Contract Management 101 is as much a foreign language as Spanish 101. Beyond storage and understanding the Meta data that will mitigate your risk relative to contract leakage, understanding the terminology in your contracts and how they are organized is a daunting task.

There are many law dictionaries available in hard cover and over the internet that can help, but remember just having one does not make understanding these documents any easier. Here is a list of many of the most popular.

1. Anderson’s Dictionary of Law (1893)
2. Bouvier’s Law Dictionary 1856 Edition
3. Criminal Justice Today Glossary
4. Criminology Today Glossary
5. Criminal Law Glossary
6. Canadian Bankruptcy Glossary
7. Divorce Law Dictionary
8. Duhaime’s Law Dictionary
9. Everybody’s Legal Glossary
10. Glossary of Commercial Fraud
11. International Law Glossary
12. INS Glossary of Immigration and Naturalization Law
13. Law Glossary
14. Merriam-Webster’s Law Dictionary
15. Legal Lexicon’s Lyceum
16. Merriam-Webster’s Law Dictionary
17. Oxford Law Dictionary Top of Form

Certainly one could argue that some of these might be eliminated for business use, and this author would agree. However others might argue that separating from an unfavorable contract or supplier relationship  can be as difficult as a divorce so maybe we should leave that one on the list.

Be careful out there.

We look forward to and appreciate your comments

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.