We are rapidly reaching the end of the year. It is probably as good of a time as any to take some time aside from running your business to take a look at your future by taking a look at your past. What do I mean by that? Well over the last year or so, you have probably signed many contracts for your business. You may have signed a contract for janitorial services, a lease on your office space or office equipment. You may have signed a contract to supply you with widgets to be incorporated in the products you sell to your customers.
You should review these contracts and look at when the contracts will end. Are you close to the end of the contract? Even if your contract says it will end on December 31st, that does not mean it will has to or will end on that date. Many of these contracts will have a renewal clause in them. These clauses allow the contract to be extended under certain circumstances. There are at least two different kinds of renewal clause.
One type of renewal clause provides that you can extend the contract. The clause will likely provide for the length of the additional term of the contract as well as the price increase of for the new term. In order to be effective you must take an affirmative action to renew the contract. You must notify the vendor in writing that you wish to extend the contract. For these types of contracts you have to decide at some point prior to the expiration of the contract whether the price increase built into the renewal clause is more or less than what you could get a new contract with a different vendor. Obviously if the renewal clause is less than what a new contract would cost you, you would renew the contract. If the renewable price is greater it is either time for a new vendor or at least a discussion with your current vendor to renegotiate a contract.
The second type of renewal clause is the automatic renewal. This type of clause provides that the contract will automatically renew if you do not take affirmative steps to inform your vendor that you do not want the contract to renew. Again you must send a letter to your vendor and notify them that you do not want to renew the contract.
Both kinds of renewal clauses usually have a deadline by which you need to act. This deadline can be days before the end of the contract or it can be several months before the end of the contract. You need to know this date. There is nothing worse to find out that your contract renewed and you are stuck paying more for something than have to because your contract automatically renewed. Taking a few minutes today can save you lots of the money in the future.