Just because someone manages contracts for a company doesn’t necessarily guarantee that negotiation comes easily to them. If you don’t feel like you have a natural talent for negotiation, contract renewal can spark feelings of uncertainty. The following vendor contract renewal best practices can improve your chances for success.
Allow Plenty of Advance Prep Time
Going into contract renewal discussions without a strong plan is likely to be a costly mistake. With proper preparation, you should understand which services are essential or merely “nice-to-have” options, goals for pricing terms, and any issues with the previous contract that must be addressed at renewal. Having the organization’s top priorities and a few well-chosen alternative options in mind can put you in a strong position to make choices that will benefit the organization.
The easiest way to ensure you’re well prepared for vendor contract renewal is to build in ample review time. Setting automatic reminders to review contracts can keep a contract renewal date from sneaking up on you.
Look for Small Adjustments
In many cases, a vendor contract won’t require a major overhaul. That doesn’t mean you should simply renew the original agreement. Breaking out the fine-tooth comb to find opportunities for minor adjustments can result in surprisingly large improvements.
Contracts contain detailed information about many aspects of the vendor agreement. Range and frequency of service, the types of support available, terms for product delivery or payment, and rates can all be excellent terms to examine more closely. An organization working to improve cash flow may find that renegotiating timeframes for payment can be just as important as discussing pricing. Making small refinements to vendor contracts can have a ripple effect, improving spending efficiency and quality of the vendor services received throughout the organization.
Ask for Discount Opportunities
Pricing is one of the first priorities that comes to mind for many people when they think of contract renewal. There’s good reason to think this way. Large organizations can manage tens of thousands of contracts and rely on many vendors to operate effectively. Managing spending is an ever-present concern, so finding ways to reduce spending on necessary products or services is an important focus in contract renewal.
One of the benefits of establishing a contractual relationship with a vendor, rather than making one-off purchases, is the increased opportunity for discounted rates. Volume discounts are a common example.
Compare vendor rates for similar services to understand what price points are available. You can start within your contract management system. Perform an advanced search for vendor contracts, including any tags needed to further refine the search. If one branch of the organization uses a vendor with a better rate, you may have an excellent opportunity to request a price match, terminate the less-favorable contract and expand the better one, or search for alternate vendor options.
Make Signing Easy
Once you’ve finalized the renewed contract agreement, it’s time to collect any needed signatures from all signing parties. If the contract renewal updated or added documents such as an NDA, you may find that there’s a pile of paperwork for various parties to sign.
Electronic signatures can be more convenient than mailing or faxing hard copies. A contract management system with e-signature capabilities can make it easy to send important documents, collect signatures, and store completed documents in a secure cloud-based system.
Even vendor contracts that are running smoothly deserve careful review upon renewal. Taking advantage of the chance to update the contract to reflect the most current needs of the organization sets both the organization and the vendor up for successful continuation of the relationship.