More often, supplier invoices differ from the details of signed contracts. It causes some of the most expensive overpayment mistakes. Therefore, complex contractual agreements must undergo thorough audits to locate and recover any lost funds. By spotting errors in contract billing and supplier charges, contract compliance audits make it possible to guarantee billing accuracy. Organizations can find opportunities to reduce overcharging and unnecessary spending by collaborating with various departments during compliance checks.   

• Risk management

A contract compliance audit provides actionable insights into the entire contract management lifecycle. In addition, non-compliance can result in numerous financial, legal, and operational risks. Organizations can identify errors, revenue leakage, and contractual risks through the audit process. Then, it becomes relatively simple for businesses to remove potential barriers to increasing the effectiveness and efficiency of their operations. Enterprises can thus live without the worry of late deliveries, contract violations, or even strained business relationships with proper risk management through consistent audit processes. 

How do contract compliance audits benefit from a contract management system? 

Contract compliance audits can be either reactive or proactive. Compliance checks for a specific business event, concern, or requirement are known as reactive audits. Creating a new relationship, extending an existing one, or severing a vendor partnership are a few examples. Proactive audits are carried out regularly as a preventative measure to address potential problems before they create roadblocks for the organization. Contract management software offers the necessary tools and technologies for both compliance measures.   

• Obligation tracking  

The terms and requirements outlined in the contract must always be understood and followed by organizations because non-compliance from either party can lead to legal, financial, and reputational repercussions. Keeping track of all the clauses and provisions might be daunting for a company with thousands of active contracts in its portfolio. 

Fortunately, contract management software offers automated obligation tracking. Businesses can identify and extract significant obligations outlined in the contractual agreement and set up reminders for them. Without a manual search, the legal team can obtain a thorough picture of obligations by project, supplier, or service type. Users can also assign tasks to specific personnel to bring accountability to obligation fulfillment.

• Configurable dashboard 

Contract compliance audits involve reviewing contractual provisions, payments, and procedures. Conducting a comprehensive analysis of the contract management lifecycle in organizations with fragmented systems is challenging. Contract management software offers custom dashboards to address this problem.   

With configurable dashboards for customers, vendors, and contracts, organizations can easily stay on top of contractual terms, vendor obligations, and payments. There is no information overload or losing track of relevant contract data in countless active business agreements. Users can keep adding and removing widgets to get a contract compliance dashboard perfected for their business needs.  

• Automated reminders 

The consequences of missing significant deadlines can be severe for businesses. The risks associated with neglecting contract milestones are endless: unnoticed renewals can result in revenue leaks, lapsed security certificates can jeopardize business operations, and unfulfilled obligations can result in subpar performance.   

Organizations can tackle all these issues and more with the automated reminder function offered by contract management software. Users can trigger timely alerts for reviews, renewals, and expiration dates. They can choose the warning period for each significant event, and knowing when something is due encourages proactive business behavior. To ensure compliance, the customizable dashboard will provide complete visibility of impending deadlines to all pertinent stakeholders.  

• Contract reports 

Contract reports enable enterprises to collect and analyze significant insights from contractual agreements to track the progress of businesses. With contract management software, organizations can find real-time data on contract value, lifecycle duration, deadlines, vendor risks, and so on. It enables organizations to collect and track data even if contracts expand quickly.  

Raw contract data can make contract compliance audits lengthy and daunting. Dock CMS (Contract Management Software) empowers users to filter contract reports based on fields and tags suited to their business needs. They can even prepare specific reports on contract performance and compliance. Comprehensive contract reporting can help organizations identify bottlenecks in the contract workflow and opportunities to improve it. 

Conclusion 

Ensuring contractual agreements keep to their promise requires constant monitoring from the company. Organizations can reduce bottlenecks and improve control over the contract lifecycle by moving forward using contract compliance audits. An ideal audit process includes defining objectives, reviewing contracts and finances, identifying areas of non-compliance, resolving issues, and recommending improvements. Contract management software provides all the necessary equipment and tools to speed up each stage of the audit procedure. 

Regular contract compliance audits through contract management software empower enterprises to identify revenue leaks and recover lost profits. In short, effective contract compliance audits can eliminate numerous risks, including damages to one's reputation, legal repercussions, and a negative customer experience. That is why any company must establish proper contract compliance from the start.