Last updated on February 3rd, 2020 at 02:49 am
Your contract repository allows you to easily and effectively access all of the contracts your business has put together. Its sole purpose, however, is not just to store contracts for future access. Your contract repository also has the potential to become a valuable compliance tool. Maintaining compliance is one of the most important stages in every contract management process, and you can learn more about each stage in our comprehensive overview. Integrating your system with automated compliance checks allows you to track your contracts and ensure that your business is meeting its commitments. Follow these steps to monitor compliance with regulatory standards, service uptimes, and contractual requirements.
1. Score Your Contracts
One of the first steps in turning your contract repository into a compliance tool is scoring your contracts. Contract scoring allows you to identify any potential challenges — including compliance challenges — with your contracts. Any time you have a significant risk in your contract, such as a risk of falling out of industry or government compliance standards, your contract management software should alert you to the challenge. This may mean that you want to take a fresh look at the terms of your contract. Alternatively, it might mean that you have to put safeguards in place to ensure that you remain in compliance as you implement the contract.
2. Keep Standards Readily Available
In addition to your current contracts, your contract repository should contain guidelines that indicate what terms you are and are not willing to accept in your contracts. This includes a couple of things:
- The terms that you’re willing to negotiate when you’re putting together a new contract for a client
- A range within which your negotiators can operate
- The terms on which you absolutely are not willing to negotiate.
In these non-negotiable terms, you should include the terms that will keep you in compliance. Depending on your industry, your compliance terms may look different. For example, if you deal with customer payments, you must remain PCI compliant any time you connect your system to the other party’s. You must meet basic safety standards, including OSHA standards, to mitigate the risk of expensive fines. Still other industries must keep in mind basic legal standards particular to their industries.
By making these non-negotiable points readily available, you can ensure that negotiators don’t miss them. Also, by identifying them as compliance standards that you must follow, rather than standards set by your business, you can better communicate to other departments that the terms can’t be negotiated.
3. Set Your Contract Management Software to Check for Compliance
Any time you work with a client or perform work for that client, you have the potential to step outside your usual compliance standards. This is especially true if new standards have recently transformed your industry or you have a particularly demanding client who fails to fully understand the industry. Your contract management software, however, should check for compliance at every stage of the process, from negotiation to execution. Set your system to trigger an alert any time certain steps aren’t complete by a certain date, if necessary paperwork hasn’t been uploaded, and other factors that raise red flags.
4. Have Your Software Assign Responsibilities (Or At Least Record It)
In order to maintain government compliance, you need to keep your contracts strictly organized. This starts from the negotiation phase, when you must make those goals and your ability to adhere to them clear, to the obligation phase and beyond.
Part of that process includes assigning responsible parties to each piece of the compliance process. Who is responsible for ensuring that those requirements are met as you draft the contract? Who should ensure that those standards are maintained on the job site? When you assign a specific individual to take on those responsibilities, you set aside that individual to ensure that those needs are met at each stage of the process/ Don’t just leave it to chance. Automate the checklist of requirements they need to take so you know it gets done and there’s evidence to back it up.
If there is a breakdown in compliance, knowing who is responsible for those standards will also allow you to identify the problem and ensure that it doesn’t happen again.
5. Include Compliance Standards in Your Audit
When you audit a contract, you want to know that it benefited your company. It’s equally important, however, to ensure that each contract meets basic compliance standards. During your audit, review each contract and its execution. Check them against compliance standards for your industry. If you identify any potential problems, figure out where in the process those breaches occurred. Then you can improve your compliance efforts for the life of the contract. In some cases, it may be too late to fix the problem when you conduct the audit. But you can still identify challenges that could prevent your business from meeting compliance standards in the future.
Failure to maintain compliance can lead to hefty fines and penalties for your business. Keeping up with compliance standards begins in the contract — and extends throughout the contract cycle. With these strategies, you can prioritize compliance and turn your contract repository into a valuable compliance tool. Each of these steps will make it easier for your business to meet all of those important standards.