Contract renewals are one of the most important aspects of your contract lifecycle. You don’t want your existing customers to fall away or turn to your competitors for their needs in your industry. Start building a stronger renewal process by seeing where renewals fall in your total contract management process and then creating specific strategies to keep existing clients. By backward designing your contract renewal process, you can get a better look at exactly what your customers really need. You can also streamline the process so that you can get those contracts renewed faster.
- 1 Start the Contract Review Process Early
- 2 One Month Before the Contract Expires
- 3 How to Create Your Timeline
- 4 One Week Before the Contract Expires
Start the Contract Review Process Early
Contract auditing and review is a critical part of your contract management lifecycle. If you’re waiting until the contract’s term is over to begin that review process, however, you’re probably bogging down the process. Waiting until the last minute to review those contracts could mean that it takes significantly longer to finish the review. That could interrupt a client’s service. It also gives them ample opportunity to move to one of your competitors.
Instead, have your contract management software issue a notification well before the contract is due for renewal. This will allow you to set up your team for success — and help you get started as soon as possible.
One Month Before the Contract Expires
A month before the contract expires, the notification goes out. It’s time to start reviewing that contract and considering what changes you may want to implement before renewing. If the contract has an autorenewal clause, conduct your internal review a month before the termination window ends. Also, coordinate with your customer service team to predict the likelihood of the customer renewing.
Ask these questions:
1. Where did the contract fall short of customer expectations?
By now, you’ve interacted with the customer a great deal. Where did the contract fail to meet their needs? Are there elements that the customer expected you to take care of but weren’t in the contract? You may want to connect with the customer at this point in the cycle and discuss what they liked and did not like about the existing contract. If you have a good relationship with them, ask what changes they would like to see.
2. Was the customer able to meet their obligations?
If the customer struggled to meet their side of those contractual obligations, including payment, reconsider the deal. You may want to redesign the contract so that it better reflects the customer’s past behavior. Your company may also decide to not renew with unreliable customers.
3. Were you able to meet your obligations effectively?
Was there anything in the contract that your business struggled with? Common examples include too-tight deadlines were too tight and unclear change orders. If something routinely got in the way of success, now is the time to make changes.
4. Did any clauses in the contract pose a higher level of risk than anticipated for your business?
Now is the ideal time to revisit those clauses. Consider how you want to shape them to reduce risk for your business. This is also a great opportunity to get customers to expand their account.
How to Create Your Timeline
A month before the contract is set to renew sounds like a lot of time, but it can disappear in the blink of an eye. Missed renewal opportunities is a big pain point in contract management, but you can put processes in motion to catch every potential renewal. Work backward to better understand how much time you need.
How long does it take your customer to approve a new contract? While you can’t have an exact number, you do know that you want the new contract approved before the old one expires. So you need to have a completed contract ready to hand over with enough time for your customer to evaluate it.
How long is your approval process? Your team needs to approve the contract before you can pass a final version over to the customer. If it takes a couple of weeks, you might want to start even earlier than a month ahead.
How much negotiation does this contract need? If it needs extensive revision, you may spend more time in the negotiation phase than if you’re renewing a contract very similar to the one you used last year.
How long does it take you to draft a new contract? You’ll want to have any issues with the contract ironed out well ahead of time so that you can create that new draft.
By working backward from these important deadlines, you can better craft your contract renewal process. You can get a better idea of when you should begin and your schedule for the coming weeks.
One Week Before the Contract Expires
A week before the contract expires, get in touch with the customer. If you haven’t already heard from them, follow up. Remind them that their contract with you will be expiring and the services you provide for them will end up a pre-specified date unless you have a new contract in hand. Ideally, you’d like to get that new contract signed as soon as possible. This benefits both you and the customer because you can start fulfilling that new agreement right on time. Are you working backward to get an idea of when you need to focus on the details of your renewing contracts? Take a look at your approval process and your schedule. Staying on top of your renewal processes is one of the key advantages of working with smart software. By working backward, you can often get a better idea of exactly how long you need to handle your renewing contracts. Also, you can streamline that process so that you don’t miss out on those important details.