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Managing contract renewals effectively is no easy task, especially when relying on outdated technologies such as spreadsheets and email reminders.
In this article, you'll learn how to manage contract renewals most efficiently. We'll also address potential issues that you should avoid. But first, we should talk about what the contract renewal is all about.
What is a Contract Renewal?
When a contract expires and the parties decide to continue the terms of the contract for a new period of time, this is considered as contract renewal. The process can be carried out through revaluations and renegotiations of the contract or through automatic extensions.
If you're wondering what the difference is between contract renewals and contract extensions, read this article.
Why Are Contract Renewals Important?
During the contract extension phase the contracting parties have the opportunity to discuss possible problems with the old contract and to renegotiate more favourable conditions. Most contracts include provisions for renewal, but it is important to prepare in advance for typical conditions and clauses that may have changed since the contract was signed.
How to Keep Track of Your Contract Renewals
Organize contract data in one place
To optimize the contract extension process, you must be aware of all upcoming appointments. Set up notifications and keep an eye on appointments all in one place to stay informed.
Probably the most difficult situation is finding that you have to renegotiate the terms of a contract after its renewal has been initiated automatically. Another unpleasant situation is when you learn that you have completely forgotten to renew the contract. Sometimes contracts that should actually be terminated are automatically extended and ruin the company's finances.
Thorough review of contracts
Allow enough time for a comprehensive assessment. Deferring the review until the last minute could hurt your business. Think about the issues that occurred during the last contract period and update the relevant clauses. Check out cheaper options. A new contract should take your performance to the next level and take account of changes in your company.
Ensuring that contracts are still being met
If you set up new agreements, you will likely make adjustments to the terms. To ensure that the renewed relationships comply with regulations, you should review your company's rules and all applicable federal and state laws.
You may need legal assistance to do so. It is also helpful to have your templates reviewed regularly by professionals and to revise them extensively so that they are consistent with any changes in company policies and applicable legislation.
Abolition of manual processes
Processes for manually renewing contracts involve a high level of risk. Ineffective processes in the areas of scheduling, data search, information organization, information networking and document reconciliation mean companies waste valuable time and money.
In addition, overburdened employees are also just people. No matter how many people check the document, there is always the chance that they will make a mistake, forget a word, mistype the numbers, or miss a risk due to stress, fatigue, or carelessness.
Checklist: 5 Things to Consider When Renewing Your Contract
It can quickly happen that you forget to renew contracts, which can result in losses for your company. For example, if you don't know that the contract has expired, you could double your spending, spend money on overly expensive business partners, or even lose an important business partner.
Bad contract renewal practices expose your organization to a range of risks, particularly when using manual processes such as email and spreadsheets.
Review of the existing contract
As a company, you should first review the original contract and determine whether changes or updates are required. This should ensure that all aspects of the agreement are still relevant and that business requirements have not changed over time.
- Find and read the original contract
- Note the expiration date
- Identify key clauses (cancellation, renewal, price adjustments, etc.)
- Evaluate current performance and satisfaction level
Evaluation of contract terms
A properly conducted assessment ensures that both parties continue to receive what they expect from the agreement. If this important step is neglected, it can have undesirable consequences for everyone involved.
- Compare current conditions with industry standards
- Identify areas for improvement or renegotiation
- Review any necessary legal or regulatory changes that could affect the contract
Preparing for the Negotiation
- Set goals and priorities for renewal
- Research market trends and offers from competitors
- Gather performance data and metrics to back up your position
- Develop a Negotiation strategy
Third, before you submit papers or sign anything that is sent by vendors that indicates what needs to be renewed, you should make sure that external teams know which other internal team members they need a signature from in advance to avoid delays when the loop reaches the last 48-72 hours when everyone is panicking.
Also review all conditions and make sure you are aware of your rights and obligations under the new arrangements. This could also include the distribution data that apply after the effective time period for performance has been limited if problems arise or an amicable settlement is not reached until the most important milestones in the contract period have been reached.
Finally, ensure that any discounts or current incentives promised under current contracts also apply to future contract renewals by clarifying them in advance so that there are no bad surprises when things such as incomplete figures, where contractual obligations remain unfulfilled without clear action plans, contribute as an additional factor to potential disputes.
