Is it time for an audit? Contract compliance audits can be costly and time-consuming. These 5 considerations make them easier and will help you recover costs, improve processes, and ensure compliance faster.
When was the last time you performed an assessment of your contracts? An audit, as painful as they can be, is a necessary step in due diligence—helping you save money in the long run by reducing risk and improving processes and controls. And if you’re a pre-IPO company, an audit can help you achieve compliance that fuels greater scalability and accelerates growth, and position your company to generate higher returns when it does go public. What makes for a successful contract compliance audit? Here are 5 key things to consider before you begin.
Consider the scope
Are you reviewing the entirety of the contract? Are there particular areas with which you’re concerned? Who will be performing the audit—internal or hire external consultants?
Depending upon how you’re managing your contracts, or the capabilities of your contract management solution and how well your contracts are organized, an audit could be as easy as a quick search for contracts containing keywords, vendor names, terms, etc., or a file folder click. Say, for example, if you’re performing an audit due to Brexit regulations and changes, you would search for contracts using search terms like EU and UK. Not using a cloud-based contract management solution that makes an audit that easy? Consider hiring someone—it will cost you less in frustration and resources.
Consider the objectives
With so many benefits to an audit—recovering costs, improving processes, deterring fraudulent activity, and managing risk—what are you hoping to achieve? Identifying specific areas and defining clear objectives will help you focus your efforts and better organize your time and resources.
Audits should be initiated when you have strong leverage to change processes or recover payments. Releasing a new product? Changing regulations? IFRS 15 might require reconsideration of contract terms, clauses, pricing, etc., could be a good time for an audit. Think practically about when to begin an audit, and how long the audit will take to complete so you stay ahead of timelines, i.e. January 2018 for IFRS 15, or March 2019 for Brexit.
You’re likely not the only party in the contract. Use the audit as an opportunity to strengthen your relationship by framing it within the scope of collaboration. Present it as a chance to make sure that all parties involved are getting what is expected, and that processes are being fulfilled from both sides as was initially agreed.
To foster collaboration, leading contract management solutions have built in features like the ability to track changes; to edit, comment, and negotiate in-document and directly online; and version control with a robust audit trail. Intuitive features like these not only help ensure flawless compliance but they’ll speed up the overall audit process.
Consider the future
This is likely not the first, nor will it be the last audit you’ll perform. A very time-consuming and comprehensive task, possibly lasting months and requiring a lot of leg work to chase down contracts, the easiest way to perform an audit is by using a comprehensive cloud-based contract management solution.
Contract management solutions not only make performing a successful contract audit easier, they make implementing changes and enforcing them easier too, giving your organization faster processes, and the flawless compliance that accelerates growth.