Accurately tracking the revenue stream throughout the contract renewal process is a prominent struggle for companies large and small. Without easy access to the appropriate data to understand new revenue, churn, and total renewal revenue, the contract renewal management process carries the potential for financial, security, and legal risks.
Understanding the challenges of handling contract renewals will help you avoid the complications and risks – no matter the size of your business. If you’d like to jump ahead and begin the process of automating your contract renewal processes, visit the Contract Renewals Management Solutions page to get started.
What Are Contract Renewals?
When a contract’s lifecycle reaches its end, both parties can decide to renew the contract to extend the duration or negotiate a new agreement. This process frequently requires extensive review through legal teams within or outside an organization to ensure fairness and legality.
Today most subscription-based contracts are automatically renewed with an option to cancel the contract rather than continue. This process has become the most popular choice, but both parties can lose out because of automatic renewals. Automated renewals without proper support prevent both parties from getting locked into a contract that no longer amounts to the same value as before. Simply implementing automatic renewal without support can lead to decreased potential revenue.
What Are The Challenges Of Handling Contract Renewals?
Speed vs. Control
The most significant source of friction in a contract’s lifecycle comes from the balancing act between speed and control. Because contracts are so critical legal teams prefer to examine contracts in extreme detail.
Counteractive to this is the pressure to close deals faster. As such, the main business challenge becomes moving contracts through quickly but with enough oversight to effectively manage company risk.
Lack of Visibility
Part of what aggravates the speed vs. control dilemma for legal is a general lack of visibility into contract terms, obligations, and value. If you can’t see it, you can’t control it.
Missed contract terms can become a major pain point. Agreements outline the terms of the value exchanged between both parties. If you can’t ensure you are getting the correct value for your deals with effective contract management, you are missing potential profit. In addition, lack of visibility is a severe problem for expiring contracts and renewals.
Manual Processes
Managing all the necessary steps in your contract process is hard enough internally across several departments. The complexity rises when you consider different office locations, time zones, and languages. The ability to have everything centrally located with changes tracked in real-time becomes critical.
Human error, bottlenecked contract cycles, and limited process control can increase risk dramatically when contracts are managed manually. In addition, the more contracts an organization might deal with, the more challenges can arise with manual processes. Automating contract management with specialized software can help companies improve control and visibility and significantly shorten contract creation time.
Inability To Manage Changes
It’s essential to have a mechanism for managing changes over time. When renewing your contract manually, be prepared to discuss any changes to your contractual relationship with your customer or vendor. Possible scenarios include renewal dates, pricing changes, emerging legal requirements, and other events that may require a review of the contract’s information. Your ability to manage the contract, particularly the changes over time and the renewal process, will directly impact your customer retention rate.
How To Combat The Challenges
Contract renewals are a necessary part of business, but they don’t have to be a demanding and error-prone process. Contract automation can support the renewal process with user-friendly management tools that help get more value out of each contract. With an automated contract renewal management system, organizations can afford to have their legal team focus on providing valuable counsel and risk assessment instead of prolonged document review. With the right solution, price changes and upcoming legal requirements can be easily updated throughout business operations.
Why SOFTRAX Is The Solution
With the SOFTRAX Revenue Management System, you can access the only solution with contract renewal management, multi-form billing, and revenue recognition. Whatever contract might be automated, we can systemize and enforce compliance with complex revenue recognition accounting guidelines. We specialize in the extensive changes from ASC 606/IFRS 15, allowing organizations the security of compliance as well as automated and effective processes. With our cloud-based revenue management solution, organizations can stay updated with new accounting practices. We also offer seamless upgrades to ensure a consistent beneficial user experience and predictable costs.
Learn more about this solution on the SOFTRAX Revenue Management System solutions page. To learn how implementing this automation software can benefit your business’s unique needs, schedule a short demo with a contract renewal automation expert.
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