Procurement teams often underestimate the time and resources required to thoroughly manage their suppliers and contracts. Commonly there’s an assumption that because there’s a contract in place they are automatically receiving all negotiated benefits. Errors, misunderstandings and inadequate oversight of the agreed terms mean the value promised is often underdelivered.
So how does an organization know they are getting the full value promised? Organizations that implement a supplier contract audit program benefit through accessing business insights otherwise unknown and optimizing procurement and accounts payable processes. Furthermore, they ensure the hard work, time and resources taken to negotiate terms across an organizations supply chain are being delivered, controls implemented and transparency between an organization and their suppliers is paramount.
As companies gain a better understanding and appreciation for the deep intelligence gained through supplier contract audits, they are demanding enhanced audit strategies designed to expose errors sooner and prevent them from happening again.
As a whole, trends dictate an actionable or intellectual change in what worked in the past to what’s popular now or will be in the immediate future. Below we explore the current shift in gears for contract audit programs.
Switching focus from recovery to prevention
Companies are demanding more value from contract audit programs. They realize the necessity but want more targeted risk mitigation and expanded value. This means the central focus must expand to include the traditional recovery motivation with an equal focus on error correction and prevention.
Use of technology to drive enhanced results
Advancements in technology will fundamentally change contract compliance in the very near future. Manual processes and physical labor will be replaced with artificial intelligence and machine learning to automate the ingestion, extraction, normalization and analysis of large amounts of contract data.
Next generation vs. traditional commercial compliance
By definition next gen commercial compliance auditing is an expanded service by a skilled audit partner intended to help companies overcome the shortcomings of the traditional contract compliance audit and deliver far greater value in the long run. While traditional compliance auditing has a lot to offer, given its inherent challenges, it does not fully deliver on the total value opportunity in this area.
Want to learn more?
Check out the Contract Audit: The Power of Prevention webinar where we explore new ways to expand the value delivered by your supplier contract audit program and key steps to help recover lost profit sooner and enhance your bottom line.