Contract Obligation And Compliance Management Essentials
- 10 min read
- Bethany Mullinix
Introduction
Contract obligation and compliance management is, by nature, a risky business.
Not in a dangerous sense. Quite the opposite – it reduces the risk that can come with contract management, ensuring that you or your vendors meet contractual commitments and regulatory and legal requirements throughout a contract’s lifecycle.
However, it can become truly risky if your organization relies on inefficient contract tracking processes. Poor or nonexistent contract obligation and compliance tracking within a contract lifecycle management (CLM) platform can have significant legal, financial, and operational consequences.
Let’s take a closer look at what tracking obligation and compliance management involves and how to implement it. We’ll also share the resources for selecting CLM software with industry-leading tracking features.
Understanding Contract Obligation and Compliance Tracking
Contract obligation and compliance tracking involves extracting, overseeing, and managing the agreed-upon commitments of all parties during a contract period. This post-signature function begins as soon as the contract is signed and continues through renewal or termination.
It plays a crucial role in contract management and can lead to unwanted consequences, including financial losses, lawsuits, and strained business relationships.
But here’s what happens when you effectively track your contract obligations:
- You maintain legal and regulatory compliance, reducing the risk of legal disputes, fines, and reputational damage. By tracking and fulfilling contractual obligations, businesses demonstrate they’re committed to transparency and ethical practices.
- You improve operational efficiency. Obligation and compliance tracking lets you proactively manage deadlines and milestones, preventing missed contractual commitments and associated penalties. Because you can easily see approaching deadlines, you can allocate resources toward those projects, ensuring they’re completed on time and within budget.
- You enhance accountability and transparency within the organization. Tracking obligations provides clear visibility into responsibilities and performance, making it easier to identify areas that require improvement and measure progress.
The bottom line is that obligation and compliance tracking can have a major impact on your bottom line.
Features of Intelligent Compliance and Obligation Tracking
Intelligent compliance and obligation tracking features within contract management software provide advanced tools for efficiently managing contractual commitments. These features typically include:
- Automated Alerts and Notifications – CLM platforms can automatically generate alerts and notifications for key deadlines and milestones, ensuring that obligations are met on time. Users can configure these alerts to suit their specific needs.
- Rules-Based Compliance Monitoring – Intelligent tracking systems allow users to define rules and criteria for compliance. It can identify deviations, triggering alerts for necessary actions.
- Document and Data Integration – CLM platforms can integrate with various data sources and document repositories. This enables the automatic extraction of critical information from contracts and other documents, making it easier to track compliance metrics.
- Customizable Dashboards and Reporting – Users can create personalized dashboards to monitor compliance and obligation statuses in real-time. Custom reports and AI-based analytics provide insights into overall performance.
- Audit Trails – Comprehensive audit trails record all changes and interactions within the system, maintaining a transparent history of compliance activities for audit and accountability purposes.
How to Implement a Tracking Process
Implementing intelligent compliance and obligation tracking within an existing workstream begins before you purchase a CLM system.
Begin your research by evaluating your current contract management processes and identifying pain points related to compliance and obligation tracking. Determine the key performance indicators (KPIs) you want to track.
Then, connect with those on your team who will use the system to get insights into the features you need to align it with your organization’s needs.
When you have a contract management platform in place, follow these steps to integrate it into your workstream:
- Migrate your data. If transitioning from an existing system, be sure to retain historical contract information and compliance data.
- Customize and configure the system to match your organization’s specific compliance and obligation requirements, setting up rules and alerts.
- Train your team on the new platform and its features to ensure they understand how to use it effectively.
- Test and optimize the software to validate the system’s accuracy and efficiency in tracking compliance. Make adjustments as necessary.
- Integrate the platform with other relevant systems or repositories to streamline data sharing and reporting.
- Continuously monitor and analyze compliance metrics and contract performance, making improvements based on any insights you find throughout the process.
Explore the Next Level of Contract Performance Monitoring
Intelligent compliance and obligation tracking features can help your organization proactively manage its contract obligations, reduce risks, and improve operational efficiency within the existing workstream.
But, finding the right CLM platform with tracking features that fit your needs takes research. Start by reading what the industry pros have to say.
We’ll give you a head start:
- Gartner Magic Quadrant Report for CLM – Each year, the Magic Quadrant report gives a comprehensive overview of the top CLM vendors on the market, complete with visuals and extensively researched insights to help you make a purchasing decision. It’s a valuable resource if you’re looking to understand the market dynamics and key players.
- Gartner Critical Capabilities – Alongside the Magic Quadrant report, Gartner also annually releases its Critical Capabilities report. It delves even deeper into the CLM market, enhancing the insights from the Magic Quadrant analysis. It’s a must-have if you’re looking for an in-depth understanding.
Curious about other key features of CLM platforms? Dive into our top two essentials (also essential capabilities according to Gartner) to find out more:
Additional Resources
6 Contract Management Software Benefits For Enterprise Success
Applying Application Administration to the Contract Lifecycle
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