Welcome to the first article in a five-part series that will focus on how procurement, finance, and other professionals effectively build a “compliance management” checklist that addresses multiple avenues of spend management and the compliance ramifications behind strategic spend categories. The first four articles will highlight the dozen items that should be included in an enterprise’s procurement compliance checklist, which span across supply management, risk management, and complex spend management, while the fifth and final article in the series will detail how collaboration plays a vital role in both building this checklist and amending it when the need arises.
“Compliance” is a concept that haunts nearly every professional across the greater enterprise, no matter the function: IT, finance, human resources, and, especially procurement. Spend regulations, labor compliance, financial, and legal ramifications are just a few of the areas that force companies to build multi-layered compliance management programs. CPO Rising’s “Compliance Management Checklist” series has been designed to help enterprises narrow down the plethora of compliance measurement items that should comprise the modern procurement compliance checklist, as well as highlight the intricacies of risk that are prevalent across all areas of the contemporary spend management spectrum.
We kick off the discussion of the compliance management checklist with the first three items that should be included:
- Standardized contract language and terms. The more grizzled procurement veterans in the industry will agree that contracts are the “lifeblood” of any enterprise. At the end of the day, agreements with key suppliers are the reasons for cost savings and driving dollars to the bottom-line. When it comes to the legal ramifications of poor contract lifecycle management, it is imperative that enterprises build strong, consistent language and terms in their contracts to ensure the legal safety of the greater organization. A procurement professional should never author a contract that does not include items that are consistent with other enterprise agreements.
- Enforcement of a preferred supplier program. As with the above bullet, contracts are the very tool that procurement utilizes to “lock in” favorable terms with its core suppliers. Discounts across various materials, components, and services can help the enterprise better manage its budget and contribute to true strategic spending. The very value of procurement is immediately erased when functions across the company spend outside of a preferred supplier program; maverick spend is the villain that erodes the bottom-line of any organization. Companies must ensure that they are actively enforcing spending that is compliant with supplier agreements.
- Procure-to-pay processes that are tightly-linked. This area may seem like a more general recommendation for procurement and finance execs, however, P2P processes have a direct link to the measurement and management of compliance. Linking purchasing to invoice-processing to payment to back-end analytics are prime methods of reconciling spend to the formal agreements with key suppliers. The information (and intelligence) extracted from these efforts can paint a vivid picture of just how compliant spending is against procurement contracts.
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