Refund Policy for SaaS

Just as with physical products and software purchases, Software as a Service (SaaS) customers sometimes want their money back. A clear Refund Policy will avoid confusion and make sure both sides know where they stand. However, the unique nature of SaaS means you need to think carefully about what to put in your Refund Policy.

Here's what you need to know about why to have a Refund Policy for your SaaS platform, and how to create and display your own.

What is a Refund Policy?

A Refund Policy is a posted notice or document that issues a clear statement to your customers about when and how you offer refunds, as well as when you do not. It also covers any restrictions, consequences or conditions to refunds.

It will include information about the entire refund process including how to request one, how long the process takes, and what users must do and should expect.

What Features of SaaS Affect a Refund Policy?

With SaaS products, your Refund Policy must take into account the software's expected performance and availability, and the ongoing nature of your financial arrangement with the customer.

For the purposes of this guide, we've defined SaaS as both a licensing and distribution model:

• Like other software, customers license the product rather than buying it outright. This affects the concept of "returning" a product for a refund.
• Unlike some software, SaaS usually involves accessing software via the Internet rather than installing a specific edition or version. This means features can change over time, which could affect a customer's expectations of a refund.
• Unlike with some software, SaaS is usually a subscription service rather than a one-off fee for indefinite use. This could affect how and when a customer cancels and whether they expect a refund.

Do I Need a Refund Policy for SaaS?

Legally you don't usually need a Refund Policy for SaaS. However, it's almost always a smart idea to have one.

Laws on refunds in the context of SaaS vary significantly between jurisdictions. The following are some key (generalized) points:

• In most places you must issue refunds if a product or service (including a SaaS product) is faulty or not as described.
• In most places, customers don't have an automatic right to a refund simply because they've changed their minds about a product or service.
• In some states and countries a default return and refund right applies unless you clearly state otherwise in a prominent returns and Refund Policy.
• The European Union has a 14-day cooling off period for products and services bought online. This means customers who change their mind can get a refund. The rules include an exception for "digital content" such as streaming video, meaning the cooling off period ends once the customer downloads or starts watching the content. How this applies to SaaS is not a settled legal point, so it may be safer to offer EU customers refunds within 14 days of purchase.

Framer offers such refunds to avoid legal problems in Europe:

To sum up, you will rarely if ever face a legal requirement to have a Refund Policy for SaaS, though not having one may limit your ability to refuse refunds in some circumstances. If you want to have custom refund rules that go outside of statutory allowances, you will almost always be required to post your own Refund Policy to give notice of your specific parameters.

Without displaying one, you will likely be compelled to at least offer the statutory minimums.

Here are a few compelling reasons to have a Refund Policy even if not legally required:

• To make sure you can enforce any restrictions or conditions you place on refunds
• To reduce the risk of a legal dispute
• To build trust and authority with potential customers

What Information Should I Include in My Refund Policy for SaaS?

Your Refund Policy for your SaaS app should cover anything customers need to know about when and how they can get a refund, including situations when they can't. Make sure to include anything you want to be able to enforce in a legal dispute if necessary.

These are some of the key points to cover, in further detail and with visual examples of what information to include.

Under What Circumstances You Issue Refunds

List all the circumstances in which you will give refunds. You could also include circumstances in which you won't issue refunds, particularly if they may not be obvious to customers.

Circumstances to address either way could include:

• The customer has changed their mind shortly after purchase
• The customer wants to end a subscription period early and get some money back
• You've removed key features of the service
• You've increased the price

If you don't give refunds in any circumstances, make this clear as well. "No refunds" is still a form of Refund Policy. Don't try to mislead customers into thinking you will refuse to give refunds when you are legally obliged to do so.

Ceros is clear that it only issues refunds in a very specific scenario:

37signals gives examples of possible reasons for refunds:

ServiceNow details its policy on refunds when it fails to live up to promises about its service:

How Customers Can Initiate a Refund Request

Tell customers exactly what they need to do to initiate a request for a refund. This could include:

• Using an online form
• Contacting you by phone
• Contacting you by email
• Writing a physical letter

Make sure the various contact details are up-to-date and operational.

Tell customers what details they need to include in their refund claim, for example customer numbers, their contact details, and their reasons for requesting a refund.

Zoom gives detailed instructions of how to get a refund:

Jasper tells users how to request a refund and gives an idea what to expect:

Any Fees and Refund Deductions You Charge or Keep

Detail whether any fees will apply to the refund. These could include processing or handling fees.

Either say what the fee will be, or how it will be calculated. For example, it could be a fixed amount, a set percentage of the refund, or it could be variable with a minimum or maximum amount.

Explain any factors that could affect the fees (and in turn the refund amount) such as the amount of time left in a billing period.

Slack explains how its automated refunds (for inactive users) are calculated and then paid as credit:

Adobe details a fee that applies to some refunds after early cancellation:

Timescales and Timeframes For the Entire Process

Set out any applicable timescales such as:

• Any time limit on requesting a refund after starting service
• Any time limit on canceling and getting a refund before a scheduled payment date
• Any time limit on canceling and getting a refund after a price rise announcement
• The time it will take you to issue the refund

Timescales are particularly important with free trials, for example when you offer a refund during the first 30 days of a new service plan. Explain the time limit on a free trial, including when it starts, such as placing an order vs using the service for the first time.

If you think it may prove relevant, note which location/time zone you use when deciding if the cancellation was before a particular date.

Pipefy covers both the length of the free trial and when the clock starts ticking:

Canva explains the refund process and timescale:

Effects or Consequences of the Refund Being Requested/Granted

Detail any practical effects of you granting the refund, particularly when canceling a service. This could include:

• When the customer will lose access to the SaaS product
• What happens (if anything) to files they have created using the product
• What happens to any stored data, for example if they'll be able to access and download any files stored in the cloud

Microsoft gives clear examples of some negative consequences of getting a refund:

Where Should I Display My Refund Policy for SaaS?

Make sure customers have a reasonable opportunity to see your Refund Policy before they sign up to a service and while they are using it, at any time after purchasing the app.

Consider putting your Refund Policy in any or all of the following places:

• On your website, either as a standalone page or in a legal section. Link to this page or section in a footer menu or similar navigation tool to make it easy to find.
• During the sign-up process for becoming a customer
• Within the SaaS itself, for example in help menus or "About" sections
• As a clause or section within another agreement like a Terms and Conditions agreement

StyleSend links to a dedicated Refund Policy page throughout its site within the site's footer:

Summary

While SaaS is a differing business and software model to other products, you still need to address refunds. A clear policy builds trust with users and makes it easier to enforce your legal position if needed.

Points to cover include reasons you will and won't give refunds, how users can request a refund, any fees and other deductions to refunded amounts, timescales, and any consequences that come from getting a refund such as a loss of access to files.

Display your Refund Policy clearly so customers can easily review it before and after signing up to your service, such as in the SaaS app itself and in your website's footer.