Many charities are increasingly working with third parties to fulfil their organisational needs and services. For example, areas such as catering, branded merchandising and property management all require detailed contracts including licensing agreements.
The agreements themselves are critical in defining relationship terms, responsibilities, deliverables and compensation; however, after signing, often these contracts and agreements are not revisited. Revisiting them ensures that the terms are being complied with and that revenue is being maximised or costs minimised, together with ensuring that all the agreed services are being fully delivered so that the organisation is not receiving the full benefit of the contract terms.
In order to address this, it makes sense to review contracts after award to ensure that the full monetary and service benefit is received compared with what was contractually agreed between the charity and the suppliers, licensees, distributors, joint-venture and key alliance partners. A successful contract compliance programme should be embedded in an organisation’s approach to addressing third party risk and the primary goal of the review is measured by the visibility and transparency they provide and the valuable insight beyond what the organisation already knows of its business relationships.
As well as greater transparency, the reviews also identify and recover over expenditure and therefore provide a direct and measurable benefit enabling funds to be maximised. The reviews also allow for improvements to be made with regards to the quality of contracting and providing opportunities for further operational cost-saving opportunities. Operational improvements stem from contractual agreements which are better managed, up-to-date, streamlined and easy to monitor, ultimately delivering maximum value.
With increasing pressure on the financial sustainability of charitable organisations, contract compliance reviews and licensing reviews are therefore a valuable tool to uncover potential savings which are never more needed following the challenges of the last year. We are therefore really excited to be able to share with you some of our key learnings from helping organisations with such contract reviews at the CFG Annual Conference as well as some handy hints and tips and specific examples.
This article previously appeared in the August 2021 issue of Finance Focus
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