Contract Renewal Process Best Practices
Contract renewals are the last, but certainly not least, phase in the contract management cycle. While most contracts include built-in renewal provisions, routine oversight is necessary to ensure all standards, price terms, goals, and representations/warranties are up-to-date and favorable. Seemingly minor changes to any of these provisions during renewal time can impact costs, performance, and efficiency, so it’s worth building review processes into your organization. Following a set of contract renewal best practices ensures prioritization and adequate renewal time so no opportunity for modernization is missed.
Best Practices for Contract Renewal
Traditional best practices for contract renewal include the following steps:
- Set reminders. Legal teams often underestimate the amount of time and labor it takes to review and renew contract terms. Standard procedure is to set a reminder at least 30 days in advance of the auto-renew to provide sufficient space for assigning personnel, organizing records, and achieving consensus on what needs to change, if anything. Companies often maintain an Excel spreadsheet or a calendar of dates, routinely checking both.
- Organize stakeholders. Getting the right people to the table is just as important as the review itself. Everyone who was involved in the last review process should be prepared to weigh in on the current one. Some people may have left the company, moved to a new role, or taken a leave of absence. New people may need training on renewals. This gathering of minds takes time, which is another reason to schedule renewals at least 30 days in advance.
- Maintain templates. Templates of preferred terms, boilerplate language, standard clauses, and negotiating parameters are extraordinarily helpful in renegotiations. Legal departments often refer to this document as “the company playbook.” Regardless of any personnel changes that were endured over the years, this document’s presence remains consistent.
- Record information. To negotiate from a position of strength, a person at the company should be in charge of maintaining a file containing supplier pricing and capabilities as well as researching comparable products and services in the market. Similarly, records of delays, disputes, errors, and issues should be kept in order to aid in decision-making come renewal time.
- Eliminate labor. Manual processes slow down contract renewal work considerably, but there are a number of ways to digitize and automate them. From creating a searchable cloud repository of contracts and e-signatures to setting automated reminders and Artificial Intelligence (AI) pre-review processes, there is no reason to expend so much human capital and potentially expose the company to risk.
Risks of Manual Contract Renewal and How To Overcome Them
Manual contract renewal processes pose significant risk. Organizations lose time and money due to inefficient methods of scheduling, searching for data, organizing information, networking between individuals, and comparing documents. Additionally, overburdened staff members are only human; the potential to miss a deadline, omit a word, get the numbers wrong, or ignore a risk due to stress, fatigue, or carelessness exists regardless of how many eyes are on the document. Fortunately, technology can help legal departments overcome these inefficiencies.
Contract managers seek better ways to tackle the renewal process, especially as the number of contracts grows and a scalable solution becomes necessary. They may even hire contract renewal specialists to oversee the legal team and associates tasked with review and renegotiating. The smarter option, however, is to use contract renewal software that automates routine tasks, reserving human labor for agreement escalations.
Automated Contract Renewal Is the Best Practice of All
AI-powered automation provides the next-level solution for contract renewal and risk analysis. LexCheck offers corporate legal departments a innovative solution that:
- Analyzes clauses for potential risk, performing redlining and offering context-based revision suggestions
- Compares contracts to the AI Digital Playbook to identify deviations and opportunities to revise and clarify terms and clauses
- Notifies the appropriate stakeholder in the company once the AI completes its review
- Adds contextual notes on revision suggestions that can help train staff on the company’s standard negotiating positions
Getting started with an AI-powered contract review and negotiation platform is easy. And with the ability to integrate with your company’s pre-existing workflows, a solution like LexCheck can be as intuitive and effortless as using email.
LexCheck’s innovative platform leverages AI to ensure your legal team consistently applies contract review best practices. To learn more, contact us at email@example.com or request a demo to experience the technology first-hand.
Gary Sangha | Founder & CEO
Gary Sangha is the Founder and CEO LexCheck. He's a serial entrepreneur and an academic. Gary previously founded Intelligize, a legal technology company that was acquired by LexisNexis. He's affiliated with the University of Pennsylvania and Stanford University and started his career as an attorney at Shearman & Sterling and White & Case.