It’s possible to forget about a contract after it’s been signed, but that’s a costly mistake. Instead, legal teams and compliance stakeholders, including IT and finance, need to keep track of contracts and contract data — e.g. privacy clauses, renewal dates, obligations — after the agreement has been signed in order to manage risk.
Every organization, from growth stage to enterprise, should establish a contract compliance audit program to ensure that contracts follow internal and external rules. With regularly scheduled compliance audits, risk-concerned teams like legal, finance, and IT can fulfill obligations and comply with regulatory requirements more effectively.
All the moving parts of the audit process make it nearly impossible to do manually. Using Contract Lifecycle Management (CLM) software, businesses can manage their contract compliance audit programs, collaborate cross-functionally, and easily gather necessary data.
Here are some ways you can use CLM to manage your audits.
Verify Financial Data
CLM’s centralized repository enables finance to find every relevant contract and extract financial data to generate financial reports and verify financial statements. With an audit trail that tracks everything that happens to the contract throughout its lifecycle, CLM helps finance prove that the company has established and follows internal processes and controls, which the SOX Act and other regulations require.
Audit Data Security for SOC2
SOC2 compliance is a huge indicator of how serious a company is about protecting customer data. When preparing for a SOC2 audit or maintaining compliance, IT teams have to prove that their internal systems, processes, and tools are secure. Not only does CLM encrypt contract data, but it also gives teams the power to control user access and permissions, safeguarding sensitive data from both cyberattacks and rogue employees.
Build Compliance into the Contract Process
If contract compliance is an afterthought, then audits will always feel like a slog. Instead, legal teams should build it into the contract process so that everyone has what they need for a smooth audit process. Here’s how:
Have clear and consistent terms in your contracts
Every contract, regardless of execution date, should have the most up-to-date legal-approved terms at any given time. Legal teams can use CLM to standardize global terms and update legacy contracts, preventing inconsistencies that would increase risk.
Monitor contracts and document processes
Don’t wait for upcoming renewals to check on your contracts. Run reports to monitor privacy terms, important dates, and service-level promises so you can stay on top of your obligations and identify gaps more quickly. Use the audit trail to track versions and ensure you’re using the most recent and relevant terms.
Centralize storage
Centralized contract storage ensures that you can find all your agreements in one place. This is crucial not just for data protection, but also for ensuring that all stakeholders have access to the contracts and documents they need for their own compliance audits.
Takeaways
By necessity, a contract compliance audit program should be a cross-functional initiative that helps legal protect the business and support other teams during their own audits. See how LinkSquares CLM can help you manage your audit program. Request a demo today.
