Manage Auto-Renewals The Easy Way: Cancel When You Sign

There's many a slip 'twixt a cup and a lip, says the proverb.

Even with the most robust renewals management workflow, you will always run the risk that a contract you want to cancel ends up auto-renewing.

You can automate your process almost end to end with contract management solutions like Icertis or Apttus, but invariably some papers actually need to be signed by a specimen of homo sapiens.

Things happen, papers don't get signed. A signatory is on vacation and can't be reached. A cancellation date was misinterpreted. And a $50K contract ends up renewing, even though you don't need it and haven't budgeted for it.

Not good.

Two things I do to prevent this

1. Strike auto-renewal provisions from contracts. Vendors will object, saying they're "standard". Push back. The only reason a vendor wants an auto-renewal is because they're counting on you to forget to cancel. Auto-renewals lower churn and increase recurring revenue, simple as that. If a vendor won't budge, limit the notice of cancellation to 30 days from the end of the then current term and add a clause requiring you get 60 days notice of renewal with renewal terms (pricing).  That gives you 30 days to digest the renewal offer before deciding to renew. 
2. Serve notice of cancellation when you sign the contract. If you really must sign an auto-renewal agreement, simply submit what I like to call pre-cautionary notice of cancellation when you send back the contract. On your cancellation notice, make sure you reference the Order Form and all agreements incorporated therein, including document name, date, number (if available), and signing officer.  Make sure the same person who signed the contract also signs the notice of cancellation. You can have them do it when they sign the contract. 

There are caveats. Do you have favorable terms in your contract that might be at risk if you cancel? Things like a CPI cap on price increases? Of course, a vendor can always try to force you to repaper with terms that strip out price increase caps, but an auto-renewal feature might help grandfather you in, and make you less of a target for renegotiated terms. 

If you take an aggressive approach to auto-renewals by cancelling when signing, be prepared for feigned offense from your counterparty. Don't be cowed. Auto-renews have the potential to play havoc on your budgeting. 

- Kevan Huston