Contract renewal: process, best practices, and automation
Contract renewal: process, best practices, and automation
Contract renewal is extending the duration of a contract beyond the original expiration date, either automatically or through a manual renewal process.
Renewing contracts allows businesses to extend commercial relationships, renegotiate terms, and address changes in a timely manner.
Auto-renewal can ensure your contract renewal process goes smoothly, avoiding delays in the provision of goods and services (and associated financial impacts). But it requires a proper workflow.
Read on to learn about the contract renewal process. You can also check out our playbook on how to automate your contract renewal process.
Key takeaways
Renewing contracts ensures continuity of business relationships, financial stability, risk mitigation, and opportunities to renegotiate and make improvements to the original contract.
Automatic renewal provisions can save time, ensure uninterrupted service, and guarantee revenue.
Contract lifecycle management (CLM) is essential for efficiently tracking contracts, finding renewal opportunities, and never missing renewal dates.
With features like automated reminders and contract templates, contract management software can streamline the contract renewal process.
What is contract renewal?
Contract renewal is the process of extending an agreement past its original end date so the contractual relationship between parties continues without a gap.
Renewal can happen in one of two ways:
Automatically, when the contract's existing terms include an auto-renewal clause that takes effect unless someone cancels it
Manually, when the parties revisit the agreement and choose to renew it before it expires
Either way, renewal doesn't require starting over. Parties can carry forward the existing terms as-is, or use the renewal as an opportunity to negotiate amendments — updated pricing, scope, or terms that reflect how the relationship has changed since signing.
What happens between signature and renewal
A lot happens in the time between when a contract gets signed and its renewal. This stage is, unfortunately, where most teams go dark and lose leverage with the buyer. The contract will often get signed, filed away, and then forgotten until a contract renewal reminder fires.
This window of time is an opportunity to catch problems early, strengthen the relationship, and expand the terms of the agreement. Here’s how:
Monitor performance against contract terms
A signed contract means certain expectations are at play like SLAs, deliverables, and payment terms. It shouldn’t be a surprise whether those are being met by the time you ask for renewal. You want to catch a missed SLA or slipped obligation before that renewal period approaches.
PandaDoc’s AI data extraction can automatically read signed contracts and capture key fields like renewal dates, obligations, payment terms, and SLA requirements, so you’ll know what to track without having to review every document by hand.
Manage the relationship proactively
When both sides feel the relationship is working, renewal is far more likely. The relationship can be strengthened or diminished during the time leading up to that renewal window. Instead of months of silence, it’s a good idea to maintain regular, low-friction communication to build trust before beginning that renewal conversation.
Watch for expansion signals
The time between signature and renewal is also when upsell and cross-sell opportunities arise. You want to be aware of a customer that is close to hitting their plan’s ceiling or that shows usage patterns that hint at a broader need. That way, you can use these signals and other contract performance metrics to determine opportunities for expansion before the renewal conversation even begins.
A great tool is an AI Assistant that allows you to ask about your contract portfolio in plain language. For example, you can ask “Which vendor contracts expire this quarter?” or “What are the SLA terms in the Acme agreement?” instead of digging through your documents for answers.
Keep contracts accessible and searchable
All of this only works if you can easily find contracts. If you store your contracts in email threads or shared drives, you can’t actually act on what’s inside them. An SLA or auto-renewal clause will essentially become invisible if no one can find or search for it.
A good cure for this is having a contract repository, which gives every signed contract a centralized home with metadata, renewal dates, and clear ownership.
If you deal with legacy contracts like scanned PDFs or pre-digital agreements, intelligent document processing can process and extract data from documents that aren’t already in structured digital form, meaning older contracts aren't locked out of the same monitoring.
How can I know when my contract will expire?
There’s no hard-and-fast rule for where information appears about when a contract expires.
Commercial contracts, like non-disclosure agreements and equipment rental agreements, typically define the length of the contract’s terms in a section called DURATION OF TERMS. Simple contracts may state their duration at the very beginning.
Here’s an example of a contract renewal clause from our copyright license agreement template:
“This Agreement will commence on [date] (the “Effective Date”) and continue until [date] (the “Termination Date”) or until either party provides written notice of termination to the other party with a [number of days] notice.”
Copyright License Agreement Template
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Use this Copyright License Agreement to authorize others to use your intellectual property.
Use this template - freeCopyright License Agreement Template
Used4,872times
Use this Copyright License Agreement to authorize others to use your intellectual property.
In this example, the renewal clause is placed directly under the identification clause and in the same paragraph as the governing law clause.
A termination notice period clause is also present.
Typically, a contract will stipulate a renewal notice period. Some US states require businesses to notify clients of contract renewal (usually 30 days in advance). Other states, like Indiana and Idaho, require no renewal notice period.
If you're managing contracts in PandaDoc, you don't have to rely on scanning clauses manually. You can set a renewal date on any document or template, either a specific date or a set number of months after the document is completed, and configure a reminder email to go out to the document owner a customizable number of days in advance.
Apply this at the template level, and every new document created from it automatically inherits the same schedule. The Upcoming renewals tab in your document list then gives you a real-time view of every contract approaching its renewal date, so you're never digging back into a signed agreement to check.
What’s the difference between renewing and extending a contract?
The terms renewal and extension are often used interchangeably, but contract extension is different from contract renewal. In fact, in a case decided before the Tennessee Supreme Court1, ambiguity as to whether the terms renew and renewal within a contract referred to an extension had real financial consequences.
The justices decided that BSG did not owe residual fees to Check Velocity on the grounds that a contract between the companies signed in 2006 was not a renewal of the original contract signed in 2004.
While contract renewals present the opportunity to improve existing contracts and meet the goals of contract stakeholders, extensions simply extend the existing terms of the contract, without the need to create a new agreement.
Contract extension is a good idea if an agreement governs a specific, term-limited project that needs more time to be completed.
Contract renewal is a good idea if companies are satisfied with the current business relationship and want to continue working together for another fixed period of time. For example, a contract may be renewed annually.
Keep up the pace by optimizing your contract workflow
Customize, negotiate, and eSign complex contracts with ease. Request a demo to learn how.
How can businesses renew contracts?
The contract renewal process extends the validity of a contractual relationship that would otherwise expire.
The manual contract renewal process usually looks like this:
Initial notification: One party notifies the other of the upcoming contract expiration.
Evaluating terms: Both parties review existing contract terms and obligations.
Negotiation: If needed, the parties agree on new terms or changes to existing terms.
Drafting a new contract: Once both parties come to an agreement, they draft a new contract, keeping the previous terms or making changes.
Signing the contract: Parties sign the contract, making it legally valid.
A contract can be renewed manually (with or without the assistance of contract automation tools) or entirely automatically according to renewal provisions in the contract itself.
Each approach has its advantages, though in most cases, automatic renewal is the better option.
Why consider manual contract renewal?
Traditional manual contract renewal relies on emails, spreadsheets, and decentralized contract databases.
Thankfully, contract management software can help you automate parts of the renewal process — for example, reviewing large volumes of contracts with different expiration dates and terms.
Manual contract renewal can sometimes be beneficial, as it can result in:
1. Strong business relationships
If you maintain business relationships by discussing agreement terms annually, you likely won’t have to look for new partners and spend time on procurement.
Plus, old customers are more likely to negotiate and offer more favorable contract terms than new partners.
2. Contract lifecycle management
Setting up contract management processes and a contract repository (often with the help of contract management software) is an essential part of any contracting process but is critical when manually renewing contracts.
According to the Aberdeen Group, businesses that have strong contract management processes are:
More likely to manage their contract costs;
More likely to reduce overall business risk;
More likely to receive higher reviews;
Less likely to lose clients during a renewal;
Less likely to receive complaints;
Less likely to fail in the negotiation stage.
3. Finding renewal opportunities
During a manual renewal process, you may find opportunities for improvement.
For example, if your sales team has made billing-related changes, you may want to renegotiate how clients pay their invoices.
If you choose to review contracts manually, you must have a solid process in place to achieve scalable success.
Why is auto-renewal best in most cases?
Business owners can benefit from contracts that auto-renew in various ways:
No business interruptions
Automatic renewal provisions mean parties can continue providing and receiving goods and services without interruption.
Less negotiation
If you’re happy with the current terms of your existing contracts, there’s no need to renegotiate them.
You can simply allow them to automatically renew.
Guaranteed revenue
Manual renewal leaves you open to business interruptions and possible revenue losses if a contract expires before you agree on renewal terms.
When your contracts renew automatically, you’re guaranteed continual revenue without relying on your sales team.
Easier forecasting
With automatic contract renewal, your team can reliably forecast revenue from loyal clients because they won’t have to worry about contract termination.
Less time and hassle
When contracts renew automatically, you don’t need to spend time reviewing existing contracts and signing additional documents.
Do I receive a new contract after renewal?
In most cases, you will receive a new contract after renewal.
For example, a mobile provider will auto-renew your cell phone contract if you pay month to month.
When this happens, even if the costs and terms of service stay the same, a new contract is created.
Bonus tip
Keep in mind that non-renewal isn’t the same as contract termination. When a contract is not renewed, it expires. A contract is terminated when it is ended prematurely.
Risks of contract renewal
Whether contracts are renewed manually or automatically, every contract renewal process involves risk management.
Renewing a contract comes with these risks:
Loss of customers: Not listening to customers’ needs when renewing contracts might make customers dissatisfied and lead to loss of cooperation.
Missed opportunities: Not renewing contracts in a timely manner can result in delays to project timelines, the need to quickly replace vital resources, loss of access to favorable prices, and the end of meaningful partnerships.
Managing and mitigating contract renewal risks involves detailed planning and preparation, an established contract management system, and effective communication with customers.
See also
What is contract management? Key processes, benefits, and best practices
10 tips for an effective contract management workflow
A well-designed contract workflow is the best way to prepare for contract renewal and find renewal opportunities. Here are some best practices to make your contract renewal strategy effective.
1. Don’t put off a contract review until it’s time to renew
Don’t put your renewal process on the back burner or you could miss out on opportunities to negotiate new terms.
In 2023, PandaDoc users relied on the auto reminders feature for 163,572 more agreements than in 2022.
Getting timely renewal reminders for all your contracts helps you avoid being locked into contracts with unfavorable terms and ensures you are ready to suggest changes when the time arrives.
2. Have a library of contract templates and terms
Start by categorizing contracts by type (service agreements, vendor contracts, employment agreements, etc.).
Develop standardized templates for each contract type, and regularly review and update them to reflect changes in laws, regulations, and industry standards.
You can rely on software like PandaDoc to store templates so they are easy to find and use.
When maintaining templates, stay flexible by adding or removing clauses or sections based on specific contract requirements.
3. Communicate with your partners and employees
In addition to negotiating with your business partners, don’t forget to speak to your employees during the contract renewal process.
Your employees interact with your customers daily and may be able to offer unique insights on how to improve your processes or your relationships with partners.
4. Consult with a legal team to improve your contracts
Contract management comes with a lot of legal red tape.
You need to follow contract law, include the essential elements of a contract, and avoid vitiating factors that could make your contracts invalid.
Keeping an attorney on retainer isn’t cost-effective for most small businesses, but you can pay a contract lawyer hourly to review existing documents to ensure they protect you and your clients.
You can also use PandaDoc to track changes and include those responsible for approval in the workflow.
When reviewing modifications to an existing template, tracking changes may save time for an attorney or legal team.
5. Automate data collection and tracking
Collecting and monitoring data is increasingly important to support business growth and monitor contract performance.
Companies use customer relationship management (CRM) or sales pipeline software to automatically track important metrics such as lead time and cost per acquisition.
These are some tips on how you can automate contract-related data collection and tracking:
Use dedicated software to manage all contracts, ensuring easy access to contract details and automated data tracking.
Set up automated reminders to notify responsible parties of upcoming renewals, preventing missed deadlines.
Leverage the power of contract templates and configure auto-renewal provisions.
Develop workflows to automate approval processes, sending contracts to responsible personnel for review and authorization.
Add analytics tools to easily track, access, and analyze contract data. You may also want to add automatic reporting features, allowing you to gain insights into renewal trends, performance metrics, and potential risks.
Use electronic signature software powered by robust document management features to expedite the signing process, and rest assured that all contracts are securely stored and easily retrievable.
6. Share contracts securely
Securing a contract means preventing others from seeing it, manipulating it, or sending it to people who shouldn’t have access.
It’s common for clients and business owners to send contracts by email, but this is actually one of the least secure methods of transmitting information.
One way to ensure that no one gains access to your files is by using the PandaDoc eSignature tool, which allows you to send documents via an encrypted channel and only allows access to authorized parties.
Want to streamline your contract management process?
Try PandaDoc eSignature and contract management tools.
7. Build a contract repository
Consider using a contract repository to have a bird’s-eye view of all contracts, including details like terms, dates, and obligations for each agreement.
A contract repository helps you securely store data, enables automated document version tracking, allows instant document access, and automates several steps in the contract lifecycle, from creation to renewal.
This is what a contract repository looks like in PandaDoc:
For a closer look, check out our contract audit active documents recipe.
8. Hold monthly/yearly reviews
Irrespective of contract renewal dates, consider holding either monthly or yearly contract reviews.
This helps you decide in advance whether you would like to review a contract and, if yes, what changes have to be made before the renewal date.
9. Standardize the process
Have a standardized procedure for contract renewals.
This could be especially useful when the person responsible for renewals leaves on vacation and contract due dates are approaching.
You can write out detailed steps for your company’s contract renewal process, create a Loom video to share details, and keep all contract templates in one place for convenience.
Use this AI prompt for renewal prep to get a playbook covering your narrative, stakeholder plan, and guidance, so you're prepared for any renewal conversation.
Get more AI tools for renewals, expansion, and customer health in our AI Skills Lab.
10. Assign roles
When various parties are involved in the contract renewal process, make sure everyone knows what tasks they are responsible for.
If you don’t want to turn contract renewal into a brainstorming session, consider assigning specialists responsible for:
Drafting contracts
Checking and approving terms
Negotiating new changes with clients or vendors
Managing renewals
How to automate the contract renewal process
Tracking renewal dates by memory, spreadsheet, or calendar reminder can only work for so long. When your portfolio grows to more than a dozen active contracts, it’s time to employ automation to handle the basics like dates, reminders, routing, and record-keeping.
Here are the core ways to do this:
Auto-reminders
You can configure reminders to fire ahead of a contract’s expiration date at whatever cadence your team sets, for example, 90, 60, and 30 days out. This setting can be applied at the template level so that every new document inherits the same reminder cadence without someone having to remember it.
See the auto-reminders setup guide or this walkthrough on setting up contract renewal reminders for the full setup.
AI data extraction
This feature pulls renewal dates automatically from uploaded contracts, including legacy order agreements that were never built from a template. That also includes legacy paperwork, so no manual entry is required to bring past contracts into the same tracking system as new ones.
Learn more about AI data extraction.
Approval workflows
These workflows automatically route renewals above a certain deal value, or ones with non-standard terms, to the right internal reviewer before they reach the counterparty. This means review happens by rule instead of relying on someone to remember who needs to be looped in. Read more on workflow approvals.
CRM sync
The right automation tool will automatically sync to the CRM record when a contract renews, updating the renewal date, contract value, and the next renewal window. This is done without any manual re-entry, saving significant time and reducing human-error. See PandaDoc CRM integrations here.
All together, these features will cover the entire renewal process. For a deeper look, see PandaDoc's contract renewal automation, or check out our playbook on how to automate your contract renewal process.
Streamline contract renewal with PandaDoc
Contract renewal is the last stage of the contract lifecycle that actually starts back at the proposal. A renewal strategy should be more proactive, rather than only kicking in 30 days before the expiration date. Otherwise, you miss out on how the contract was created, negotiated, signed, and tracked, which are important stages to monitor throughout the contract lifecycle. PandaDoc covers all of them.
Check out our guide: What is contract lifecycle management?
Proposal stage
Renewals are much smoother when the original agreement came from a consistent process. Proposal software helps with this, as it lets you generate proposals from templates or trigger them right from a CRM deal record. This means terms, pricing, and structure of the original contract are documented and reusable instead of created from memory when it’s renewal time.
Negotiation and signature
In-document collaboration allows both parties to comment and redline the terms, and approval workflows route the contract for the appropriate internal sign-off before the document goes out. E-signature with configurable signing order makes sure everyone signs in the right sequence, and the executed contract is captured in the system from the beginning.
Post-signature monitoring
A lot of tools ignore the stage that happens after signature. With AI data extraction, renewal dates and key terms are automatically captured from a signed contract right when it’s executed. The AI Assistant also lets you query that data with natural language questions like, “What’s the notice period on this agreement?” This means you don’t have to reopen a PDF and manually search.
If you want to learn more about linking contract management to renewal, read our guide on CLM for sales teams.
Renewal
Auto-reminders are the star here, as they fire ahead of the expiration date on a contract, then renewal documents are generated from pre-approved templates instead of having to start from a blank draft. Plus, the CRM syncing capabilities help keep the deal record current as soon as a contract is renewed. Here’s how contract renewal works in PandaDoc.
Most SMB and mid-market teams get everything they need in the document workflow with PandaDoc, from proposal through renewal. This is possible without the overhead of a dedicated contract lifecycle management platform, which makes more sense for organizations managing far larger or more complex contract portfolios.
Ready to make your renewal process more efficient with PandaDoc? Start your trial today.
Disclaimer
PandaDoc is not a law firm, or a substitute for an attorney or law firm. This page is not intended to and does not provide legal advice. Should you have legal questions on the validity of e-signatures or digital signatures and the enforceability thereof, please consult with an attorney or law firm. Use of PandaDocs services are governed by our Terms of Use and Privacy Policy.
Frequently asked questions
You should start renewal conversations at least 90 days before the contract expires. Starting 120 days before is best for high-value or complex contracts. That window will leave time for reviewing performance, preparing for renegotiation, and signing before any auto-renewal opt-out deadline closes. This is a practitioner convention and not a legal requirement. PandaDoc uses a 90-day renewal notice period with its own customers.
Contract renewal extends an agreement past its original end date so that it continues without a gap. This happens automatically through an auto-renewal clause, or it can happen manually, when both parties choose to renew before expiration.
Contract renewal is usually when a new contract term is created and there’s an opportunity to renegotiate pricing, scope, or other terms. Extension is simply continuing the existing terms as-is, usually to give a term-limited project more time to finish. Read our guide on how to extend a contract.
When a contract is not renewed, it will expire and the relationship ends. This is different from termination, which ends a contract prematurely. Non-renewal can result in lost revenue, an interruption in goods or services, or a rush to find a new partner or vendor.
There are four aspects that help automate contract renewals: auto-reminders before the expiration date, automatic extraction of renewal dates and terms from signed contracts, approval workflows for internal review, and CRM sync when the contract renews.
An auto-renewal clause (also called an evergreen clause) automatically continues a contract for another term, unless one party actively opts out before a specified deadline. The opt-out window is usually 30-90 days before the renewal date. Missing this window locks the party into another full term, which is the most common (and costly) renewal mistake. Requirements can vary by jurisdiction and contract type, so you want to confirm against the contract itself and with counsel where needed. PandaDoc is not a law firm and this isn’t legal advice.
Contract renewal: process, best practices, and automation
Author
Olga Asheychik
Senior Web Analytics Manager at PandaDoc
Olga is a Senior Web Analytics Manager at PandaDoc who has been working in the Digital Marketing field for the past 15 years. Olga had roles driving marketing campaigns in document automation, contracts, invoices, and agreements. In her daily life, she is a big fan of traveling and connecting with new people.
Reviewed by
Maggie Brennand
Senior Product Marketing Manager, AI & CLM
Maggie Brennand is the Senior Product Marketing Manager, AI & CLM at PandaDoc, where she helps teams understand how they can use AI to work smarter every day. Away from the office, she’s often found drinking too much coffee and exploring the outdoors with her dog, Pepper.
