Saas Tips by Sapna | Tip No. 9 – Audit Rights

As a SaaS supplier you may want to negotiate a right to audit your customer. An audit right will allow you to examine how your customer is using the SaaS service. This may be necessary if you have reason to believe that your customer is not complying with the agreement, such as exceeding the number of users.

Should you allow your SaaS supplier audit rights?

Your supplier may want to audit your use of the software to ensure that you are using it as agreed to. For example they may want to ensure that you are not exceeding the number of users.

Audits can be quite intrusive. They can involve the supplier coming on site to examine the servers, requests for extensive documentation and evidence and answering long questionnaires.

If possible, audit rights should be given sparingly – the most common rationale to deny an audit right is that the supplier has access to the server logs and can monitor usage remotely in order to determine if usage is exceeding normal use.

If you have to agree to providing your supplier audit rights, some things to consider negotiating:

  • The supplier may audit only if the supplier can demonstrate that there is evidence to suspect unauthorized use of the SaaS.
  • Adequate notice before the audit – you need some time to prepare for the audit, finding people to assist with the audit, pull the required information and if necessary, make alternate arrangements if the SaaS is pulled out of service.
  • Procedures around how the audit will be conducted – Will this be an on-site audit or will you provide responses to questions and produce documentation? When will the audit be conducted – during business hours or at some other time? Will the audit be conducted without disrupting your regular business.
  • Who will pay for the audit? If the audit involves third parties such as a third-party auditor or one of your subcontractors, who will compensate them for their time? Usually the party who initiates the audit should be responsible for the expenses related to the audit. If the audit shows that you had not done anything wrong, you may consider charging the supplier for your time as well.

To learn more and join in the discussion, check out my LinkedIn post.

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