Why you should automate contract compliance

How automated contract compliance can increase your team’s efficiency while strengthening vendor relationships

Reviewing a contract

Procurement teams invest significant effort into creating detailed contracts. These documents outline expected costs, deliverables, and timelines—ensuring projects run smoothly. They establish clear expectations for both you and your vendor. 

However, ensuring vendors follow these terms throughout the project is no easy task, especially when done manually.

Manual contract compliance can be a soul-crushing task that is incredibly time-consuming and repetitive. Worse yet, when an error is found, you must address any errors reactively. This can lead to inefficiencies, increased costs, and strained relationships with your vendors. 

A more effective approach is to proactively manage contract compliance through automation. It enables your team to concentrate on more critical tasks while still ensuring the terms and conditions of the contract are being adhered to. 

Speed up your contract compliance process

Manual contract compliance checks are tedious and time-consuming. When non-compliance occurs, it generates extra work for all teams and slows project execution. 

By automating your contract compliance process, you can immediately identify non-compliance without human verification, significantly speeding up the process. This transparency also benefits vendors by eliminating surprises on their end.

Here are some features of an automated process:

  • Real-time notifications: Automated systems can instantly notify vendors if their work does not meet contract terms. This real-time feedback allows vendors to correct issues before submitting labor, equipment, and material (LEM) submissions, keeping everything aligned from the start and preventing problems from escalating.
  • Instant identification of deviations: Automated systems quickly identify discrepancies once LEMs are submitted, allowing your team to address issues early. By catching and resolving discrepancies upfront, Purchase Orders (POs) can go to invoice quicker, streamlining the entire process.

These methods streamline the contract compliance process, reducing the time spent on manual checks and follow-ups.

Increase operational efficiency and resource optimization

There is a significant opportunity cost for the time spent manually verifying contract compliance. When teams are bogged down checking inputs line-by-line, they don’t have much time to focus on initiatives that drive business value. 

Time would be better spent reviewing data trends to see if there’s anything the project management team could use in conversations with the vendor around productivity. Maybe some standard practices result in unnecessary spending that is currently going unnoticed.

Non-compliance can also have a rippling effect, causing issues with other processes. For example, it will cause conflicts during three-way matching. If the vendor enters an incorrect rate, it won’t match the purchase order and receipt. 

Automating contract compliance prevents this conflict by flagging issues before they hit your ERP.

You can tackle two things simultaneously by transitioning away from manual contract compliance. You reduce the burden of inefficient menial tasks, and your team can provide additional value to the organization.

Reduce unnecessary costs and improve spend management

Managing project costs is a significant challenge, especially when inputs need to be manually verified. Errors from both vendors and operators can lead to overrun budgets and needless spending. An automated compliance process removes potential human error and further improves financial operations by:

  • Identifying non-compliant submissions: Automated solutions do more than cross-reference rate cards. They can identify duplicate POs, unexpected third-party expenses, and non-approved overtime, flagging non-compliance immediately.
  • Recommending rate consolidations: If your organization has approved daily, weekly, or monthly rates, automation can save money by proactively applying them. For example, if the total hourly costs for a day recorded on a timesheet exceed the approved daily rate, the system prompts using the approved rate.

By implementing automated contract compliance, you not only eliminate human error but also achieve a more streamlined and cost-effective approach to managing your project expenses.

Protect your vendor relationships by avoiding disputes

Frequent compliance disputes can strain vendor relationships, negatively affecting the quality and timeliness of deliverables. These conflicts disrupt project flow and create friction between procurement teams and contractors. 

Automated contract compliance helps maintain strong vendor relationships by preventing surprises and fostering open communication. Here’s how it benefits everyone involved:

  • Avoiding disputes: Addressing compliance issues early, before they reach the invoicing stage, minimizes the potential for disputes. Early resolution ensures smoother and more positive working relationships with vendors.
  • Streamlined communication: Providing real-time updates and notifications around non-compliance ensures there are no surprises. This transparency keeps contractors informed and accountable, fostering a culture of openness.

Maintaining a healthy relationship with your vendors is critical for long-term success. Automating contract compliance not only reduces the risk of conflict but also builds a foundation of trust and cooperation that benefits everyone involved.

Embrace a more proactive approach to contract compliance

Ensuring vendors follow contract terms is essential but challenging. Automation simplifies this process, reducing the risk of conflicts and improving operational efficiency. 

By taking a proactive approach to contract compliance, you can enhance financial management and strengthen vendor relationships. Embrace automation for a smarter, more effective compliance strategy.

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