You know the adage – it’s easier to keep a customer than to get a new one. But many small businesses struggle with contract renewal because they are trying to run a modern business with antiquated processes and tools.
In this blog, we highlight some advice from contract management experts on how to make contract renewal less of a headache for your business, even turning it into an opportunity for increased revenue.
Does Your Business Have a Just-in-Time Contract Renewal Process?
Tell me this:
- Do contract renewals sneak up on your teams with just a few weeks to prepare?
- Have you ever failed to renew because you didn’t notice the due date fly by?
- Are contract renewals marked at your company by a note on someone’s calendar?
Having a just-in-time policy means you are hamstrung when it comes to negotiation. Failing to have a solid plan for your contract renewals means they can fall victim to staff turnover, busy schedules, or just plain bad luck. According to the process management experts at Laserfiche, there are three actions that divide those companies more likely to say they did it yesterday than the someday crowd.
Companies with good contract management processes:
1. Store contracts in an electronic repository.
Having a central store makes each contract easier to track and find at the appropriate time, along with relevant notes on the history of the contract and partner relationship. It also creates a transparent view of the company’s entire contract load, which can simplify renewals and fulfillment.
2. Receive automatic notifications when a contract is up for renewal.
Contracts are too important to leave to manual, error-prone processes like electronic or paper reminders. Calendars by their nature are connected with just one person and therefore lost when that person leaves. Even the most organized salesperson is a single, fallible human. High-performing companies invest in tools that automatically notify the right people that a contract renewal is coming up and serve them the information they need to take action.
3. Use electronic signatures.
Leading companies also use electronic signature tools to speed the redlining and signature process. The ease with which a busy person can approve a contract will not only speed time to signing but create goodwill in the relationship.
Things to Consider During Contract Renewal
Firstly, there are different types of contracts so make sure you know what renewal provisions are in the existing contract. Fixed-term or duration contracts will generally terminate at the end of the period covered. Auto-renewing or evergreen contracts will renew automatically unless a specified action is taken. There are some cases, however, where evergreen contracts have been challenged. Make sure you know the contract auto-renewal regulations in your area before engaging on either side of an evergreen contract.
Another important element to consider is what you’re doing to incentivize loyalty. Incentives can be in the contract itself, such as discounts for length of service, but you can also encourage loyalty by being the company your vendors, customers, and partners want to work with. Timely and intentional outreach feels like care.
How Anapact Speeds Contract Renewals
So how can you make sure your sales teams have access to contracts in an electronic repository, receive automatic notifications ahead of renewal time, and use electronic signatures? You need a Contract Lifecycle Management tool like Anapact.
Let’s walk through the steps to contract renewal for most companies as presented by IACCM, comparing those using CLM tools with those that are not.
3 months before the current contract ends
Companies with a Contract Database: An automated message comes to the salesperson with a reminder that a contract is coming up for renewal with a primary partner. It is set to escalate to others in case the first point of contact email bounces. The salesperson pulls up the contract file, which includes:
- A history of all communications about that contract and with that company, including changes made during the redlining process.
- Customer service history and records of complaints.
- Status of the fulfillment of the current contract.
Companies without a Contract Database: The former sales manager for the area notices a calendar reminder that a contract will be up in three months. They figure the new sales manager for that area will take care of it, so they ignore the note.
2.5 months before the current contract ends
Companies with a Contract Database: Armed with the information, the salesperson begins to schedule internal meetings with fulfillment and product teams to investigate ways to create more value in the contract. Noting that there were fulfillment issues in the first few months of the contract, they decide to be proactive in communicating the technology and supply chain improvements the company has put in place to fulfill their end of the contract.
They decide to increase the price and lengthen the delivery window to avoid fulfillment issues.
2 months before the current contract ends
Companies with a Contract Database: Because the repository is using a clause library of terms approved by the legal department, the renewal passes through the checking process with ease in a matter of days.
1.5 months before the current contract ends
Companies with a Contract Database: Using the contract history, the salesperson preemptively makes changes to the contract that the partner redlined last time. When it’s delivered to the partner point of contact, they seem delighted and honored at the effort taken to make their job easier.
Companies without a Contract Database: The former sales manager receives an email from the partner, asking if they want to renew the contract. Caught on the fly, the salesperson says “uh, yeah, I think so, but I don’t work in that area anymore. Let me find out who does and have them call you back.”
The new salesperson for that area makes three phone calls to the partner but their voicemails go unanswered.
1 month before the current contract ends
Companies with a Contract Database: Supported by electronic redlining and eSignature integration, the contract is accepted with few changes and signed more than a month ahead of the renewal deadline, giving fulfillment teams a head start on delivery.
Companies without a Contract Database: Finally, the partner calls back about the contract. Immediately, they want to talk about a problem they had with fulfillment in the first months of the existing contract. Without an electronic record, the salesperson is flying blind with zero information about the fulfillment issue or the four customer service complaints connected with the contract. They are flustered and say they will have to talk to their team.
They start calling urgent meetings to find the information they need.
Contract expiry date
Companies without a Contract Database: The renewal deadline passes two days before the salesperson can draw up a new contract, which is based on the company’s standard contract. To hurry along the process, it includes a 15% discount, amounting to tens of thousands of dollars in lost revenue.
When the partner receives it, they must painstakingly redline all the additions they made to the original contract, as well as adding penalties for late delivery.
2 weeks after contract expiry
Companies without a Contract Database: The redlined contract is sent to the legal team, which notes that a regulation change required an edit to the distribution contract clauses. The frazzled salesperson makes the change and sends a new version to the partner, apologizing that they didn’t know about the change.
1 month after contract expiry
Companies without a Contract Database: It’s now a month after the contract renewal should have been signed and the nervous salesperson is still waiting for a callback…
Contract management software helps you smooth renewals and avoid disaster scenarios like the one above. They help you do it right, give you an early heads up, with recommendations for action, and clear next steps. They also help you manage mass renewals and speed the entire cycle in all the ways they speed the initial contract management lifecycle.
We built Anapact because we believe small businesses deserve an enterprise-level tool for contract management. Get a demo today!