---
title: How CLM Helps With SOX and Contract Compliance
description: Managing contracts using manual processes leads to compliance issues. Learn how CLM software helps businesses maintain contract compliance in this post.
image: https://blog.linksquares.com/hubfs/Copy%20of%20Legal%20Best%20Practices_Thumbnail-Jun-15-2023-12-33-44-7240-PM.png
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Introducing: Agentic AI for Contract Management
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[Alyssa Verzino](https://blog.linksquares.com/author/alyssa-verzino) Jun 15, 2023 5 min read
# How CLM Helps With SOX and Contract Compliance
In the early 2000s, corporations like Enron and Worldcom mismanaged their funds, hid their losses, and lied about it to investors. This left a bad taste in the American public’s mouth, so government regulators enacted the SOX Act to mandate contract compliance and prevent future corporate scandals as much as possible.
## What Is SOX Compliance?
The Sarbanes-Oxley Act (or SOX) requires publicly-traded companies to complete annual financial reporting that accurately reflects their financial status. To comply, companies must establish proper internal processes for auditing and reporting financial information.
Under the SOX, CEOs or CFOs are required to certify at penalty of perjury that their financial reports are accurate. Non-compliance can lead to hefty fines, imprisonment, and loss of good reputational standing — sometimes all three.
Given that most of this financial data lives inside a company’s business contracts, contract compliance is crucial to maintaining SOX compliance.
## How Can CLM Help with SOX and Contract Compliance?
To comply with SOX, companies need to institute internal workflows and controls for managing contracts, maintain audit trails of transactions, and generate accurate reports of their financial standing.
Trying to do all this manually is expensive and error-prone. Thankfully, contract lifecycle management (CLM) software can help businesses maintain contract compliance.
Here are three ways CLM enables SOX and contract compliance:
### Establish Internal Processes and Controls
Per SOX, businesses need to create and adhere to internal contract management processes. This means having a well-documented system for creating, executing, storing, and auditing every contract that passes through your business.
CLM allows you to create these internal workflows and automate contract compliance. CLM gives users the power to create rules for certain types of contracts, ensuring that each contract complies with set processes and controls.
[](https://cta-redirect.hubspot.com/cta/redirect/6934676/d57bd9cf-bbdb-4630-8ebf-9d600db6d43a)
### Create Audit Trails
CLM helps maintain contract audit trails. In addition to time and date stamps, every contract in a CLM repository has its own record of modifications, version history, and signers.
CLM also tracks contract activity over the lifetime of the agreement and provides immutable proof that the business followed the established processes and maintained contract compliance, making it impossible to falsify financial reports.
### Generate Up-to-Date and Accurate Reports
CEOs and CFOs have to certify the accuracy of their financial statements, so it’s crucial that the company maintains accurate transaction records — including and especially contracts.
CLM allows teams to automatically generate reports based on contract data. Building these reports manually would take weeks or months, and the information in the reports might be obsolete by the time they are submitted. CLM dashboards enable teams to visualize contract data quickly and generate up-to-date reports about money moving in and out of the business.
## Takeaways
A huge part of SOX is maintaining contract compliance. Trying to manage your contracts using manual or ad hoc processes can upset the consistency of this reporting and lead to more errors in the long run. See how LinkSquares CLM can help you maintain contract compliance. [Request a demo](https://go.linksquares.com/demo-request)today.
#### [Alyssa Verzino](https://blog.linksquares.com/author/alyssa-verzino)
Alyssa Verzino is a Senior Content Marketing Manager at LinkSquares.
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## Related Articles
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### [Mary Curtin Mar 15, 2024 7 min read Contract Management 101: Why You Need Legal Technology Remember that recurring nightmare you have when you’re about to take an exam and haven’t studied for it at all? Start Reading](https://blog.linksquares.com/contract-management-101-legal-technology)
### [Alyssa Verzino Jan 03, 2023 9 min read How CLM Helps You Retain Contract Value The price of everything has gone up. Whatever came to mind as you read that — isn’t it way more expensive now than it was a ... Start Reading](https://blog.linksquares.com/how-clm-helps-you-retain-contract-value)
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