The Cacheflow Blog

The Ultimate SaaS Agreement Checklist: Top 10 Components To Include

February 23, 2024 1:57 PM

SaaS companies grow and survive on their contracts. Getting an agreement initiated, signed, and enforced helps both RevOps and Finance teams improve their Quote-to-Cash workflow. The right contract terms are essential to ensure both parties live up to their promises. For sellers, this is where a checklist for SaaS agreements comes in.

A handy checklist covering the most crucial aspects of a contract can help you shorten your contract cycle and maintain customer expectations. 

What is a SaaS Agreement?

A SaaS agreement is a contract between a software service provider and the customer. It outlines the software services the company provides, including terms of use, subscription length, and payment details.

A SaaS agreement ensures both parties understand their rights and obligations. It also clarifies service expectations to the clients while providing legal protection. For vendors, SaaS agreements are essential for defining service terms and ensuring payment. Customers rely on them for service guarantees and data protection. 

Why do Vendors Need SaaS Agreements?

SaaS agreements give you a legal framework that supports transparent, fair business practices.

  1. Define services and use terms: SaaS agreements outline your offerings and usage guidelines. Having clear terms in an agreement sets the stage for smooth operations. They prevent misunderstandings by making expectations clear.
  1. Prevent disputes: Disagreements over service scope are less likely with everything spelled out. Thus, an agreement leads to stronger relationships with clients.
  1. Protect intellectual property: A SaaS agreement safeguards your hard work by defining who can use the software and how. It acts as a shield for your assets.
  1. Ensure timely payments: An agreement specifies payment details. It includes how and when clients should pay. It helps you get compensated on time for your efforts.
  1. Limit liability: Including liability clauses in your agreement is a smart move. It reduces your risk if something goes wrong with your service. 

10-Point Checklist for SaaS Agreements 

#1. Agreement Dates 

Agreement dates mark the timeline of your SaaS contract—including the renewal and termination. These dates set the contract's validity. They signal when your service starts and might end or need renewal. 

Remember to consider auto-renewal clauses. A simple check can prevent unexpected costs and keep your budget in check. Understanding these timelines means better planning, smoother transitions, and happier clients.

#2. Term Length

The term length of a SaaS agreement outlines how long the contract lasts. It sets clear expectations for both parties. A defined term length helps you manage resources, expectations, and future commitments. This clarity will align the expectations of both sides. Consider specifying conditions that could extend or terminate the term early. It might include performance benchmarks or breach scenarios. 

#3. Customer and Vendor Name

This formally identifies the parties and adds legal clarity and precision to the contract. This detail allows clarity about who has obligations and who enjoys the benefits. This means protection against disputes and clarity in commitments with clients. It correctly addresses all communication and legal documentation and facilitates smoother interactions.

#4. Proposal Number

Every SaaS agreement should start with a unique proposal number. This number makes it easy to identify and track the proposal. This approach makes organizing documents easier and allows both parties to reference the specific deal during discussions or follow-ups.

A proposal number eliminates confusion, especially when multiple agreements exist. It streamlines communication, reduces errors, and simplifies the management of contract versions. Ensure your agreement includes this number right at the beginning to keep things tidy and transparent.

#5. Total Contract Value (TCV)

TCV is the total revenue your business receives from a customer over the life of a contract. Listing TCV in your SaaS agreement clarifies the total amount the customer is obligated to pay for their contract. 

#6. Purchase Order 

Another critical element in your SaaS agreement checklist is detailing the purchase order. It includes line products, quantities, tiers, tax rates, discounts, and total costs. The purchase order also serves as a record for tracking and confirming accurate timelines. It also facilitates smoother service delivery by specifying the exact offerings and expectations.

#7. Payment Schedule 

Setting a clear payment schedule leads to smooth financial operations. It specifies when and how often customers must pay annually, quarterly, or monthly. Your payment details in the agreement should include:

  • Payment milestones
  • Due dates
  • Acceptable payment methods
  • Late payment penalties

#8. Termination Policy and Renewal Clause 

The termination and renewal clauses deserve special attention when drafting a SaaS agreement. Including these details protects both parties and builds trust.

  1. Termination Policy: Define how either party can end the agreement. Include conditions under which the client can terminate the contract before its end date. It helps manage expectations and provides a clear exit strategy.
  1. Renewal Clause: Specify auto-renewal conditions and the notice period required to cancel it. Also, detail any price increase at renewal. Including this element prevents complications and keeps both sides prepared for renewals.

#9. Include Key Legal Policies

Including a master service agreement (MSA) is like setting ground rules. It clears up what's expected and covers everything from service levels to how to settle disputes. With an MSA, you can easily tackle projects, knowing exactly how things run. Here's the lowdown on the critical components:

  1. Terms of Service (ToS) outlines acceptable use and the boundaries of your service to ensure users know the dos and don'ts.
  2. End User Licensing Agreement (EULA) specifies the rights you grant users. It protects your software and intellectual property.
  3. Privacy Policy declares how you respect and protect user data. This transparency enhances trust and credibility.
  4. Data Handling Policy details your practices for managing user data. It includes storage, access, and protection measures. It's essential to demonstrate compliance with global data protection regulations.

Each element of this legal framework provides a secure, transparent, and efficient foundation for your partnership. 

#10. Payment Instructions 

Precise payment details in your SaaS agreement clear up confusion and simplify billing. Ensure your checklist includes payment terms like due dates, accepted methods, invoicing procedures, and late payment penalties.

It helps you secure timely compensation for services rendered. It also helps your customers know their financial duties and plan accordingly. Plus, discussing how to handle payment disputes, refunds, and adjustments early can prevent issues later.

Challenges in SaaS Agreements

Creating SaaS agreements has several challenges—from keeping contracts visible to making clear payment instructions. Here are the most significant challenges and some strategies to overcome them.

1. Contract Visibility

All parties need easy contract access to review terms and conditions when needed. Without clear visibility, misunderstandings can arise, leading to disputes or non-compliance issues. This is important for both vendors and customers to keep track of the agreement's details, status, and performance. 

Automating agreement management can offer real-time visibility into the contract process. Everything becomes transparent and manageable with a bird-eye view of the customer journey.

2. Manual Drafting 

Creating contracts manually is time-intensive and susceptible to inaccuracies. Moreover, every SaaS agreement needs to accommodate changes such as upgrades or downgrades. This becomes particularly challenging when managing multiple contracts.

Streamlining the contract creation process through automation can reduce these risks. 

3. Compliance

Compliance is another big challenge for SaaS agreements. Your agreement should ensure both parties understand their obligations under the contract. 

You should work with legal teams to review and adjust agreements. This proactive approach helps avoid legal pitfalls. It also builds customer trust by committing to legal and ethical standards. It means updating agreements as laws change. 

4. Renewal Tracking

SaaS renewals may risk customer churn and lost revenue without a clear strategy. Poor communication and bad reminder processes lead to high churn. 

Cacheflow simplifies this process for you. With automated renewal reminders and clear communication channels, Cacheflow helps SaaS companies win more renewal deals

Simplify SaaS Contract Management with Cacheflow

Every change in your customer relationship entails a corresponding shift in your SaaS agreement. While this sounds like a herculean task, it doesn't have to be. 

Imagine purchasing, renewing, managing, and optimizing your SaaS agreements all in one place.

That's what Cacheflow helps you with—no need to manage multiple platforms for quotes, eSignatures, billing, and invoicing. With Cacheflow, everything happens in one place and in a unified flow. 

Book a demo to see why SaaS companies are switching to Cacheflow.