If your organization is looking for ways to improve your contract renewal workflow, there are business models you can follow to help guide your path. Read on to discover six tips to help you identify hidden contract renewal opportunities and products which can help make your contract renewal strategy more efficient.
Tips for Improving Your Current Contract Renewal Strategy
One way to quickly enhance your business performance is to improve your contract renewal strategy. There are many benefits of utilizing a proactive contract renewal strategy.
• It allows you to maximize your existing accounts rather than constantly relying on new business. Constantly hunting for new contracts makes it challenging to stay profitable, and being able to rely on a significant percentage of renewals takes stress off the organization and the team.
• It allows your company more room to allocate resources and prioritize your most valuable accounts.
• It enables you to focus on potentially expanding accounts with promising potential.
A proactive renewal strategy also encourages your team to assess each contract's return on investment (ROI) to decide if it is in your company's interest to renew. This allows you to prioritize your most valuable accounts and better utilize your team's time.
Here are six tips to help you improve your current contract renewal process best practices:
- Consider investing in contract management technology.
- Perform business contract review way ahead of renewal dates.
- Form a strong relationship using customer success teams.
- Spend time assessing renewal risks and renewal opportunities.
- Monitor who has access to documents.
- Set up a simple automatic renewal option.
These tips can help your organization enhance its business performance, increase revenue from contract renewals, and ultimately help your company's revenues increase exponentially over time. Let’s take a closer look at each contract renewal best practice.
1. Consider Investing in Contract Management Technology
There are many excellent reasons to invest in contract management technology, from more efficient use of company time to reduced costs. A high-quality contract management system adds significant benefits to your organization, including:
- Saving a significant amount of company time that you can allocate to strengthening existing relationships or searching for new contracts
- Revealing contractual benefits that are not yet being maximized
- Reducing your company costs and boosting your profit margins by more easily recognizing cost consolidation and contract expansion opportunities
These are just a handful of ways that your business can benefit from utilizing cutting-edge technology to manage your contracts.
2. Perform Business Contract Review Way Ahead of Renewal Dates
If you’re searching for ways to get more value from your contract renewals, an early contract review is one of your best options. Renewals are a key stage in the contract lifecycle: it's a time to evaluate the contractual relationship and determine if changes need to be made, services expanded, or the relationship terminated.
If your business isn't reviewing contracts before renewal, then it's likely that you’re regularly missing out on opportunities, including expanding your services, negotiating cost-reduction on services, and cutting your losses with less profitable client relationships.
3. Form a Strong Relationship Using Customer Success Teams
Customer success teams are key to fostering stronger client relationships on behalf of your organization. By assigning certain teams to specific clients, you designate responsibility for these partnerships and their success.
Keeping in touch with customers at regular intervals and essential milestones in the contract lifecycle will help foster a stronger customer relationship. It's more efficient (and effective) to nurture client relationships by using a well-rounded contract management system. A good technology system can help you track important contract components that can impact the relationship’s success, including:
- Contract terms
- Renewal cycles
- Contract periods
- Contract deadlines
- Contract-specific tasks
When your customer success teams have an important milestone pending, they’ll receive an alert from the system reminding them of their upcoming obligation, allowing them to proactively reach out to each client at key moments.
4. Spend Time Assessing Renewal Risks and Renewal Opportunities
Before a contract auto-renews, it’s advisable to consider the renewal risks and opportunities. Contrary to what some companies believe, it isn't desirable to renew every contract. You should carefully weigh the risks and the opportunities involved in each contract before making an informed decision to renew or terminate the relationship.
This is particularly true for well-established companies that are continually expanding. You only have so many company hours in a year, so it’s preferable to focus your time on contracts that bring a more significant ROI to your organization. By cutting your losses with customers that bring a smaller profit, you free up time to take on larger, more profitable clients.
5. Monitor Who Has Access to Documents
In contract management, it's critical to monitor who is allowed to access documents. You can set user permissions to ensure that only certain people can access specific contracts and other client data related to the contract.
Without specific user permissions, it's possible that the wrong person could access restricted data or even tamper with your files. Contract management software can help reduce this risk by implementing the user permissions built into the platform. You can easily define the security details and designate authorized and restricted users for separate contract files.
6. Set up a Simple Automatic Renewal Option
Once you’ve determined that your company would like to renew a contract, you can set up an automatic renewal option that is simple for both parties to utilize. In many cases, little must be done on either end for the contract to renew.
When you do this, it's best to build in a few automatic reminders for your team ahead of the renewal dateto allow your team time to conduct a cost-benefit analysis. Even if the contract is highly profitable when the automatic renewal option is set up, things can change down the line, especially over several years. Regular auto-renewal alerts will allow your organization to review the contract and cut losses or renegotiate terms when necessary.
Strengthen Your Contract Renewal Strategy with CLM Software
These tips can help you optimize your company's contract renewal strategy,but they’re all much easier to implement with the help of contract lifecycle management software. The right CLM allows you to reduce your contract review times, accelerate deals, and earn trust with your customer base.
Lexion offers an intuitive contract lifecycle management software that features an intuitive central dashboard where you can see every task your team is handling and what stage they're in. You can easily find the most recent contract version (and review previous versions) and deal history for easy access.
Interested in more ways to accelerate deals and retain clients? Check out our ebook, 4 Ways Legal and Sales Can Drive Faster Deals.
What Is the Contract Renewal Process?
Contract renewal occurs when a contract expires and all involved parties need to decide if the arrangement should continue (aka, be renewed) or if the agreement will terminate at the end of the agreed-upon timeline.
Contract renewal can take place either through active negotiation or through automatic renewal. In either case, the contract renewal period is a good time to enact a contract renewal strategy—outlining when your company needs to renegotiate terms or make amendments.
What’s the difference between a contract extension and a renewal?
They might sound similar, but there are distinct differences between contract extensions and renewals.
In general, a contract is considered renewed when both (or all) parties have little to no changes to make to a current agreement and choose to renew the contract for another cycle under similar terms, resulting in a new contract.
A contract extension, on the other hand, occurs when one party requests to have a specific amount of additional time added onto the existing contract. In this instance, there is no new contract; just an extended timeline with a definitive end point.