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7 Contract Compliance Tips That Will Keep You in Line

August 31, 2020

contract compliance

The entire contract drafting process can take quite some time. 

Patience, attention to detail, and negotiation skills are essential for both parties as offers and counteroffers are passed back and forth until a final agreement is reached. But even after that, the work isn’t even close to being completed. 

Once the contract is signed, the focus shifts from finalizing the agreement to doing everything in your power to remain compliant with the terms and conditions of the contract. 

Even before you enter an agreement, you should be thinking about how you’ll make efforts to remain compliant with the terms and conditions with contract management. Depending on the subject matter of the agreement, this might end up changing your day to day activities or be a one and done performance of a particular action. Whatever the case may be, compliance should be your number one priority after signing a contract. 

Contract compliance best practices

If you aren’t properly managing your contracts with compliance in mind, you can kiss the chance of a renewal goodbye. Here are seven best practices to ensure contract compliance. 

1. Create a repository of examples

Your business is going to enter a wide variety of contract types. Bringing on employees, signing or renewing deals with customers, and working with vendors are all going to require an official agreement in the form of a contract. 

Effective contract compliance includes having a stockade of contract examples that cover all possible operations of your business. The contract terms and conditions of each individual agreement will ultimately change the actual contents, but having a starting point is huge for understanding what you need to do to remain compliant.

2. Establish goals and metrics

You can look at your contracts in one of two ways. The first is as a purely obligatory document that’s sucking hours out of your day, and the second is as an opportunity to fulfill a promise and reach a goal. Can you guess which one will be the most beneficial for the end result?

As you think about what you need to do to remain compliant with your contractual obligations, set goals and metrics for each stage of the contract lifecycle. People who set goals are 10 times more likely to succeed in hitting them. Think about the purpose of the contract as a whole and designate some metrics that will help you fulfill it. 

Here are a few common contract metrics to measure and set goals against throughout the process.

  • Number of contracts: The number of contracts/deals your business is in currently. You might also want to keep track of the number of terminated and renewed contracts as well. 
  • Approval time: The amount of time it takes for an agreement to move from being an offer to a signed and executed contract. This metric will reveal how efficient your approval process is. Within approval time, there are two other important measurements
    • Response time: how long it takes for you and the other party to respond
    • Time to first and final drafts: how long it takes to land a final draft of the contract
  • Cost per transaction: the total cost associated with each contract signed. This can include time spent by your legal team or the fees of an outside legal service provider. 
  • Readability: the simplicity of the language and format of the contract. Certain office software systems can help you measure this and find ways to make everything as comprehensive as possible. 
  • Annual contract value: the average amount of money each customer contract earns your business in a year. 
  • Fulfillment of obligations: the rate at which you fulfill your contractual obligations on time and in the right manner. 

3. Be clear about roles

Contract compliance is not a one person show. It’s not even a one department show. Compliance is everyone’s job, and for people to follow through on their personal responsibilities, they need to know exactly what those look like.

Be extremely clear about roles and responsibilities for contract compliance. Lay out exactly who needs to do what, when they need to have it done by, and who they should collaborate with to make it happen.

If expectations are unclear, roles are foggy, or communication isn’t effective, this puts your organization at risk of noncompliance or breaching the contract. A big part of being clear about roles is having a thorough contract management structure in place as well.

4. Create a standardized process

Speaking of processes, they are crucial to the success of your contract compliance efforts. To ensure compliance, you’re going to need a standardized contract management process that encapsulates every agreement your business enters.

While no deal is going to be exactly the same, the steps you take to execute the contract, stay compliant, and manage the agreement is going to follow a predetermined process. 

It might look a little something like this:


Think ahead as much as you can to prepare your business for any and all agreements they might encounter. Brainstorm resources, stakeholders, and anything else you need to be successful. Determine the types of contracts you will be managing, who will be responsible for each stage, and potential issues you might run into. 


Get an idea of how your business has handled contracts in the past by conducting a complete audit of all your agreements. Take note of any compliance issues you’ve encountered in the past. 

Building a framework

After those first two steps, you will have an idea of what your contract management process needs to look like to be successful. With that in mind, build a framework for any existing and future contracts. Be specific about departments taking action, resources to be used, and metrics for success. 

Implementing technology

A huge part of contract management is not relying on paper documents. Find the right technology to automate and streamline your processes and avoid human error. Contract management software is the obvious choice as it will assist you in creating, tracking, and monitoring of all your agreements. With software comes the ability to automate, which is highly recommended, as it can remove the risk of making human errors and save your business loads of time. 

Signing new contracts

With everything in place, you are ready to enter some new contracts. But don’t take it lightly. This process is extensive for a reason. A new contract means new obligations and added risk of noncompliance. 

Here are some substeps to avoid that: 

  • Send or receive contract requests
  • Write the contract or use an existing template for contract creation
  • Commence negotiations to reach a final agreement
  • Get final approval of all terms and conditions
  • Execute the contract by signing it

Managing and complying

The last step in the contract compliance process is to, well, manage them by remaining compliant. Deliver your end of the agreement by abiding by the terms and conditions of the contract in accordance with contract law and public policy.

This might include you performing one action and then moving on or implementing something long term. If you’ve followed all of the previous steps, you should know exactly what you need to do to comply with the contract.

5. Adjust as changes occur

Business is anything but stagnant. At a certain level, contract compliance really comes down to abiding by any new rules or regulations that might accompany changes in the organization’s environment. New products are added to the list, industry standards are adjusted, and businesses experience growth. With those adjustments, your business might require adding some new types of contracts or adjusting ones that already exist. 

Always keep a tab on changing industry standards and adjust your contract management strategy to abide by them. This might include obtaining new resources or seeking help from a compliance officer that serves your industry to get your footing.

6. Audit regularly

The beginning of your contract management system will start with an audit of what you already have on your plate. Don’t let the fun stop there. Effective contract compliance will require regular audits to make sure nothing has been overlooked. 

Implement a schedule of routine contract audits. This is a great strategy in identifying sources of non-compliance before the damage is done. There are plenty of mistakes that can be caught before they are made, and non-compliance prevention can save you time, money, and energy. Identify any areas that might cause confusion both internally and externally, and find ways to increase visibility and clarity.

7. Stay organized

Organization is going to be a top priority for the management of any business process. If you remember one thing about keeping up with contract compliance, let it be that you can’t do it without organization. Contract agreements typically require taking action by a predetermined deadline, making timeliness a key feature of compliance. 

Keep all of your contracts in one place (preferably online) and find a way to organize them that makes the most sense for your business. You might want to do it according to deadline, subject matter, or the nature of the relationship with the other party. Track each stage of the contract’s lifecycle to ensure you are delivering on your contractual obligations and gain visibility into its performance.

Don't mess this up

To go through the entire contract implementation process to not comply is a waste of time with some added pains. Compliance should be a constant thought throughout every stage of the contract management process. The law is certainly something you don’t want to mess with, and complying with your contractual obligations is a sure-fire way to avoid legal trouble. 

A good chunk of the sales contract process is going back and forth with the other party until a final agreement is reached. Make sure to sharpen up your negotiation skills beforehand. 

Comply with ease

Automate it all with contract management software.

Comply with ease

Automate it all with contract management software.

7 Contract Compliance Tips That Will Keep You in Line The law is the last thing you want to mess with. Complying with contractual obligations is everybody’s job, and it’s necessary that organizations provide teams with everything they need to do so. Implement these seven contract compliance best practices to stay out of trouble.
Mary Clare Novak Mary Clare Novak is a Content Marketing Specialist at G2 based in Burlington, Vermont, where she is currently exploring topics related to sales and customer relationship management. In her free time, you can find her doing a crossword puzzle, listening to cover bands, or eating fish tacos. (she/her/hers)

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