Increasing Contract Compliance = Reduced Risk
Contract compliance continues to pose a challenge across many businesses, with the threat of supply chain disruption, failure to meet regulatory standards, legal action and reputational damage linked to non-compliance. Whilst the understanding that Contract Compliance = Reduced Risk is more prevalent, what does it mean? How do you achieve it?
Achieving a high level of contract compliance takes a good strategy, joined-up thinking between departments & business units and hard work. Maintaining this requires the continuation of these strategies and the use of tools to make this as simple as possible.
Why does contract compliance matter?
Ensuring compliance will reduce the risk across your supply chain, ensuring regulatory standards are maintained. This reduces the risk of legal action and reputational damage. By monitoring and enforcing compliance, you can identify and address potential issues before they become major problems.
Improved quality and performance: Contract compliance will help to improve the quality and performance of suppliers by ensuring they meet agreed-upon standards for quality, delivery and pricing. This in turn will lead to increased efficiency, productivity and mutual satisfaction.
Increased transparency: Good compliance will increase transparency by providing visibility into supplier practices, performance and compliance with regulations and standards. This will help build trust and improve relationships.
Ethical and sustainable sourcing: You can ensure compliance can be used to promote ethical and sustainable procurement.
Reduced costs: Compliance will help reduce costs by reducing out-of-contract increases. Having timely notifications and reviews contracts and prices can be fixed, reducing inefficiencies and waste
How does a Contract Management System Help?
When properly implemented, a contract management system allows your business to have oversight of its existing contracts. This will reduce the risks posed to you by non-compliance and allow you to ensure your supplier contract are negotiated in a timely and fair manner.
A contract management system should also form a large part of the planning for your teams, detailing which contract renewals are due and allowing you to prioritise when and where to invest your time.
When a business releases compliance figures across internal departments, this can promote an atmosphere of “competition”. Your internal stakeholders will be more focused on raising their compliance and moving up the “league table”.
Having all contracts in one place will significantly reduce the time needed and assist internal and external audits when contracts are requested.
Proven Contract Management System Impact
Our contract management system is a proven tool, used by our clients and teams on site. Recently updated and refreshed, it offers powerful reporting, timely notifications and is proven to drive compliance across complex businesses.
We have recently started working with a client for whom contract compliance had not been a priority. Following a sustained period of growth they wanted to understand their contract situation. There was no focus on contract management and no formal strategy around spend management in place. This resulted in many of their contracts slipping into automatic renewal. We identified much of the existing spend was not covered by contractual terms.
This is where the hard work started.
Our team worked with the client to compile and upload all of their existing contractual information. This provided a quick analysis of their compliance and spend data. The results were not what the client wanted. With no formal policy in place compliance was inadequate and the risk level were high.
The CMS spend report allowed us to work with the client to define where contract compliance was necessary. Working together we defined their procurement process for orders and values that required more than a Purchase Order to be completed. By defining this limit we were able to work with the client to focus on their areas of highest risk.
The internal stakeholders saw the risks associated across their departments and started to increase their focus on compliance. Comparatively the client has increased their contract compliance by 15% in 2 months and continues to drive this up with a target to achieve 90% compliance. With our support this has become an achievable target.
Furthermore, our client has now adopted a new mantra of “Compliance, Compliance, Compliance” when looking at contracts. Undoubtedly a complete turnaround on their previous approach, and proof that increasing Contract Compliance = Reducing Risk & Improved Performance
To find out more about our Contract Management System and the latest updates take a look at this video or contact us to start the discussion.