Many companies think of contract renewal as a routine process that they can leave on autopilot. But apart from the risks of missing the timeframe to cancel or renew a contract, contract renewal is also an opportunity to strengthen your relationship with your business partners and refine the contract to meet your evolving business needs.

Missing contract renewal windows can be expensive and risky. You might allow a service to auto-renew when you aren’t happy with it, or you no longer need it.

Your business might be severely disrupted if you failed to renew a contract that is with a key service provider or supplier.

Here are some best practices to consider when a contract renewal comes up:

1. Review the terms and conditions of the contract

The key to efficient, low-risk management of your contracts is ensuring that you understand the terms and conditions of the agreements and that you can ensure compliance with any benefits or obligations that have been contracted for.

When managing many contracts, a digital platform for post-signature contract management can help you stay on top of the details and ensure that you are alerted timeously when you are required to perform a task or should be receiving something from the other party.

2. Assess contract performance

The next step is to take a critical look at the contract and evaluate whether it has met your requirements.

Analyse whether the other signatory has lived up to their obligations as agreed to in the initial contract.

Also consider whether the relationship as stipulated in the contract supports your current and future business needs as well as if you could secure a better agreement elsewhere.

For example, with a property lease, you can evaluate whether the premises will accommodate the growth of your business.

For a commercial insurance agreement, you may want to seek some quotes to make sure you’re paying a fair premium.

3. Decide whether to renew, renegotiate or terminate the contract

Following steps one and two, you’ll know whether you want to keep the existing contract in place, modify it or exit it when it’s time for renewal.

If you’re happy with the contract as is, you can simply sign the renewal or let it auto-renew if such a clause exists. If you want to change certain conditions, you will need to negotiate with the other party. Make sure you have a clear idea about what you hope to achieve before embarking on such negotiations.

On the other hand, if you intend to cancel ensure that you keep to the timelines stipulated in the contract because missing those may have unintended consequences.

4. Automate contract workflows

The best practice for post-signature contract management these days is to use specialised cloud-based solutions to manage the admin-intensive workflows that are required to ensure compliance.

With the right software in place, you can trigger workflows for events such as renewals, terminations, price escalations, force majeure, cancellations, and breaches.

In the case of renewals, a predefined workflow will ensure that all parties within the company that are impacted by the decision to renew or not are advised.

This would include the finance department to ensure that a payment is not made incorrectly.

Contract management – minimising your risk     

Managing post-signature contracts requires significant effort for any business. It’s difficult to keep track of the your contractual obligations and ensure that you comply with them.

Failure to do so can cause significant risk to the business resulting in contract cancellation, business disruption, penalties, and reputational damage.

A modern contract management solution will minimise the risks by ensuring that you are aware of your obligations and that these are managed appropriately via automated workflows.

No business is an island, every company in the world depends on a delicate network of relationships with customers, suppliers, service providers, employees, contractors and other entities and people to run its operations.

In most cases, these business relationships are governed by legal contracts that outline the obligations and entitlements of each party.

Organisations, understandably, spend a great deal of time scrutinising and negotiating the terms and conditions of each legal agreement that they enter.

But once the contract is signed, it will often be filed in a cabinet or scanned and uploaded to the cloud, forgotten about until someone realises the other party is breaching the terms or that a deadline for cancelling the contract has been missed.

Research from World Commerce & Contracting finds that 9.2% of annual contract value is lost through poor management across the whole lifecycle, most of it after the contract is signed.

Businesses that thus treat their post-signature contracts as a living asset to be proactively managed and optimised can unlock significant value.

Here are some processes that fall under the umbrella of post-signature contract management:

1. Storage and visibility of all contracts the company has signed

The most fundamental aspect of post-signature contract management is gaining visibility of which contracts the business has signed, who the counterparties are, and which internal signatories are responsible for managing the commercial or legal relationship.

All too many businesses lose track of contracts that are in force because they’re scattered across different business units or departments – with no way of categorising them or knowing who has access to them.

2. Managing deadlines

Most contracts a business signs will be for a limited term, with clauses in the agreement setting out when the contract can be renewed, renegotiated, or terminated.

If deadlines and milestones are not properly managed, the business may find that a contract gets renewed before it negotiates more favourable pricing or cancels to switch suppliers. Or the contract might expire and leave the business without access to essential services.

3. Avoiding penalties and breaches

One of the vital aspects of post-signature management is ensuring that the business meets any obligations of the agreement, such as service level agreements or deadlines.

It’s essential to have full visibility of terms and conditions and ways to monitor adherence, so that the business doesn’t suffer any penalties for breach of contract.

4. Maximising benefits and incentives

Commercial contracts will often include incentives for exceeding service levels, discounts for early settlement of invoices, commissions for providing leads to a partner company, and other benefits.

Forward-thinking companies will want to be proactive about maximising these benefits to ensure that they’re getting the full value from each business relationship.

5. Keeping track of amendments and correspondence

Contracts often change over time as addendums and amendments are made. There is also often a lot of correspondence associated with each contract.

Keeping on top of this documentation is a key part of the post-signature process.

6. Contract management workflow

Through the lifecycle of a contract, there are many admin-intensive tasks that need to be handled. It’s best practice to have clearly defined workflows and automated processes to streamline this work.

This includes triggering workflows for events catered for in the documentation when they occur e.g., force majeure, cancellation, and breach.

7. Monitoring performance

Post-signature contract management also focuses on monitoring and optimising business value derived from contracts. Leading companies will closely track contract performance, financial implications, and other relevant metrics. This can help the business improve decision-making, processes, and contract strategy formulation.

Automation can enhance post-signature contract management

Many companies still think about contract signing as the endpoint, neglecting the critical post-signature phase.

But those that treat it as a strategic necessity will be able to maximise benefits, mitigate risks, and ensure compliance.

Today, artificial intelligence (AI) and automation can simplify what was once a tedious and time-consuming burden, so that businesses can turn contract management into a strategic advantage.

Most businesses don’t have formal processes and systems in place for post-signature contract management.

Once a contract is signed, it’s usually locked up in a filing cabinet or scanned and saved as a PDF on a server or a cloud platform.

Yet signing a contract isn’t the end of the associated business relationship – it’s just the beginning.

Once the contract is signed, it creates binding legal and commercial responsibilities for all parties to the agreement.

There are benefits and obligations such as discounts, incentives, penalties, and service level agreements that need to be managed on an ongoing basis. Plus, the contract lifecycle will usually give rise to a range of deadlines for notifications, renewals, price adjustments and cancellations.

Staying on top of these activities can be a significant burden when a company has dozens or even hundreds of contracts in force across different parts of its business. This lack of visibility, along with a reliance on manual processes, causes a range of headaches for companies.

These include not having the actual documentation at hand when the team needs to review it, missing deadlines to renew, renegotiate or cancel term-based contracts, failing to capitalise on benefits such as incentives or discounts due under a contract, or incurring penalties for breaching terms and conditions such as deadlines or service level agreements.

This is where post-signature contract management software has an invaluable role to play. These solutions enable companies to automate processes associated with post-signature contracts to minimise risk and maximise efficiency.

Contract management solutions used to be complex and expensive to implement, but today’s software-as-a-service solutions are affordable and accessible to businesses of all sizes.

Here are some ways technology streamlines post-signature contract management in your business:

Document capture: The first step in streamlining contract management is digitising your contracts and storing them in a secure, central repository.

The software will typically use optical character recognition (OCR) combined with artificial intelligence (AI) and machine learning (ML) to extract and repurpose text from scanned or emailed PDF documents. By leveraging AI and ML it will extract the key fields and clauses from the contracts you upload.

Contract visibility: The AI and ML technology will identify critical data points like involved parties, obligations, and deadlines from every contract.

This will give you at-a-glance insight into key dates, milestones, and obligations mentioned in each contract. Functions such as HR, finance and procurement will be able to track tasks and deadlines associated with contracts.

They can, for example, monitor whether suppliers are meeting their deliverables, performance agreements, and other contractual terms.

On the other side, you can ensure that you are meeting your client service level agreements and other conditions. Reminders and notifications may be set up to prompt relevant parties.

Workflow: Contract management software enables you to set up and trigger workflows for expected events such as renewals, terminations, and price escalations as well as for less routine events like force majeure, cancellation, and breach. Each stage of a workflow is tracked and automatically escalated if necessary.

All documentation generated during the completion is stored for easy reference.

Elevating efficiency and improving compliance

AI-powered contract management systems can enable nearly any business to save time and use its people’s time more efficiently by automating admin-intensive tasks.

It improves real-time visibility into contract management, helping you to mitigate risk and optimise business outcomes.

Given the central role of contracts in most businesses’ operations, an investment in post-signature contract management can deliver a significant ROI.

Contracts are an essential part of every organisation’s operations. But despite the effort that companies put into negotiating, drafting and understanding contracts before they’re signed, they often lose track of them post-signature.

The documents get filed away in a cabinet somewhere or scanned for storage on a server, then forgotten about, exposing the business to a range of significant risks.

Some of these include losing track of the actual paperwork, missing deadlines to renew or cancel contracts, failing to take advantage of incentives or discounts due under a contract, and incurring penalties for non-compliance with terms and conditions. That’s why most businesses that manage more than 50 documents can benefit from a formal contract management process.

Here are a few tips about how you can implement an approach to contract management that will help you to maximise the benefits of the legal agreements you have signed while minimising risk.

1. Understand where your contracts are

Many companies don’t have a clear view of which contracts are in force, what the terms and conditions are, or how they’ve been changed through amendments over the years.

They often also lack information about who holds internal accountability for a contract, the risk profile associated with the contract, or who their contacts are at the counterparty.

Thus, taking an inventory of the contracts you have signed over the years is a good starting point for a formal contract management process. Speak to team members in different functions and ask them to identify which contracts they have signed as well as whether these contracts have been digested and where they are stored.

2. Categorise your contracts

The next logical step is to start sorting contracts into categories such as agreements with vendors and service providers, sales agreements with customers, leases and rental contracts, employee contracts, contracts for subscription services such as telecoms, insurance policies, and non-disclosure agreements.

You can also sort documents according to their risk profile and how critical they are to your business.

3. Identify the pain points

Once you’ve made sense of which contracts are in place, you can begin to identify the associated pain points.

One of the most common and expensive mistakes companies make is to lose the opportunity to renew, cancel or renegotiate contracts when they reach the end of their term. You could, for example, miss your chance to cancel an insurance policy or seek a better deal before renewal.

Other pain points are associated with not being able to track the terms and conditions of the numerous contracts you have signed. One example is not tracking and thus losing out on the benefits of a contract such as discounts or incentives.

On the flipside, it’s possible to accidentally breach the terms of a contract such as a service level agreement with a customer or a payment deadline to a supplier. This can result in needless costs and penalties.

4. Choose a software solution to streamline the process

While it’s theoretically possible to keep track of contracts using a manual system like spreadsheets, it’s far from optimal.

There are affordable software solutions that can help you improve the visibility of your post-signature contracts. Look for an artificial intelligence-driven, software-as-a-service offering that supports a wide range of contract types.

In addition to a secure online document repository, such a solution should also offer powerful workflow and analytics tools to streamline your processes.

5. Start uploading contracts

Once you’ve selected a solution, you can start capturing your contracts. Begin with the most business critical contracts or those that cause the biggest headaches.

Start small, especially if you have hundreds or thousands of contracts. Most solutions will use optical character recognition (OCR) to extract and repurpose text from scanned or emailed PDF documents.

Once a contract is uploaded in a format the system can use AI algorithms and machine learning techniques to extract key information from the text, classify different terms and provisions and provide a high-level understanding of the agreement. Bear in mind that AI is good, but not perfect. A human should validate its output.

6. Automate workflows

With the right software in place, you’ll have visibility of involved parties, obligations, deadlines, and distinct clauses of your contracts.

This, in turn, enables you to set up automated workflows to better manage post-signature contracts. These workflows range from processes to manage routine events like termination and price escalations as well as ones to manage extraordinary events such as force majeure or breaches.

Keep optimising

After following steps one to six, you can go back to point three to find the next set of documents to ingest into your contract management system.

You should also look for opportunities to continuously automate and optimise workflows, as well as to use reporting insights to make better decisions.

Over time, you can add all your contracts to the system as well as put a process in place to ensure all new contracts are ingested the moment they are signed.

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Every business depends on a web of relationships with numerous suppliers, service providers, advisors, clients, business partners, employees, shareholders, and other stakeholders to carry out its operations.

In turn, the conditions, benefits, and responsibilities attached to each of these relationships are set out in legal contracts that range from brief and simple to long and convoluted.

Depending on the size of a business, it may have hundreds, or even thousands of active contracts in force at any time.

These contracts, some digitised, some not, may be stored across numerous physical and virtual locations, with no single view of the contents of these contracts.

This has emerged as a major pain point for companies, especially those that are big enough to have signed hundreds of contracts, yet not large enough to be able to afford some of the more expensive and complex contract lifecycle management software currently available to the market.

The result? They face a range of post-signature contract management pain points including:

1. Lack of visibility into contracts signed

One of the most common challenges companies face with post-signature contracts is that they simply don’t know which contracts are in force and who holds internal responsibility for them, let alone what the terms and conditions of each contract are, which changes and amendments have been made to the original, or who the contact people are on the counterparty’s side.

In some organisations, invisible contracts have proliferated, with the accounts team paying the bills each month but no wider awareness of the associated terms and conditions, obligations, rights, deadlines or risk profile.

2. Missed deadlines

Term-based contracts generally come up for renewal, renegotiation or cancellation at specific intervals. If a company misses this window, the contract might be automatically cancelled or renewed.

As a result, a company could see its broadband contract renewed for 12 or 24 months when it intended to cancel or negotiate a better deal for example. Or a business-critical service such as monthly inventory delivery could be unexpectedly cancelled because no one was alerted to renew the contract.

3. Unnecessary penalties and lost benefits 

Some of the most important detail in a contract concerns the benefits and obligations it sets out for each party.

These details can easily be lost in the small print of a lengthy contract, especially if finance and procurement teams are managing hundreds of contracts and counterparties.  For example, a company might need to pay a penalty or lose a discount for not meeting its payment deadlines to a supplier. Or it could miss out on supplier incentives and discounts because it is not aware of them.

4. Manual workflows

Post-signature contract management typically involves a range of time-draining, admin-intensive tasks related to events such as renewals, terminations, price escalations, breaches and so on. These tasks can slow a business down, introduce human error into processes, and use up time that employees could be directing towards more value-adding activities.

5. Controlling access to privileged information

When contracts are stored in a haphazard way with no centralised controls, it becomes significantly harder to ensure the confidentiality and privacy of sensitive contracts.

There is no consistent way to manage user access to stored information or assign limited access to designated users for highly confidential contracts. 

6. Unlocking the value of your contracts beyond signature

The legal contracts a company has signed have a significant bearing on its finances, operations, and risks. Yet most companies are not managing post-signature contracts in a strategic manner.

According to KPMG, this oversight means that organisations are missing out on 40% of the identified potential of their contracts.

However, cloud-based technology that enables companies to securely and efficiently store, organise and manage post-signature contracts has become increasingly accessible over the past few years. Such solutions analyse and extract key data from contracts, offering complete visibility into every contract a company manages.

This enables companies to improve management of their post-signature contracts, make better decisions, meet deadlines and obligations, and ensure that they are receiving the full benefits due to them.

It all begins with a simple subscription to a Software as a Service (SaaS) solution – a compelling strategy to unlock untapped value within any business.

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