What is worse than missing the renewal date of a contract? Nothing? How about realizing that the renewal date is missed and for yet another year, you are stuck into an expensive arrangement? Yes? We got it! Fortunately, wherever there is a problem, there is always a solution and therefore this can totally be prevented from happening.
It all starts with a good contract management procedure and software that can tackle it all.
Dealing with contracts is a part of the day-to-day routine of any business, whether it is a small business or a big one. A contract is a binding agreement that defines most of the relationships of a business with other businesses. And that is why it is important to have a well-planned contract management system.
what is contract renewal?
We all are well aware that every contract has its starting date and an ending one too. However, renewal is that stage of contract management that arrives when the contract is scheduled to expire.
At the time of expiration, parties choose whether they want to terminate the deal or continue with it. If they choose the latter, that is the contract is renewed. However, on choosing the former, the contract ends at that point.
To give a better definition, contract renewal can be defined as the procedure that emphasizes the continuation of the agreement once the contract reaches its termination date.
During this stage of contract management, the parties involved can decide whether or not they want to renew, and if they want the renewal on existing terms or on revised terms, as suited. Exactly like the first time, when the agreement is finalized after all the amends or requirements are met, a fresh copy is generated and renewed officially.
difference between contract extension and contract renewal
There is a lot of confusion between contract extension and renewal. However, both these terms as similar as the sound are miles apart. Renewal can be with or without amending the existing terms.
The contract extension means extending the contract on existing terms for a shorter period than finally expires before the termination date. Basically, extension refers to adding length to the contract before it runs out.
what happens if one misses the renewal date?
Well for starters, it is not very good to miss out on such an important date. Secondly, it is just very unprofessional. However, other than this, a missed date opens up a lot of risks:
- Automatic renewal in the absence of data required.
- Losing the opportunities to renegotiate and amend the terms.
- Automatic renewal of contracts that you were expecting to terminate.
Risks, no matter big or small carries a huge weight of losses. No firm or individual wishes to go through any loss and therefore puts in everything to prevent it. through this blog, we’ll learn how to avoid such pitfalls.
what are the reasons for missed renewal dates?
We all know that at some time or another, being a lawyer and having so much on hand can lead to missing important dates. But what exactly leads to a missed contract renewal date? Is it bad contract management or is it unprofessionalism? Here are a few reasons that lead to missed renewal dates.
- Lack of transparency: It is very often that businesses stack up on contracts, even if the contract management is good. There are several contract deals and it is common to let a few contracts slip through the cracks if there is no transparency. In such a case, old contracts might be lost among several new ones leading to a missed date. Such scenarios occur when there is a lack of centralized storage.
- Manual contract management: Although businesses have adopted contract management through software, before that each and every step of contract management was performed manually. This did not only lead to mismanagement but also unexpected risks. Without a good mechanism for contract management, it is difficult to track each and every contract, this involves regularly updating and keeping track of renewal dates. Many a time, poor contract management because of manual tracking leads to renewal date slipping through.
- No automatic notification system: As mentioned earlier, manual contract management is difficult and one thing that automated contract management gives is reminders and alerts when the date of renewal is coming close.
Tips to manage contract renewal
Being a lawyer can be a hectic job. They have to handle every task, from handling clients to contract management, from tackling legal issues to handling the legal sector of the firm, a lawyer’s hand can be full with so much to do and so little time. Above all, a lawyer is always expected to be perfect in what they do, or else there have to be consequences. Therefore, here are some tips to perform contract management effectively so that one doesn’t miss out on the renewal date.
1. Opt for automated processes:
Traditionally, contract management was done through a manual process. This opened gates to a lot of risks each one ending with bearing losses. As technology rose, especially in the legal sector, the best thing it brought to the table was automated contract management.
Through the manual procedure, along with huge loads of paperwork and lots and lots of risks such as inaccuracy and ineffectiveness, the contract management procedure suffered as a whole. However, by automation leverage, not just words but even stats show the increase in effectiveness and decrease in workload
Apart from widespread benefits such as automatic contract management (which involves tracking the contract, updating it regularly, etc.), and helping hand in contract negotiation and review, automation reduces the lawyer’s workload, and therefore, lawyers can focus on what they do best.
Contract management automation sends out alerts and reminders so that you don’t miss out on renewal dates or other important events.
2. Store data centrally
For starters, before automation was ‘a thing,’ the data files were stored at all places in hard copy. Often old contracts were lost when more and more new ones were added. Moreover, because of heavy paperwork, it was so difficult to get a single piece of information in piles of files, when needed.
Although automating the contract management process has made it all a whole lot easier, what’s the use of this technology if one still loses a few files? Even with digitalization, files tend to get lost if not stored properly or if stored in different places. In order to make the best use of this technology, use a centralized storage system for these files.
Therefore, whenever a piece of information is needed like checking the renewal date, one will not have to search each and every storage, instead, a single folder will do the work.
3. Choose data and facts for renegotiation
Most of the time when we talk about contract renewal, we often forget to discuss how important part of the entire process is renegotiation. The parties involved have been in the agreement for a while now and they have all the stats and the data required to mend the terms of the contract. Rather they use this information than state unnecessary details.
To make the negotiation more effective, figure out data that gives leverage and present it like a pro! Make sure to have the data that puts one in a position of strength.
CLM for contract renewal
As mentioned, no business is done without agreements. If the business is not performing contract management up to the mark, it is going to have consequences. The clients won’t be satisfied, the firm will not be working effectively, and above all the reputation of a lawyer might be ruptured.
By using a good CLM software, one can:
- Easy data extraction and research
- Automated alerts and notifications to help remind important dates and tasks
- Complete transparency and data visibility.
- Improved contract management and outcomes
- Less paperwork
One cannot help it but contracts are a vital part and it is as important as any other business task. Missing contract renewal dates can be considered unprofessional and one might be stuck into yet another unpleasant deal. Through contract lifecycle management software (CLM) one can not only just perform contract management within a matter of time but also like a pro! It assists in increasing effectiveness leading to a good reputation and client satisfaction.