Effective contract renewal management is crucial in the fast-paced business environment of today to preserve positive customer relationships and guarantee ongoing revenue streams.
With its dedicated Contract Renewals module, NetSuite, a top provider of cloud-based ERP software, enables subscription companies to optimize their contract lifecycle management and streamline their renewal procedures.
Here are the main characteristics and advantages of the NetSuite Contract Renewals module, followed by a step-by-step tutorial on how to efficiently manage contract renewals with this potent tool.
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Benefits Of The Contract Renewals Module In NetSuite
NetSuite's Contract Renewals module provides software companies with a comprehensive set of functionalities to simplify and automate the renewal process.
This module seamlessly integrates with other NetSuite modules, such as CRM and Finance, allowing for a unified view of customer information and financial data. Users of the Contract Renewals module can benefit from the following key features:
Renewal Automation
NetSuite's Contract Renewals module offers a flexible and powerful automated renewal process. This functionality benefits software companies that provide perpetually licensed and term-licensed products.
The module effectively manages the recurring billing of both on-premise and on-demand software licenses. With NetSuite, businesses can automatically generate renewal transactions within a predefined window, such as 90 or 120 days before expiration.
This ensures timely handling of renewals, minimizes the risk of missed revenue opportunities, and streamlines workflow, saving time and expense.
Multi-Contract Management
Managing multiple transactions that occur with a customer throughout the year can be complex. NetSuite simplifies this process by allowing the co-termination of multiple transactions into a single contract with a single renewal.
This streamlined approach benefits both the vendor and the customer, ensuring maximum revenue during the renewal process. Additionally, the multi-contract support provides flexibility when it's not appropriate to co-terminate all items under a single contract.
Upsell and Discount Management
Upsells and discounts play a crucial role in the contract renewal process. NetSuite provides the flexibility to implement and customize uplifts and discounts across a range of customers.
This eliminates the risk of errors and revenue loss associated with managing these processes through spreadsheets. NetSuite enables upselling to be managed across the board or on a customer basis and supports granular discounting down to the individual transaction level.
Revenue Recognition
Recognizing revenue from contract renewals can be challenging for software companies, especially with varying transaction types and new Financial Accounting Standards Board (FASB) rules.
NetSuite addresses this challenge by offering flexibility in managing different sets of dates for revenue recognition purposes. This capability ensures that the contract renewal and billing process flows automatically, while revenue recognition can follow a separate process without the need for additional spreadsheets and complexity.
Reporting and Visibility
Reporting and real-time visibility are crucial for optimizing the recurring revenue stream. NetSuite's Contract Renewals module provides real-time dashboards that deliver the necessary visibility and drill-down capabilities for effective contract renewal management.
These dashboards present key performance indicators (KPIs) that enable staff to track and manage critical contracts, the renewal pipeline, upsell opportunities, and more.
The interactive drill-down and reporting features allow for granular analysis of customer and contract types, identifying areas for improvement and reducing revenue leakage and customer churn.
Step-by-Step Guide: Creating and Managing Contracts using NetSuite's Contract Renewal Module
Create a Sales Order
- Access the Contract Renewals module in NetSuite.
- Create a new sales order, selecting a customer and adding the desired items to the order.
- Configure the line items based on the subscription duration and billing requirements.
Save the Sales Order
- Save the sales order. As it saves, NetSuite automatically creates a contract.
Review the Contract
- Navigate to the Contract Renewal module and locate the newly created contract.
- The contract will initially display basic details such as the start and end dates.
Trigger the Contract Items Generation
- Run the periodic process (force it if needed) to generate the contract items.
- Once completed, the contract will display the contract items associated with the sales order.
Approve the Sales Order
- Approve the sales order to activate the creation of contract items within the Contract Renewal module.
- This step may vary based on the configuration preferences set for your account.
View the Updated Contract
- Navigate back to the Contract Renewal module and locate the contract.
- The contract should now include the contract items from the approved sales order.
Make Amendments to the Contract
- If desired, make amendments to the contract by creating upsell items or other edits.
- Within the contract, utilize the options to add or remove items to reflect any changes.
Save and Renew the Contract
- Save the amendments made to the contract.
- Select the option to renew the contract to create a new contract for the following period.
Configure Renewal Transactions
- NetSuite's Contract Renewal module automatically creates renewal transactions based on defined window periods.
- Configure the renewal transaction to be an opportunity, a quotation, or a sales order, pending approval or already approved.
Determine Line Item Consolidation
- Decide whether line items with the same item should be consolidated into a single line or kept separate.
- NetSuite's configuration allows for customization of line item consolidation based on unit pricing.
Renew the Contract
- Initiate the renewal process by selecting the renew now option.
- A new sales order will be created for the renewal.
Review the Renewed Sales Order and Contract
- Navigate to the renewed sales order to review the updated contract items.
- The sales order will reflect the renewed line items and associated licenses.
Note: Perpetual licenses and service lines may not be included in the renewed sales order.
Confirm the Creation of a New Contract
- Verify that a new contract has been created for the renewed period.