It’s impossible to conduct business for any length of time without the need for contracts. From working with third-party sellers to onboarding new customers and even hiring, contracts and business are inextricably connected. While negotiating a contract can be a challenge; complying with the terms of that contract is another.
For the sake of business relationships, as well as potential legal repercussions, it’s important to understand the best practices when it comes to contract compliance. This will ensure that you and your business hold up your end of the bargain, but it will also protect you in the event that the other party defaults.
What Is Contract Compliance?
Contract compliance is a contract management strategy used to make sure all involved parties uphold the terms of their contract. This may include routine audits, as well as terms set out in the contract that would serve as consequences for default. It’s essential for both you and the other party or parties to comply with the contract mandates. Failure to do so could mean the end of your working relationship or could lead to legal disputes and fines.
Contract Compliance Best Practices
It’s unlikely that you or anyone would enter into a contract with an intention to not actually carry out those terms. Most parties draft and sign contracts with good intentions, but it can be more of a challenge to keep to a contract as time goes on and situations change. The stronger your contract compliance practices, the better everyone will be able to comply with the contract. Here are some of the best practices when it comes to contract compliance:
Stay Current On Industry Standards of Compliance
People are always changing and growing. Business, which is made up of people, is also a constantly shifting landscape. The contract compliance management standards that might have suited ten years ago may now be irrelevant. Look at effective contracts that exist today and what parties do to enforce contract compliance. Use these as examples for your own compliance agreement plans.
Use a Centralized Contract Repository
It’s pretty obvious that paper contracts can easily become misplaced, but digitized contracts often have the same problem when they are stored in multiple locations like email inboxes, cloud file storage applications, etc. Finding contracts, their multiple versions, and associated documents can be a nightmare. That’s where centralized contract repositories come in. Contract repositories are centralized software programs where you can store, review, and access your contract from your device with ease. Consider repository systems like Lexion, which uses AI and automation to make contract storage, searching, and reporting a breeze.
Monitor These Common Contract Metrics
The clearer your contract, the easier compliance will be. You can review your contract by considering factors like:
- Measurability. How easily can contract compliance be scaled and measured? What are the specifics?
- Responsibility. Which party is responsible for which portion of the contract? What is your responsibility to uphold, and what responsibility belongs to the other party?
- Risk. What is the risk involved for both parties in upholding the contract? What are the potential risks of defaulting on the contract?
- Time. How much time does it take to finalize the contract? How long is the contract applicable?
Create a Standardized Contract Management Process
At or even before the start of the contract, it’s a good idea to have a process set for your compliance. If you have a team assigned to this, make sure everyone knows their role in the contract compliance management. If you plan to use software to manage the tasks to execute, review and organize the contract, choose software that’s easy to use and implement so your team will be on board. Conduct training on the standards of the process so everyone involved is on the same page.
Conduct Regular Audits to Monitor Performance
In your contract compliance management, you should include regular evaluations to ensure that the terms of the contract are still being upheld. Review the contract to make a list of important points to audit, and run down that list. Make sure relevant teams know about the audits. This will keep compliance terms in everyone’s mind so that you will be less likely to run into compliance issues.
How To Use Contract Management Software To Ensure Compliance
Contracts are an essential part of business, and contract management software makes every part of contract management easier. Contract management software like Lexion allows you to keep your contract in one convenient central location. No more losing hours hunting for a file. With award-winning AI, you can find your contract in minutes. You can review it, automatically file, and even get reminders for renewal timelines. Contracts often require a backlog of old documents and even legacy contracts. Lexion allows you to upload these, as well, and find them as easily as the current contract. You can even integrate your software with other apps you use, such as email, Slack, Teams, Salesforce, or even electronic signature tools.
Contract management software also helps to improve workflow. Automated software makes it easy to draft, sign, assign teams, set and organize tasks, share the contract, and analyze metrics. A user-friendly interface and a central dashboard helps to streamline the workflow and save time.
Security is an extremely important issue when it comes to any business documentation, including contracts. When cloud software is brought into the mix, you may find yourself worried about privacy. With the right contract management software, you can be confident in your security. Lexion, for example, provides contract management software that is SOC Type II certified and performs automated network intrusion tests to ensure the privacy of its virtual cloud server. All data is encrypted and software is subject to reviews. Every change is logged and audited within the system so you can keep track of exactly who has access and makes changes to your files.
Contracts have always been a part of business, but contracts have evolved over the years. So has contract management. Whether you need to streamline the process of contract compliance, draft a contract, or organize the contracts you already have, Lexion can help. Schedule a demo today to learn more about what contract management software can do for your business or take a look at our products today.