SaaS agreement checklist: 10 components you need to include

Software as a Service (SaaS) applications have become essential for businesses across various industries. A well-crafted SaaS agreement is the foundation of any successful software-as-a-service relationship, yet many businesses overlook critical elements that could protect their interests.

To that end, we've put together a SaaS agreement checklist to guide you through the essential aspects of SaaS agreements. This will help you know what to look for and understand things like data ownership, service level agreements, and termination policies before signing.

What is a SaaS agreement checklist?

To know what a SaaS agreement checklist is, you first need to know what a SaaS agreement is.

This contract is essential for defining the legal relationship between the two parties, ensuring both understand their rights and responsibilities.

Despite its importance, many users tend to overlook the details of SaaS agreements. This may be because 90% of business users find contracts "difficult or impossible to understand." That's where a SaaS agreement checklist, sometimes simply called a SaaS checklist, comes in. It ensures the most important concerns for both parties are included in the agreement.

How to use a SaaS agreement checklist

While it's not a replacement for reading a contract, a SaaS agreement checklist serves as a tool for both SaaS providers and customers to ensure all critical aspects of their relationship are properly documented and agreed upon before entering into a contract.

Used during contract negotiations and reviews, a SaaS agreement checklist helps both parties ensure nothing important is missed, potentially saving significant time and money by preventing disputes and misunderstandings later.

For example, when negotiating with a SaaS provider, you can methodically discuss each item on the checklist to ensure it's been addressed in the agreement. The provider will have the opportunity to explain their processes, and you can give feedback and make requests based on your business needs. This will help satisfy both parties that the agreement is fair and balanced.

10-step checklist for SaaS agreements

Before diving into your next SaaS contract, use this checklist to make sure critical elements are covered. These key points will help any business effectively evaluate a SaaS agreement while protecting the organization's interests throughout the relationship.

1. Agreement dates

Understanding the SaaS agreement's start, end, and renewal dates is fundamental in effectively managing a software subscription.

• Start date: Marks when the agreement comes into force, making the SaaS application available to the business that has subscribed. This is the date from which all terms and conditions of the agreement begin to apply.
• End date: Indicates when the subscription needs to be renewed or will terminate. Being vigilant about these dates is essential to creating a smooth user experience and avoiding any service interruptions.
• Renewal date: Unmonitored auto-renewals can lead to unnecessary expenses if the service is no longer needed or if there are more competitive options available on the market.

Try planning a renewal strategy ahead of time to ensure payment deadlines are met or plans are canceled on time to avoid additional fees.

2. Access rights and users

Most SaaS agreements define a cap on the number of users allowed to access the software, which varies depending on the subscription plan chosen.

• Basic plans: Typically designed for individual use, meaning only one user is permitted under a single-user license
• Premium or enterprise-level plans: If your team comprises multiple members, these plans can accommodate more users without penalties for going over the user cap
• Custom plans: You may be able to negotiate with the provider for a customized agreement that suits your team's size and needs

When negotiating the agreement, consider discussing volume discounts or flexible terms with the provider, especially if you anticipate needing to expand your team’s access in the future.

3. Support services and customer assistance

SaaS companies offer varying levels of support. Before committing to a SaaS product, confirm the types of support offered and understand how these services align with business needs.

First, find out how support will be provided—by phone, email, chat, or some combination thereof. This will facilitate communication with the provider and prevent confusion about how to contact them.

Knowing standard response times can manage your team's expectations for having their questions answered. This is particularly important if there is a significant time zone difference between your location and the company's headquarters.

Finally, onboarding and tech support will make sure that your team can easily access and use the software from the outset. If customer support isn't explicitly mentioned in the agreement, you might need to negotiate its inclusion or make sure it's reflected in the pricing.

4. Data ownership and management

Data terms are the foundation of who controls, accesses, and uses the valuable information your business generates. Clearly defining ownership rights, retrieval processes, and usage permissions ensures you maintain control of your digital assets while protecting your organization's most sensitive information from unwanted exposure or exploitation.

• Who retains data ownership: While some vendors state that any data uploaded to their system becomes their property, ideally, the agreement should specify that the customer retains ownership
• How to retrieve data: This is how you'll be able to access your data if the contract is terminated
• Use of data: If the vendor claims ownership rights, make sure you understand how they intend to use that data. Ensure you have the option to restrict use, especially in cases of sensitive information like patents, source codes, and confidential customer data.

Be wary of vendors who claim ownership of your data. Always negotiate terms that safeguard your interests, especially when it comes to sensitive or proprietary information.

5. Subscription renewal and notification periods

Vendors must clearly define the notice period during which users must inform them if they don't wish to renew their subscription. Users need to adhere strictly to this timeline. Failing to give timely notice can lead to automatic renewal of the contract, which might not always be in the business's best interest.

To effectively manage these challenges:

• Define the notice period: Typical durations are 30, 60, and 90 days, although some agreements may require as little as 15 days or as much as 180 days
• Ask for accommodation: Negotiate with vendors for a notice period that best suits operational needs, such as a 90-day notice period which offers more flexibility
• Use a centralized contract management system: This system can help track and manage different SaaS agreements and use automated workflows to alert you well before each renewal deadline

The complexity increases for businesses that use multiple SaaS applications, each with unique renewal terms and notice periods. By ensuring these items are clearly addressed across the board, you can manage all contracts more effectively.

6. Total contract value

The total contract value (TCV) of the agreement represents the complete financial commitment you're making over the contract's duration. This value includes all associated costs and financial obligations across all facets of the business, which can provide significant leverage for optimizing the SaaS agreement.

It's common to find discrepancies between the initial commitments outlined in a contract and the actual expenses incurred. For instance, there may be an increase in the number of active users beyond what was agreed, charges for additional features, or overages that weren't initially accounted for.

It's also common for team members to sign up for trial services and forget to cancel them before they automatically convert into paid subscriptions, leading to unexpected charges.

To manage these situations effectively:

• Review and compare contracts: Make sure they still meet your needs and reflect actual usage
• Manage spend: Track usage metrics, additional feature opt-ins, and other factors that might contribute to cost increases
• Use procurement software: Instead of manually monitoring these expenses, use software tools to help identify unnecessary expenditures and provide insights for cost optimization

Tracking the total contract value and actively managing SaaS expenditures will help avoid budget surprises and maintain financial control. Regular reviews of usage patterns and contract terms will help identify optimization opportunities that can significantly reduce overall technology spending.

7. Service Level Agreement (SLA)

This section of the agreement spells out the specific services the vendor is committed to providing, including various performance standards and usability benchmarks they're obligated to meet.

• Uptime guarantee: If the vendor fails to achieve this, the SLA should provide mechanisms for accountability, allowing you to seek remedies or compensation as outlined
• Service disruptions or performance issues: The SLA should compel the vendor to address and resolve these issues promptly, ensuring the service runs smoothly
• Response time: Include a clause that specifies how quickly the vendor must address and resolve any issues you encounter, particularly vital if the business heavily relies on the SaaS product for day-to-day operations

Before committing to a SaaS product, ensure that the SLA terms covering performance standards, uptime commitments, and resolution procedures are acceptable and align with business needs. Only subscribe if the service levels meet those requirements.

8. Consumption metrics and billing models

The section outlines how usage of the SaaS application is measured and billed. It directly influences how you'll be financially responsible for the service throughout the contract term.

• Per user: Commonly referred to as "seats" in the SaaS product. This model should scale with your team.
• Tier pricing: Service packages with increasingly comprehensive features at higher price points. Each tier includes a specific set of features, capabilities, and sometimes usage limits.
• Consumption: Billed based on the extent of usage, such as data consumed, storage used, or features accessed

Make sure these terms are clearly defined, reasonable, and within the business's capacity to manage. This scrutiny will help prevent billing surprises and aid in more accurate financial planning.

9. Data compliance obligations

These elements are foundational in ensuring that personal and corporate data stored on the vendor’s servers are managed securely and according to legal requirements.

• Protection of data: What country's regulations will determine the level of data protection? Those rules can vary by region.
• Vendor's compliance: Perform a thorough examination of the vendor's compliance with relevant regulations such as the General Data Protection Regulation (GDPR), California Consumer Privacy Act (CCPA), Payment Card Industry Data Security Standard (PCI DSS), and System and Organization Controls (SOC) 2, among others
• Data security: Confirm that the vendor’s service complies with the latest security standards and regulatory requirements

A solid compliance framework significantly reduces legal exposure while protecting your data. Make sure the vendor's contractual obligations match their compliance claims and include regular security audits to verify ongoing adherence to regulations.

10. Exit strategies and termination clauses

The termination policy ensures that both parties understand the conditions under which the agreement can be concluded or discontinued. It protects your business interests and assists in a smooth transition if the relationship ends.

• Early termination costs: Make sure that any specific costs or penalties associated with terminating the contract prematurely are clearly outlined
• Notice period: Understand the required notice period to initiate the termination process, ensuring both parties have adequate time to prepare for the end of the service
• Data disposition: Outline how data will be returned or destroyed after the termination
• Post-contract duties: Clarify any responsibilities that persist beyond the end of the contract, such as confidentiality commitments

A thoughtful exit strategy prevents costly disputes and operational disruptions when ending the SaaS relationship. Addressing termination details up front will allow you to secure proper data handling and maintain business continuity while protecting the business's long-term interests.

Key takeaways

• Confirm core terms: Set clear agreement dates, access rights, user limits, and support expectations upfront
• Protect your data: Negotiate data ownership, retrieval rights, and compliance terms that align with your business needs
• Watch the fine print: Track renewal notifications, total contract value, and SLAs to avoid hidden risks or performance gaps
• Align billing with usage: Choose a pricing model that fits your actual usage to avoid overpaying
• Plan for exit: Include strong termination clauses and data protection terms to ensure a smooth offboarding process

Streamline SaaS agreement management with Ramp

Ramp offers a comprehensive suite of features that not only help control and monitor spending but also simplify the complexities associated with managing SaaS contracts.

With Ramp, you can:

• Consolidate the request and approval process: Ensure that all contractual commitments are visible and manageable from one platform
• See savings opportunities: Gain complete visibility into spending to uncover savings on unused subscriptions, licenses, and memberships, eliminating unnecessary costs
• Automate approval workflows: Build automated approval workflows that integrate seamlessly with existing tools
• Match invoices to POs: Ramp provides a clear view of all committed spending by automatically generating purchase orders and matching invoices to those orders

Ramp is a powerful ally in managing SaaS agreements by providing the tools to control spending, streamline procurement processes, and maintain clear oversight of all agreements.

Explore Ramp's procurement software to see how it can help you optimize your SaaS investments and ensure you derive maximum value from your software subscriptions.