Contract Renewal: Benefits, Process & Automation Steps

Contract renewal is the process of extending the contract period which is about to expire to continue the services or relationship between two parties with same or different terms. The contracts can be renewed automatically or might require formal negotiations in case of changes in price, services or terms. The renewal process includes various steps like initiating the process, reviewing the contract, selection of mode i.e. manual or automatic and finally drafting of new contract.

Why Contract Renewals are Important?

Contract renewal is way more important than negotiation or continuation of contracts and therefore it is important to renew them on time.

Cost Effectiveness

It is usually more effective to renew an old contract than finding a new vendor, start negotiations and setting up a new agreement. Renewing old contract can save time, cost and resources.

Ensures Business Continuity

Renewing the contracts which are already in place helps businesses to run without any interruptions and the services can keep going without any break. It ensures balanced flow of work with the people who already knows your work in and out.

Reducing Business Risks

As the services that are running already were properly established, there is less chances of risks and operation and services can run smoothly. While in case of new vendor there is chance of errors as it will take time for them to adapt and understand.

Allows for Adaptation and Optimization

Renewals are a great opportunity to analyse the business needs, changes that are required, adjustments needed to contract as per the changes in the requirements.

Contract Renewal Process: Step-by-Step Guide

Contract renewal process involves 5 important steps from start to finish which are:

Initiating Contract renewal

The first step is to be aware of the contracts that are about to expire. After tracking all the contracts that are about to expire, business can initiate the renewal process. It is recommended to start the process at least 90 days before the last date.

Contract goals Discussion

Once the process is initiated, it is important to notify the other party and see if they agree on renewing the contract. If yes, the future objectives can be discussed.

Re-Negotiation

After discussing the objective, the contract needs to be renegotiated and the process will take place till both parties gets satisfied. However, as the existing contract is negotiated, the process doesn’t needs to be started from scratch.

Drafting New Contract

Once, both parties have agreed and reached common ground of negotiation, its time to draft a new contract.  To draft a contract for renewal, there are two ways:

• Create a new contract with the help of revisions and amendment of previous contract.
• Make the modifications in the same contract on the basis of discussion and negotiation.

Approve and Sign

Once the draft is ready, it is time for reviewing contract, approval, and signing. For signing, both the parties involved in the contract needs to sign and enforce it.

How to Automate Contract Renewal Process?

Automating contract renewals can save time, reduce errors, and ensure you never miss important renewal deadlines. Here’s a 5-step implementation plan powered by contract automation tools and contract management automation best practices:

1. Centralize Your Contract Repository

• Implement a contract automation system or use your CRM’s contract workflow automation features.
• Digitize all existing contracts with key metadata (dates, parties, terms) using a reliable automated contract creation or automated contract drafting solution.
• Standardize contract templates for consistency.

2. Set Up Automated Tracking

• Configure alerts for key dates (renewal windows, termination notices) using contract automation software or AI contract automation features.
• Establish escalation paths for approvals.
• Integrate with calendar systems for visibility.

3. Create Approval Workflows

• Define rules for auto-renewal vs. manual review.
• Set up electronic signature capabilities through your automated contract maker or document automation tool.
• Configure role-based approval hierarchies. 

4. Implement Notification System

• Automated emails to stakeholders (internal and external) should be built into your contract automation tool.
• Reminders at 90, 60, and 30-day intervals using a contract management automation solution.
• Final confirmation notices before auto-renewal through your automated contract creation engine.

5. Monitor and Optimize

• Track renewal rates and response times.
• Analyze reasons for non-renewals with automated contract analysis tools.
• Continuously refine templates and workflows using feedback captured by your contract document automation system.

How Automated Renewals Revolutionize Your Business?

Contract renewal automation guarantees that they are never overlooked. Businesses can maintain service continuity and avoid issues by utilizing automated reminders, escalation protocols, and dashboard notifications.

Best-in-class businesses have 78% of their contracts in a searchable central repository, while others only have 34%, according to Aberdeen Group.

Furthermore, contract management digitization has the potential to increase compliance by 55%.

What to Look for in a Contract Renewals Automation Platform?

Make sure the contract automation system you choose for managing renewals has the following crucial components:

• Customisable Renewal Alerts: Personalize notifications to eliminate the chance of any contract lapses escaping notice.
• Auto-Generated Renewal Clauses: Built directly through the automated contract drafting process, it slashes the effort and mistakes.
• Integration with Calendar Tools: Connect the renewal dates with tools such as Outlook or Google Calendar to achieve optimal contract workflow automation.
• Reporting on Upcoming Renewals: Dashboard and analytics will help track the expiration timelines, while through your contract management workflow automation the full visibility will be maintained.

These features are critical in maximising the value of your contract automation platform while reducing risks associated with missed deadlines.