SaaS renewal best practices: What to do when you miss a cancellation window
Most everyone knows that sinking feeling of missing a cancellation deadline. An unexpected charge on a corporate card or the "thank you for your payment" email can cause even the calmest among us to get a bit sweaty.
Cancellation terms have become a sore subject for IT and finance. Intentionally vague or obscure terms and processes can make it seem like it’s happening on purpose.
If you're on the receiving end of an unwanted renewal, you're not alone. Take a breath, grab a beverage, and try the following steps to get it sorted out. With a little digging, some good-faith supplier communication, and a bit of perseverance, all is not lost.
Check your software contract for renewal terms
Knowing your contract is the first line of defense in avoiding an unwanted contract renewal. Check the performance dates laid out in your contract to be sure your window has closed.
Also, check your contract for any specific performance on your supplier's part. Does the contract state specific time windows or channels for providing notice? Did the contractor meet those requirements before putting through the renewal? While this may take some hours in research, you may find an avenue out of the unwanted renewal.
When reviewing an unwanted renewal, check that the supplier met all their obligations. Were downtime and maintenance requirements met? Did the service meet the Service-level Agreement (SLA) parameters? Check with your IT and security departments for data. If things were amiss during the contract, it may give you the leverage to separate without penalty.
Know your State laws on evergreen SaaS renewals
One lesser-known way to deal with an unwanted renewal: check its enforceability. As SaaS solutions continue to grow, states are taking notice of vague or difficult cancellations. New York and Vermont have recently enacted stricter laws for evergreen clauses. The majority of states have laws in place or under consideration.
For instance, some states have made evergreen clauses unenforceable except under specific terms. Some cite the need for "clear and conspicuous" renewal language. Others call for specific renewal windows — making 60 or 90-day terms potentially unenforceable.
While many of these laws fall under consumer protection, commercial contracts may benefit.
Contact your supplier for before you buy SaaS software elsewhere
You may not need the lawyers to save you from a missed cancellation. This is especially true if you've done the work of building good supplier relationships. Having a solid rapport and treating your supplier as a valued partner goes a long way to smoothing the path when you need something.
If you find you've missed an opportunity to negotiate within the contract window, reach out to your contact and explain the situation. Try to find common ground, and use empathy. If the service has been a good fit for you but needs some changes, try to work with your supplier to get what you need without severing the relationship.
While the supplier might hold your feet to the fire, remember that they also have incentive to play ball. First, working together is more likely to result in continuing revenue for their company. It could be that they can accommodate the changes you need as a way to save the deal.
In a larger sense, working with a customer is a good reputation-maker. If they help you in your time of need, they preserve the relationship. You're also more likely to recommend them to others. Happy customers don't leave bad reviews.
While it may be tempting to dispute the charge and let the card company handle it, be aware of the consequences.
Dispute may be easy, but it's not a victim-free solution. If you had a good experience with the supplier, disputing the charge may be tricky. Chargebacks represent a burden for the supplier, with fees and paperwork to consider. It may affect their ability to use processors (if chargebacks become frequent.)
Consider all angles before going this route, especially if you may need to use this supplier's services again some day.
Know your SaaS buying options and costs
If you can't work it out with your supplier, it may be time to run the numbers. What are the business incomes of staying with this contract for another year? Can your organizational goals still work with the current system or service? If so, you can make plans to move on when the contract term ends. (Next time, you'll be ready.)
If the service simply won't do, consider the costs to void the contract. Check your terms for early cancellation fees or clauses. Find out how much of your renewal investment is at risk, and if there is any proration written into the contract.
Also, see what savings you can realize by moving to another supplier. Once the finance team runs the numbers, it may turn out to be a wash. As always, be sure to examine the underlying costs (downtime, equipment, training, and consulting).
It may be less of a blow to move on regardless of the sunk cost. At best, negotiating well with your new supplier will be important to the bottom line.
Avoid missed software cancellations in the future
Once you put out the fire, don't forget to set yourself up for success and avoid the pitfalls of the evergreen clause next time.
A missed cancellation or an unwanted auto-renewal is a bit of a wake-up call. It's a sign that your process and contracts need attention. Once you have a good vendor management process in place, you can take steps to avoid repeat issues. There are several steps you can take to ensure smooth sailing:
Move away from credit card payments
Auto-renewal relies on the background process of charging a credit card. It makes evergreen clauses risky. It can also make renewal activity invisible until it's too late. One way to avoid this is to insist on a PO process with your supplier. While it doesn't work for every contract, for larger agreements it can save a lot of frustration.
Have a SaaS buying policy in place
One way to ensure one-off purchases don't lead to auto-renewal and waste spending is to have a formal procurement process in place. It should outline what purchases can happen on a corporate card or expense account. It should also have guidance on renewals and tracking so that your Finance department has a way to keep tabs on spend.
Negotiate good renewal terms when buying software
Evergreen clauses don't have to be an issue if you negotiate effectively up front. When outlining the terms of a SaaS buying contract, be sure renewal gets addressed. It may mean giving a little elsewhere, but avoiding lock-in could save time and frustration down the road.
Again, if the evergreen clause is non-negotiable for your supplier, tracking becomes vital. Leave yourself time to read contracts and analyze cost-benefit before the window closes.
Consider vendor management software to handle renewals
An ounce of prevention is worth a pound of cure. The best way to keep ahead of your contracts (and avoid the sting of a missed cancellation) is to have an automated system in place to manage SaaS contracts.
With the increase in SaaS buying and subscription-model solutions, complexity is skyrocketing. Automating your contracts process with a platform can save time, avoid waste spending, and keep you on top of your tech stack.
I'm sure we can all agree there's no anxiety like the anxiety you feel after receiving an unexpected "thank you for your payment" auto email.
We've all been there – whether it was the fitness app on your phone you swore you'd use or the collaboration software your team forgot about.
Staying on top of SaaS cancellation terms and avoiding missed renewals, regardless of if you want to continue using the software is critical to bottom line spend.
With the steps above and honest supplier communication, you can avoid these issues in the future.