Compliance is an important area for anyone that has to issue contracts. It can be easy to make mistakes in contract compliance. However, there are ways to see off these avoidable mistakes and overcome these pitfalls. Our blog identifies five common contract compliance pitfalls and importantly, how to avoid them.
In general, professionals must work on two levels of compliance. Firstly, they must comply with external rules imposed on their industry. Secondly, they need to comply with internal control systems to achieve compliance with the externally imposed rules.
To ensure contract compliance at each level, we have written a helpful guide to highlight the most common contract compliance pitfalls and how to overcome them.
The Five Common Contract Compliance Pitfalls
1. Engaging with the correct entity
Pitfall: Accuracy is essential. Inaccurate or incorrect company names or registration numbers within contracts can result in confusion and delays due to the requirement to resend an amended contract. The worst-case scenario is to render the contract invalid.
Overcome: To ensure you engage with the correct entity, always check that the company information matches Companies House.
2. Retaining copies of agreements
Pitfall: It’s good practice to keep accurate records of all contracts and agreements. Paper records or records stored in a disorganised manner can easily be mislaid or lost. Potentially causing serious compliance issues.
Overcome: Take the time to establish a quality process. Time spent upfront organising a quality record-keeping process will save time in the long run.
3. Ensuring an authorised signatory has signed
Pitfall: Should an unauthorised signatory sign a contract for the client, it is possible that the contract cannot be relied upon by either party. As a result, fees may not be recoverable.
Overcome: It is quick and easy to check if the person is an authorised company signatory by checking on Companies House to establish if they are a director. Our blog about who can sign a contract is worth a look if you are in doubt.
4. Ensuring agreements are signed before commencing work
Pitfall: Should a contract not be signed before work commences, recovering fees may be difficult. For example, a client may decide not to carry on with the deal and with no signed contract to rely on means no fees can be collected.
Overcome: Make sure your company has the policy to have a signed agreement in place before the commencement of work. This ensures that any work completed is legally covered and any fees can be recovered. No work should start until appropriate agreements are signed.
If you use a system such as Doc2, it will make this process seamless.
5. Using out-of-date templates
Pitfall: Legislative changes can often lead to the need for contract templates to be updated in line with the new legislation. This can result in different people within an organisation having different versions of the same contract. Inevitably some will be out of date. This creates an opening for the organisation to be vulnerable to unnecessary legal, financial and reputational risks.
Overcome: To ensure compliance make sure that appropriate and up-to-date agreements are distributed to all appropriate staff. Importantly, establish that policies are in place to ensure they are being used.
If you would like more information about how Doc2 can help you with contract compliance then please get in touch.