This author’s guidance would be to look to standards settings bodies and laws that apply to guidance for reporting of financial data that might and associated risks that may surface during an audit or areas that may have material impact on forecast results. FASB is one of many organizations that can offer such guidance relative to accounting impact.

Just who is FASB or The Financial Accounting Standards Board?

The mission of the FASB is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information.

Our financial reporting system is essential to the efficient functioning of the economy. That is because it is the means by which investors, creditors, and others receive the credible, transparent, and comparable financial information they rely on to make sound investment and credit decisions. Accounting standards are an important element of the financial reporting system because they govern the minimum required content of financial statements of U.S. public companies.

One action that FASB takes to accomplish their mission is to improve the usefulness of financial reporting by focusing on the primary characteristics of relevance and reliability and on the qualities of comparability and consistency.

Now give some thought as to what areas of your contracts have an impact that influences financial reporting. Here’s a clue. It is not the contract definitions area of your agreements.

We look forward to and appreciate your comments.

The question here is really are you as a buying organization prepared for any kind of an audit because most of the time contracts work there way back to the procurement department whether they are for consumables, services or any area other business expense that requires negotiation resulting in specific terms and conditions or standards that require compliance.

Although the audit process can be a good thing because it holds companies and individuals accountable, to often they are a result of something that is already broken and we are looking for a reason as to why. Or, someone to blame.

Audits can generally be broken down into the three classes that follow.

1. Significant Risk – This is non compliance that generally results in a major financial loss to the company
2. Moderate Risk – This is non compliance that generally results in a negative impact to the company
3. Minor Risk – This is a non compliant act that generally  results in a negative impact to an existing process within a company

From a procurement perspective this can include all items required during the bid and award process. Such as .

1. Purchase Orders tied to contract quotes
1. Delivery T&C’s
2. Definition of contract terms
4. Bidding process used
5. Vendor notification of award
6. Corporate standards adherence
7. Signature authority
8. Termination Clauses
9. Training adherence

The above list is potentially endless. The point is if you are buying products or services for your company, you need to be able to withstand a vigorous internal audit so that your auditors can withstand a vigorous external audit.

Is your procurement team prepared?

We look forward to and appreciate your comments.

With the release of SafeContract? Software as a Service offering or hosted software solution we have had many conversations with dozens of retailers as to what is the best way to store and leverage the language or data within existing contracts. My answer has always been the same and that is the identification of your Metadata.

According to Wikipedia Metadata is loosely defined as data about data. Though this definition is easy to remember, it is not very precise. The strength of this definition is in recognizing that metadata is data. As such, metadata can be stored and managed in a database.

When we think about contract management, we need to be thinking about mitigating risk and not necessarily all of the language embedded in a contract. On many occasions this information is listed on addendums or attachments. For sake of simplicity, and this is certainly not an exhaustive list the following twenty items reflect the metadata you might want to hi-lite and set alert targets against in storage of current contracts.

1.?Supplier or Seller Information
2.?Purchaser or Buyer Information
3.?Detail of Goods to be purchased
4.?Detail of Services to be purchased
5.?Delivery Timeline Details of the Goods and or Services
6.?Agreed Upon Price
7.?When and where should payments are to be made?
8.?Payment Terms?
9.?Down Payment Terms?
10.?Delivery Dates
11.?Delivery Location or locations
12.?Risk of Loss or Damage and transfer language
13.?Is Assignment of this Agreement Allowed?
14.?Detailed Warranty
15.?Trademark infringement language
16.?Origination Dates
17.?Termination Dates
18.?Termination Notice
19.?Additional Clauses
20.?Signature Details

The above should be data that is considered for inclusion during the review process that your solution provider puts in place for you during the early stages of implementation, training and review of your new contract management SaaS offering.

We look forward to and appreciate your comments.