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Year End Renewals: Here We Go Again – 5 Tips to Make Deal Making Smarter Saving Time & Money!

Two months to go! If not renewed, serious stress will be starting for your customer operations or supply chain operations organisations. There are better ways to deal with this issue than just  “roll it over” or extend the “end date” of your deal.

As we approach year-end, we are noticing more and more stress and fully booked calendars with our potential leads and their decision makers. Too busy internally, instead of doing business.

The sales and procurement members in a fire fighting mode, too busy with preparing, negotiating and closing the next year deals. Is the year-end time pressure compromising the quality the deal? Stripping the negotiation power? As you can’t provide a proper attention to these activities.

Do you recognize the issue? Continue reading….

The issue is getting year be year worse, according to the IACCM research [the leading non-profit international association of Contract & Commercial Management] showed in their latest research that the number of hours is increasing about 60 hours per contract or cost per contract around USD 6,900.  Curious about this number, just read the post of Albert Schot next week.

Imagine the number of 1,000 contracts to be renewed every year, and how much this number will distract your people from doing business: 60,000 hours taken away. Not really a lean number.

See hereby the 5 tips and thoughts to help you in getting the right attention to your deals at the right time and avoid stress in your organisation:

  1. What’s the driver to set year-end date as the expiry date? Is it just a date: set another date. If it is linked to a year budget: work with rolling quarters or months. If pricing is linked to the date, work with indexes or develop an algorithm to meet similar outcomes;
  2. Is it really needed to work with a yearly renewal date?Is the basis from a pricing perspective, because of the price volatility: execute a price discovery action for the specific product or service on the ideal contract length. If it is needed to fix it at year-end work with multiple contingents in one contract;
  3. Are all contracts really required, or agreed just in case? It is a waste of time to have under-utilitised contracts hanging out there; wasting negotiation time and contra-productive from a controls perspective. A contract optimization action supports your organisation in right sizing products, categories and your organization requirements. ;
  4. Do you have the Contract Models underpinning your business?Are you working with one type of contract model, good for a specific transaction to cover for example a yearly subscription or license and because of this success, you copied the contract model to the complete indirect category? What works for one product family doesn’t mean that it can be copied to other saleable products or categories;
  5. Is your Contract Strategy linked to your business plan? A catch all, are your deals linked to the business plan and are your deals related to the contracting strategy to execute your business plan. By having a contracting strategy you will discover that a lot of these contracts do need a different renewal period, a different start and end date, other pricing features to get a balanced portfolio. Also the intensity, diversity of the portfolio will drive a fit for purpose approach which automatically leaves the most important question, why do you have 1stJanuary as the start date. In most of the countries a public holiday and maybe a good starting point to shift this date to the 2ndJanuary or even later due to the year-end break.

The 5 tips will move you from fire fighting mode to a strategic approach to relieve your organisation from year-end stress and drives better value outcomes!

Two months to go! As you see there are better ways to deal with this issue than just “roll it over” or extend the end date of your current deal.

We are interested to hear your views, how you dealt with this issue and if these 5 tips were helpful to driving better value outcomes. Don’t hesitate to contact us if you like to hear more about this topic.

Need more inspiration how to deal with portfolio management issues, join our 1 day course on “Introduction to Strategic Procurement & Contract Management”, to bring your knowledge to the next level in creating value added deals.