Best Practices for SaaS Contract Management

Coworkers discussing best practices for SaaS contract management
by Jerry Levine

Managing contracts on a SaaS (software-as-a-service) contract management platform offers your company the flexibility to manage your agreements without the usual complexities of on-premises applications — complexities like data center technology infrastructure overhead, disruptive software upgrades, rigid workflows, and complex integration protocols. Not to mention the need for costly, complicated business intelligence software, or for contract authors to have access to your office network or a VPN to access and use the system.

Companies that subscribe to cloud-based contract management software avoid the costs and time associated with maintaining complex hardware and software. Their administrator and cross-organizational user adoption rates are generally higher because SaaS contract systems are device agnostic and accessible from wherever internet access is available.

Detractors of early SaaS contract management systems used to cite concerns about data security and scalability. Now, leading platforms from vendors like ContractPodAi have matured and evolved. The security posture, expandability, and extensibility available from select SaaS business solution providers now meet or exceed the high standards of industries like banking and finance. The best way for your business to maximize your contract management software return on investment (ROI) is to follow SaaS contract best practices established by organizations like yours that already run these applications.

What is SaaS Contract Management?

SaaS Contract Management software is a CLM tool that manages contractual processes between SaaS vendors and buyers, such as creation, requests, approvals, negotiations, and renewals. One of the key differences between SaaS contract management and traditional contract management is the focus on recurring revenue streams. With SaaS products, customers typically pay a monthly or annual subscription fee, rather than a one-time purchase price. Because of this, SaaS contract management must consider key milestones, like contract negotiations and renegotiations, renewals, and changes to the agreement. As the use of SaaS applications continues to grow, so too does the need for effective SaaS contract management.

Contract management software like ContractPodAi Cloud streamlines the creation and maintenance of legal documents. It makes the contract negotiation process and renewals easier and quicker. And it makes day-to-day contracts far more manageable within a single platform.

SaaS Contract Management Best Practices

Implementing SaaS contract practices will create efficiencies for your organization, accelerate contract negotiations, and help you to comply with regulations.

In the realm of business technology (and when traveling through deep snow) it is wiser to follow in the footsteps of those who completed their journey successfully or continue to thrive along it. Trying to blaze your own trail and develop your own contract management processes is a risky business, and frequently doomed to fail.

Whether a colleague shared these SaaS contract best practices with you, or you discovered them yourself online, putting them to use in your organization is safer than reinventing the wheel. Implementing them in your organization is likely to create efficiencies for your organization, accelerate contract negotiations, and help you to comply with regulations.

Just be sure to implement a SaaS contract management platform that can support these best practices, and not lock you into systems and practices that prevent your business from evolving and meeting your digital transformation goals.

1. Create a System of Record

Have you worked with colleagues in roles like systems analysts, contract administrators, or legal counsel for a long time? Or maybe these roles describe your everyday responsibilities. Either way, the predictability and reliability of a contract management system of record are very comforting amidst the maelstrom of documents and data they work with every day.

Let’s say an audit, unexpected litigation, or missed contract obligation arises. If you have a comprehensive, expertly implemented SaaS contract management application in place as a system of record, all of your colleagues listed above can rest assured that:

  • If your company authored the agreement, the terms were assembled and vetted according to defined business policies that are configured into the contract software.
  • The agreement can be found in the contract repository based on its metadata, along with any versions and redlines associated with them.
  • The contract was approved according to pre-defined workflows.
  • There is an AI-powered analytics engine that can identify contract patterns and characteristics like contract renewal dates, at-risk obligations, and non-standard terms.
  • Their contracts are stored in a highly secure cloud hosting environment that meets regulatory standards
  • Only those with role or explicit access permissions to contracts would be able to view, edit, delete or share contracts.

As revenue-centric legal documents, contract lifecycle management software must be a system of record for your organization, for these reasons and several others.

2. Be Aware of Auto-Renewal

In our business and personal lives, being on the buy side of an auto-renewing contract can leave us paying for goods or services beyond their usefulness date. Contract service providers or buyers may lose their ability to renegotiate contract terms such as price or deliverables even when a business relationship is going to everyone’s satisfaction.

By being aware of an upcoming auto-renewal, each party can reassess a business relationship relative to current circumstances as the end of the term approaches. They can determine whether they can afford to continue under the same terms, renegotiate factors like price, or find another supplier or contractor to meet their needs.

Vendor lock-in was (and still remains as) one of the challenges companies experience with on-premises software vendors. SaaS contract management platforms like ContractPodAi mitigates this risk and offers powerful analytics which can identify auto-renewing contracts–before your organization is obligated to endure a business relationship for longer than you expected.

3. Be Proactive An SaaS CLM platform with an AI-powered analytics engine can provide your organization with alerts on contracts expiring in the near future.

A SaaS contract lifecycle management (CLM) platform with an AI-powered analytics engine can provide your organization with alerts on contracts expiring in the near future. Sales representatives or account managers can reach out to your clients to any obstacles or objections early that might prevent contract renewal.

It can also provide other predictive analytics to enable your project managers to reach out to customers or service providers to check on a milestone or procurement managers to follow up on delivery shortages or other supply issues. Contract management SaaS applications provide critical information for you to act on before a relationship violates the initial or amended agreement terms.

4. Always Invoice

No matter how close your relationship with another business or contractor might be, invoices create an essential paper trail for everyone’s protection. Invoices provide evidence of the transaction from the time of billing to payment and are useful for everything from tax accounting to product returns or accelerating future orders.

Conducting a sale or service agreement on a handshake deal might seem like a good idea, yet if products, services, or relationships don’t live up to expectations, an invoice can alleviate a lot of frustration and confusion down the line.

5. Ask About Usage Limits

For industries like telecommunications, technology, real estate, or automotive, leasing, usage limits, and overage fees can make a big difference in what a client pays, and what a service provider charges. Do you have usage limits built into your pricing based on the number of users a customer subscribes to, how much data they consume, or other factors? Your automated contract review or contract authoring tools can be configured to build them in or verify their accuracy.

Whether you are a buyer or seller of the kinds of products and services listed above, ensuring your contracts have usage limits and overage fees or penalties in them is critical.

6. Consider Multi-Year Agreements

Multi-year agreements can be advantageous for both buyers and suppliers. The vendor can mitigate churn for those customers who opt-in, develop deeper relationships with clients, and keep their sales team focused on pursuing new business. Buyers can access discounts by signing a long-term agreement, and be protected from price increases during their term. SaaS vendors often provide incentives for customers to sign on for multiple years. Contract manufacturers, also if they need to invest in new equipment or retrofit their factories.

If your business is offered a multi-year purchase contract, be sure there are fair early termination clauses in case of poor quality or service so you aren’t locked into an untenable arrangement.

7. Future-Proof Your Contracts

Early termination clauses are one way to future-proof your contracts by giving your company an “escape route” if a relationship doesn’t work out the way you planned when an agreement is signed. Other circumstances include when events like the pandemic, labor strikes, or power failure make it impossible for the terms of an agreement to be met. Force majeure provisions can be effective protections against these circumstances.

End-to-End SaaS Contract Management

Implementing a cloud-based contract lifecycle management system provides your employees and negotiating partners with access to contracts and reports from wherever the internet is available. It makes integrating with your existing SaaS and on-premises applications like CRM and ERP less complex and costly. It also makes configuring and customizing your CLM to align with your business processes significantly easier.

Visit here for more information on ContractPodAi’s SaaS platform.

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