Some businesses make the mistake of concluding their contract management process the moment all contracting parties sign the dotted line. Once the deal is officially sealed, the contract gets stored, only to collect dust and never be seen again. But the truth is that some of the most critical steps happen after contract signing.
One that’s often overlooked is contract auditing. It’s an important aspect that involves a thorough review and analysis of the terms and conditions of the contract. This helps ensure that everyone involved is fulfilling their obligations and adhering to the agreement’s terms.
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What Is Contract Auditing?
To put it simply, contract auditing is like an internal review of an agreement to ensure that everything is going according to what was agreed upon. It plays a crucial role in identifying potential issues before they get out of hand and cause disputes.
Contract auditing mainly involves reviewing the terms and conditions of the agreement and evaluating the performance of all parties involved. This provides a transparent assessment of the performance of the contract.
Here are some key areas that may be covered during a contract audit:
Compliance with contract terms
At its core, contract auditing is all about reviewing whether the parties comply with all the contract terms and conditions or not. For example, if the contract specifies that a supplier must deliver goods within a certain time frame, check if they can meet this requirement.
Financial management
You also have to get into the nitty gritty bits of the contract, most especially the financial aspects. This includes the payment terms and pricing. Refer to your invoices to see if you’ve been paid according to schedule and if the payment was calculated correctly.
Performance evaluation
Most, if not all, contracts come with performance metrics that allow all parties involved to perform their performances properly. When conducting an audit, look into how everyone is doing and see if they have passed the requirements. If they fall short, establish some corrective measures to help improve their performance.
Risk management
Part of contract auditing is identifying any potential risks or issues that may arise during the execution of the contract. For example, if the contract involves transferring confidential information, the audit may check that appropriate security measures are in place to protect this information.
The Best Practices for Effective Contract Auditing
Contract auditing is no small feat. It requires a systematic and structured approach that’s equally time-consuming and complex. It’s no wonder a lot of people shy away from performing such an important step in contract management.
If you are one of those who find contract auditing tedious and daunting, here are some helpful tips to simplify the process.
Plan ahead
Having a clear roadmap helps make contract auditing less daunting. When you divide the process into small manageable steps or milestones, you are more likely to feel less overwhelmed and lost. Planning helps you stay on top of your tasks while making sure you finish everything on time.
Focus on the critical areas
Part and parcel of making your contract auditing plan is identifying the critical areas of the process that require the most attention. These areas typically include pricing, delivery schedules, and performance metrics. This will help you prioritize your efforts and ensure that you are focusing on the most important issues.
Use technology
Nowadays there’s an abundance of online tools and software that can help you make contract management more manageable. These tools can help you automate many of the manual tasks involved in the audit process, such as data collection and analysis. If you regularly deal with tens and hundreds of contracts regularly, these tools can be such a great investment.
Leverage expertise
For a complex process like contract auditing, it’s ideal if you appoint a member of your team to be the key resource person. This individual must have a solid background in contract management, among other things. This can help ensure that the audit is conducted effectively and efficiently by experts in the field.
Continuously improve
To build an effective contract management system, you need to constantly work on improving your process. Conduct a review and evaluation to see which areas need improving. So the next time you audit contracts, everything will go more smoothly.
Top 3 Tools for Contract Auditing
As mentioned earlier, having the right set of tools can make contract auditing a breeze. If you are keen on investing in some of them, here are our top 3 recommendations:
Contract management software
Contract management software is one of the best investments you could ever make if you wish to simplify your auditing process. Aside from providing a centralized location for contract data, this tool also automates workflows and generates and analyzes important data.
Data analytics software
Contract auditing is a highly data-driven process, so it just makes a lot of sense to integrate a tool that can identify trends and anomalies in contract data, such as pricing discrepancies or delivery delays.
Electronic signature software
Digital contracts are becoming increasingly popular as more and more businesses are slowly switching to paperless solutions. This being said, electronic signature software could be an invaluable tool not just for online contract signing but also for contract auditing. Many eSignature tools also offer a range of features that can automate many tasks.
Fill: The Ultimate Tool for Hassle-Free Contract Auditing
If you’ve ever been tasked to audit contracts, you would know that this process is not a walk in the park. Without the right tools and resources, the whole process can take ages to finish. This is where Fill comes in.
Fill is a powerful and intuitive platform that not only offers an eSignature solution but also features that can help simplify your contract auditing process. With Fill, you can store all your contracts in one secure location, making it easier for you to access and review all contract-related information. You can also automate a myriad of tasks associated with contract auditing, including analytics and data reporting.
Not only that but Fill has a rich library filled with customizable contract templates so you don’t have to write your agreements from scratch. Our real-time tracker also allows you to closely keep an eye on the progress of your paperwork. You don’t have to constantly ask for updates from your clients or partners.
Most importantly, our platform uses military-grade encryption to ensure that only authorized parties can access your most confidential documents. Furthermore, you can easily avoid fraudulent transactions by using our signer identity verification feature.
All these and more you can enjoy when you sign up with Fill. Sign up today and experience the benefits of a streamlined, hassle-free contract management system that works for you.
