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.
Contract renewal is way more important than negotiation or continuation of contracts and therefore it is important to renew them on time.
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.
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.
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.
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 involves 5 important steps from start to finish which are:
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.
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.
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.
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:
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.
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:
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%.
Make sure the contract automation system you choose for managing renewals has the following crucial components:
These features are critical in maximising the value of your contract automation platform while reducing risks associated with missed deadlines.
Contract renewal is the process of creating a new contract with updated terms, pricing and conditions. However, Contract extension is directly using the old contract again for a new period without any changes.
Contract renewal period is the duration for which the contract is renewed after its initial expiry.
To write a contract renewal letter in PDF, use a professional contract template. Then fill all the necessary details and save the final document as pdf.
Yes, companies can use contract renewal automation tool to automate the contract renewal process and is completely legal in India.
