Here's a Simple Fix to Prevent Failed Audits

If you've ever been through an internal or external audit, then you know how grueling it can be for the entire organization. The stress levels among executives tend to peak when the auditors are in the office doing their review. Over the years, I've been on the receiving end of some pretty challenging queries from auditors. From a contracts perspective, I had to show the auditors that there was a contract in place for all of our commercial transactions. But I was also asked to demonstrate that everyone was adhering to the terms and conditions of those contracts.

That should make every contracts manager fear for their jobs. Because there are many ways you can fail an audit. But contract management shouldn't be one of them.

In this video, I'll show you a simple fix that saved my skin time and time again when the auditors came around looking for contracts.

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Video Transcript

Most organizations are subject to some form of an internal audit. Companies in some industries, like finance and healthcare, and larger publicly traded corporations may also be subject to an external audit.

Contract management, from an audit perspective, means that an organization should be able to not only show that they have a contract in place for all of their commercial transactions, but also demonstrate that everyone’s adhering to the terms and conditions of those contracts as well.

The reality is that most organizations would fail an audit today if they were just asked to show a contract for every purchase they made.

Because as much as we like to think that we have a good handle on what’s in our filing cabinets or on the shared drive, we see the problem for what it really is when we’re forced to find some obscure contract from 3 years ago and be expected to know what it says and whether or not it’s being enforced.

As a procurement manager, I was on the losing end of many conversations with internal auditors when I couldn’t find a contract for a purchase we’d made.

And it wasn’t because our filing cabinets burned down in a fire, or our network crashed.

It was just that filing contracts was a pain in the butt, so people procrastinated.

Just think about the steps you have to take to file a single contract in a filing cabinet.

If it’s a new supplier, you have to get a hanging folder, then you have to get a manila folder to go inside the hanging folder. Then you have to make a tiny label for the hanging folder and a label for the manila folder

And then you have to find the right filing cabinet. Some organizations categorize their contracts by category, others by region, some alphabetically.

So stacks of contracts would pile up on people's desks to be filed later, and inevitably one or two would go missing.

And the cost of failing an internal audit isn’t just monetary. People risk losing their jobs when an organization fails an audit.

So what’s the solution? Simplify the process of storing contracts.

If all I have to do is drag and drop my contract into an online tool like OneView, then I’m far more likely to do that than let the contract sit on my desk or in my email. And I know exactly where the contract is if I ever need to refer back to it.

And that’s all there is to it. The simple step of saving your contracts in a repository so you can easily find them when you need to can potentially save you the embarrassment (and perhaps even your career) when the internal auditors come calling... or something more serious if it’s an external audit.

Next up, we’ll take a look at how good contract management can save you from software compliance penalties.

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Also, if you’d like a free contract management process review, we’ll show you how to reduce the time you’re spending on contract management by up to 75%. Just head over to oneviewnow.com/review to claim your free session.

Thanks for watching.