The rise of subscription-based Software as a Service (SaaS) businesses in the last 15 years means that businesses now need to manage how they renew these contracts.
Over 70% of software used by companies in 2023 was made up of subscription-based SaaS applications, so that’s a lot of potential contract renewals.
The downside of this is that companies can find themselves missing renewal deadlines and being locked into another year with some software they no longer find valuable for their business. Having a strong renewal management process in place is key to ensuring that this does not happen to you.
This article explains what renewal management is, why it's important and how you can automate your renewal management processes.
What is renewal management?
Renewal management is the process of reviewing contract terms and fees to make sure you don't renew unwanted services. This usually means allowing time for renegotiating terms, as SaaS vendors will be keen to ensure you renew for another year.
Generally, vendors do send out renewal notifications in advance of your contract expiration date to allow you to decide whether or not you want to renew your contract, but contract duration will vary. It's also worth noting now that it's standard market practice to provide for auto-renewal in commercial contracts with SaaS vendors
Waiting for a notification may not be the most cost-effective way to manage your renewals. Streamlining this process gives you time to analyze the return on investment you are receiving from that tool.
Why is renewal management important?
Put simply, renewal management is instrumental in ensuring that you have control over your subscriptions. Contract renewals provide businesses with the opportunity to extend commercial relationships, renegotiate payment and delivery terms, and address any updates for both parties. It is also worth noting that it is common for businesses to auto-renew contracts, which could cost you a lot of money in the long run.
It's important to ensure that you have visibility into your subscriptions, as this will increase your chances of staying on top of them.
Teams and individual employees often purchase SaaS applications for the company to meet a given need. While at first, this may not cause any issues, costs can rise as more software purchases are made. According to research by Vertise, a staggering 33% of SaaS licenses are either barely used or not used at all by the intended employees.
A formalised renewal management process increases viability into these hidden costs and allows the business to take control of spending, review renewal terms and move before deadlines come around. In the long run, this will allow you to get more value from your tech stack and gain a competitive advantage in the market.
The consequences of poor renewal management
Having a poor renewal management system in place can lead to several consequences that may be damaging to your business.
- Missed deadlines. The most obvious consequence of this is that you may miss a renewal deadline. As most contracts are on auto-renewal, this usually means you have no choice but to pay the invoice. If you were considering churning, you may also have lost the opportunity to, as many companies mandate a month's notice.
- Hidden contract terms. According to a Deloitte survey of 2,000 U.S. consumers, 91% of people consent to terms of service without reading them. This means If you don’t check in on your existing contract before it renews, you may miss out on negotiating the terms or reviewing the pricing model.
- Renewing software you no longer need. This applies to all businesses, but especially larger ones who use more software. According to Gartner, around 25 per cent of software goes unused at a company. A solid renewal management system will include an audit of the software you are not using.
- Lack of strategic decision-making. If you don’t give yourself enough time to make a smart decision on whether the software is right for you, chances are you may rush through a renewal process. This means you could lose time you could be actively using the software in the renewal process.
Automating renewal management
Luckily, this process can be streamlined using various automation tools (yes, more software).
If you’re a user, automation tools can increase your SaaS visibility and create accountability for your renewals process which in turn will save your business money. If you’re managing renewals as a provider, using powerful automation tools can help you stay on top of your SaaS contract management.
Here are a few types of automation software for both users and providers you can use to aid the renewal process:
Contract Lifecycle Management
Contract management software (CLM) is designed to automate and streamline the contract management process for businesses.
CLMs simplify the process for businesses to create, negotiate, sign, renew and report on business contracts by automating the manual work traditionally involved in a contract workflow. Rather than switching between multiple tools to manage contracts, users can manage their contracts end-to-end, in one platform.
When it comes to renewals, a contract management tool can be instrumental, as to manage automatic contract renewals you need to stay ahead of upcoming deadlines. Using contract management software like Juro you can:
- Automate contract reminders or add smartfields to activate date reminders directly within the platform.
- Differentiate between date types using OCR-enabled contract management to tag and understand all of the information accurately.
- Record all of the renewal dates in one central location, a contract repository.
- Streamline your contract negotiation process ready for when you may need to renegotiate the terms of your contract.
Remember, the contract renewal process is part of a wider move towards solid contract management practices.
Customer Relationship Management (CRM)
Customer relationship management platforms are designed to streamline sales and marketing processes. If you’re a software provider, your CRM can enable you to manage renewals from the provider side.
CRMs provide an up-to-date record of customers and their renewal cycles for users, making them extremely useful in the renewal process. You can use your CRM to automate emails sent to your customers in advance of renewal dates and alert sales representatives when a customer is set to renew.
Keeping your CRM data clean, accurate and up-to-date will also allow you to analyse how your customers interact with your platform. This is important data for targeted marketing campaigns and personalizing interactions, which impact how customers renew.
There are numerous CRMs in the market, with people often using Salesforce or HubSpot as their preferred CRM. However, they aren't the only options, in fact, here are some Salesforce alternatives and HubSpot alternatives.
Subscription management tools
Subscription management tools help businesses to track and manage their subscription base from acquisition to renewal. This is a fairly new automation type, meaning that there aren’t as many available on the market and they aren’t a necessity for those managing subscriptions.
Gartner has made a comprehensive list of solutions available, comparing them to one another and the reviews of current users. It is worth investigating these solutions if you feel it could be valuable for your organization to automate.
This software does everything from gathering customer details and generating invoices to collecting payments. Automating this process can ensure that your business doesn’t miss out on important cash flow.
Using Juro for renewal management
Check out this article on the contract renewal process for a deep dive into how Juro can help your team automate this process and stay on top of deadlines.
If your team finds it challenging to stay on top of contract renewals as your business expands, consider the advantages of automated renewal reminders to avoid any unexpected issues.
To simplify the management of your contract renewals, complete the form below to book a demo of Juro today.