Contract Compliance

What is contract compliance?

Contract compliance is the process of ensuring that a business is meeting all of its contractual obligations. This includes complying with the terms of all contracts entered into with customers, suppliers, vendors, and employees. Contract compliance is important for accountants because it can help businesses avoid legal disputes, financial losses, and reputational damage.

Ensuring compliance.

Finance teams play a critical role in ensuring that businesses are in compliance with their contracts. Accountants are responsible for:

• Reviewing and analyzing contracts before they are signed to identify any potential risks or compliance issues.
• Tracking and managing contract deadlines and milestones.
• Preparing and reviewing contract deliverables.
• Ensuring that businesses are meeting all of their contractual financial obligations.
• Reporting on contract compliance to business leaders.

Benefits of contract compliance are felt below the surface in a business, but it can pay dividends over time. Some of the benefits include:

• Reduced risk of legal disputes: By ensuring that businesses are complying with their contracts, accountants can help reduce the risk of legal disputes. This can save businesses time and money in the long run.
• Reduced financial losses: By ensuring that businesses are meeting all of their contractual obligations, accountants can help reduce the risk of financial losses. This includes avoiding penalties for late payments or non-performance.
• Improved reputation: By demonstrating that they are a reliable and trustworthy partner, businesses can improve their reputation. This can lead to increased business opportunities and improved customer relationships.

Still, there are a number of common contract compliance challenges that businesses face, including:

• Managing complex contracts: Many contracts are complex and difficult to understand. This can make it difficult for businesses to ensure that they are complying with all of their contractual obligations.
• Tracking multiple contracts: Businesses often have multiple contracts in place at the same time. This can make it difficult to track and manage all of the contract deadlines and milestones.
• Managing changes to contracts: Contracts often change over time. This can make it difficult for businesses to ensure that they are always complying with the latest version of the contract.

Strategies for ensuring contract compliance.

Some of the ways that organizations go about managing the challenges and risks of contract compliance include automation strategies and process improvements.

• Use a contract management system: A contract management system can help businesses to track and manage their contracts more effectively. This includes tracking contract deadlines and milestones, managing changes to contracts, and generating reports on contract compliance.
• Establish clear contract review and approval procedures: Businesses should establish clear procedures for reviewing and approving contracts before they are signed. This helps ensure that all contracts are reviewed by qualified personnel and that any potential risks or compliance issues are identified and addressed.
• Regularly review and update contracts: Businesses should regularly review and update their contracts to ensure that they are reflecting the latest changes in the law and business practices.
• Train employees on contract compliance: Businesses should train their employees on contract compliance procedures. This helps ensure that all employees are aware of their contractual obligations and that they are taking steps to comply with them.

The finance team in contract management.

The finance team plays a critical role in ensuring that businesses are in compliance with their contracts. Using modern tools and efficient practices can free up time from low-value manual tasks associated with these practices. Here are some steps that they can follow to manage contracts.

• Review and analyze contracts before they are signed to identify any potential risks or compliance issues.
• Track and manage contract deadlines and milestones.
• Prepare and review contract deliverables.
• Ensure that businesses are meeting all of their contractual financial obligations.
• Report on contract compliance to business leaders.
• Stay up-to-date on the latest changes in contract law and business practices.
• Work with other departments, such as legal and sales, to ensure that contracts are being reviewed and approved by qualified personnel.
• Use technology to automate tasks such as tracking contract deadlines and milestones.
• Regularly communicate with business leaders about contract compliance risks and opportunities.

How Airbase helps in contract compliance.

Airbase’s Guided Procurement module guides employees on who must review a contract, depending on its size and type, before a purchase is made.

Airbase can integrate with contract management software like Ironclad so that communication, review, and approval flows between your procure-to-pay system and the business systems of different stakeholders.

This essential part of the procurement process takes the confusion out of what is needed for employees and learning about contracts that have been signed too late by the legal team.