Manual contract management processes involving spreadsheets, emails, internal billing systems, and Outlook reminders may suffice for organizations with a low volume of contracts. Unfortunately, when organizations manage thousands of contracts, challenges are revealed due to a time-consuming, error-prone, and inefficient manual contract renewal process. Moreover, a reactive contract renewal strategy increases risk and decreases opportunity realization. It’s time to take control of contract renewals. Learn how to digitally transform your processes from contract generation to renewal.
What is Contract Renewal?
Contract renewal is the stage in the contract lifecycle where the contract is scheduled to expire. At this point, counterparties may renew their contract based on current terms, or they may renegotiate and enter a new contract. Some contracts are scheduled for auto-renewal; however, it is crucial that all parties schedule time for review at least thirty days before the renewal becomes active. Automatic renewals can save time, yet without a proper review, they can put all counterparties at risk to get locked into a contract that is no longer creating the value as expected.
Contract Renewal Opportunities
Contract renewals allow counterparties the opportunity to address issues with the previous contract and renegotiate more favorable terms. Most contracts include renewal provisions, but it’s essential to prepare ahead of time by checking for standard clauses and terms updates that may have been updated since contract execution. Your team should also confirm that products and services provided through the contract are still necessary, and they should review price terms and goal alignment to ensure these areas are addressed during contract renewal.
Organizational strategies, needs, products, services, and budgets evolve, so contract renewals present the opportunity to improve contracts to keep up, meet new standards, and support the counterparties. Contract renewal is the time to renegotiate payment and delivery terms, lower costs, leverage volume discounts, increase performance levels, and address issues with the previous contract. Small updates can have a significant impact on the quality, the quantity, and the efficiency of the products and services provided.
Proper contract renewal management should include a historical review and strategic consideration of the pros and cons of the renewal. Renewal time is so much more than a check-in because contract renewals can help increase revenue, reduce costs, ensure obligations are met, improve legal protection, and build higher value relationships.
Contract Renewal Process
Organizations must have a solid process in place to achieve scalable success with contract renewals. Manual processes relying on email, spreadsheets, and a disparate database can make it difficult to manage large volumes of contracts with varying renegotiation dates and renewal terms.
Manual contract renewal processes lack the capability to quickly address contracts that are complex or the transparency to see how clauses are worded across different departments. Manual contract renewals also have the potential to fall through the cracks. The renewals that do get addressed will require a lot of time for the legal team to review, and time for finance to confirm the costs in the contract match the payments being processed.
Additional time will be needed to follow up with anyone and everyone that has ever touched the contract before renewal to make sure the language and numbers are updated in time. The margin for error, missed renewals, and loss of productivity is escalated with manual contract renewals.
Contract Renewal Automation
Contract renewals don’t have to be an arduous process. Contract automation supports business processes with a simple way to increase contract renewals and get more value out of contracts. Automate your contract process so you can stop inundating your legal team with document review and give them back the time to focus on providing counsel and risk assessment.
Contract automation helps organizations review contract renewals proactively and quickly, so the volume of contract renewals completed on time with favorable negotiations and reduced risk is maximized.
CobbleStone’s award-winning contract management software helps organizations realize contract renewal opportunities. With CobbleStone Software, you can identify valuable renewal opportunities, alert stakeholders so they can proactively review and make decisions, and quickly create new contracts based on existing contracts. Contract Insight® is a highly configurable and user-friendly contract management system that optimizes contract renewals with:
- Automated reminders and calendar alerts for effective renewal and obligation management
- A secure cloud-based repository with version tracking to ensure your team can easily search and access the current version of all agreements
- An audit trail to track renewal status and every change made throughout the life of the contract
- Intelligent contract management workflows to automate tasks and facilitate fast negotiation, reviews and approvals, and signing
- Contract analytics that provide insight into the value and risk of all contract types, uncomplicating renewal decisions
- Electronic signatures for faster and more secure sign-offs
- Seamless integration with accounting systems, CRM, and more
Contract Renewal Strategy
Proactive contract review and renewals driven by automation with contract management software help organizations get the most out of contracts. Renewal time is an opportunity to improve your organization with higher profitability, more accurate invoicing, decreased debtor days, more control and visibility, increased productivity, and a reduction of cost, risk, and liability.
Don’t let another renewal opportunity slip away. Strive to master contract renewals with a strategy supported by contract management software.
Take your contract management skills to the next level by reading additional blogs in the Mastering Contract Management Blog Series.