It’s safe to say that most businesses – from small companies looking to expand their reach, to large enterprises spanning continents – rely on third parties to keep their operations running. It’s clear that there are many benefits to outsourcing certain corporate functions, but even the most successful businesses can overlook the importance of proactively auditing third-party contracts for compliance.
Facing constant pressure to cut costs and do more with less, it’s not hard to imagine why closely monitoring contracts after they’re executed may not be at the top of your priorities. But, if your company is investing significant time, energy, and resources into negotiating the best possible terms and prices, then doesn’t it make sense to ensure that those terms are being delivered upon throughout the duration of the contract?
Contract compliance audits help your business get the most value out of your third-party agreements. Here are 3 ways that performing contract compliance audits can benefit your business in the year ahead:
1. Increase transparency with suppliers and boost productivity
Despite the common misconception that audits may harm a company’s relationship with its suppliers, contract compliance audits actually foster communication and increase transparency. If managing third-party contracts is put on the back burner, it’s likely that the contracts are only revisited after an issue arises and needs to be resolved. Proactively performing audits allows a company to identify potential areas of non-compliance and resolve them before the situation becomes more serious.
In the process, companies have the unique opportunity to open the lines of communication with valued suppliers. Both parties gain confidence that they are aligned and adhering to negotiated terms – and the relationship is strengthened as they collaborate to validate expectations, reduce assumptions, and improve the contract. In turn, the relationship grows more productive and earnings increase with improved performance.
2. Uncover missed opportunities for savings
Saving money is a major focus area today for many, if not all, businesses. If you’re not closely monitoring your third-party contracts, then how do you know if you’re overpaying?
Putting your contract under a microscope can help you identify potential savings, validate that pricing terms and other conditions are being followed, and reduce financial losses associated with non-compliance. According to Corporate United partner SC&H Group, contract compliance audits may result in financial savings averaging 2-4 percent of the transaction value audited.
3. Gain industry-leading best practices
In addition to identifying overbillings and uncovering areas for potential savings within your contracts, compliance audits help pinpoint areas for process improvement. This is especially true when leveraging third-party contract auditors, which come into the process with a fresh perspective and years of expertise to share.
By engaging industry specialists to perform these audits, your stakeholders can gain expert recommendations for best practices to improve their processes going forward. You can then incorporate these best practices and lessons learned into day-to-day operations and future contract management activities to support organizational efficiencies and business growth.
Now that you understand some of the benefits that contract compliance audits can bring, you may be wondering: How do I get started?
SC&H Group recommends starting small. “A well-executed pilot program that touches on several different contracts or spend categories can provide the evidence to secure stakeholder buy-in,” explains Bill Adams, Director of Contract Compliance Audit Services at SC&H Group. “The results of the pilot will often underscore the need for a broader recurring initiative.” And, Corporate United members receive additional benefits such as reduced rates, minimal time required per audit, and no upfront investment with our risk-free program.
Get all the facts about contract compliance audits by downloading “The Truth About Contract Compliance Audits: Dispelling the Myths” from SC&H Group to get started today!
Sonda Sahley: Category Management, Corporate Services at Corporate United
Sonda is responsible for Corporate Services Category Management at Corporate United. In this role, she serves as a category manager for office supplies, contract audit and translation services agreements. She works cross-functionally with stakeholders and suppliers to provide ongoing program support and she serves as a key advocate for Corporate United supplier relationships.