According to BetterCloud, the average company now uses over 110 SaaS applications across departments. Each tool comes with its own contracts, renewals, and payment cycles. As organizations scale, keeping track of all these subscriptions can quickly become overwhelming.

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What’s more, nearly 30% of SaaS spend goes unused every year. Overlapping tools and underutilized licenses quietly drain budgets that could be redirected toward growth. To stay efficient, companies need a clear system to monitor and control their SaaS ecosystem, one that eliminates waste and helps every dollar work harder.

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What is SaaS spend management? 

SaaS spend management is the process of tracking, managing, and optimizing all SaaS applications a company uses. It helps monitor subscriptions, renewals, usage, and costs to reduce waste and improve efficiency. With tools like Spendflo, businesses can automate these tasks and gain full visibility into their software spend.

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Why is it important to manage SaaS spend in 2025?

With the world’s economy teetering on the brink of a recession and inflation on the rise, companies, big and small, are aggressively pursuing cost-cutting measure. One major cost-cutting measure, that is often overlooked, is SaaS cost optimization.  

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Unmanaged SaaS spends wreaks havoc on a company’s cash flow. Managing SaaS spending in an efficient manner ensures that the company’s money is being spent wisely without wasting resources. Cloud software management tools help businesses to obtain central visibility over subscriptions. This is useful to eliminate unused apps and duplicate services while also getting a clearer picture of the company’s SaaS usage data.

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Businesses usually focus on their topline revenue and subscribe to many SaaS softwares to increase efficiency and achieve goals. But, unused software, duplicate apps, and unrestricted usage have transformed SaaS into ‘shelfware as a service’ for most companies. 

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Gartner coined the term ‘shelfware as a service’ in 2008 to refer to software that is unused or essentially sitting on a shelf. A Gartner report also exposed the uncertainties surrounding SaaS including the impact of improper spending on a company’s bottom line. 

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For companies in hyper-growth mode, it is essential to extend the runaway and reduce expenses. These are a few of the benefits of managing SaaS spend effectively, and why you should look into it immediately. Managing SaaS spends:

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  1.    Eliminates redundant or duplicate software

 2.    Reduces wasteful SaaS spending

 3.    Reduces burn rates

 4.    Leads to a higher return on investment (ROI)

 5.    Creates opportunities for better negotiations with vendors

 6.    Saves waste of resources during compliance and negotiation

 7.     Mitigates security risks
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Now you understand the importance of SaaS spend management, but managing hundreds of SaaS solutions manually comes with some challenges too. Here are the most common difficulties that companies face with cloud cost management.

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‍SaaS Spend Management vs. SaaS Spend Optimization

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SaaS Spend Management

SaaS spend management is the process of tracking, managing, and controlling all SaaS applications a company uses. It involves overseeing subscriptions, renewals, usage, and costs to ensure every tool is accounted for and budgets are used efficiently.

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SaaS Spend Optimization

SaaS spend optimization takes things a step further. Once you have visibility through spend management, optimization focuses on improving efficiency, reducing waste, removing duplicate tools, and right-sizing licenses based on actual usage.

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Key Aspects of SaaS Spend Management

SaaS spend management goes beyond tracking software costs. It gives companies complete visibility into every tool, ensures proper license usage, and drives cost efficiency through automation and policy control. Below are the main pillars that make SaaS spend management effective.

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1. Visibility and Discovery

Uncover all applications: Identify both approved and unapproved (shadow IT) tools to understand the full scope of SaaS usage.

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Centralize subscription data: Keep all SaaS contracts, billing details, and renewal dates in one place for easy access and control.

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2. Monitoring and Analysis

Track usage patterns: Monitor how each application is used to spot inactive or underutilized licenses.

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Analyze costs: Review spending by team, user, or application to identify high-cost areas and potential savings.

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Find redundancies: Detect and remove duplicate or overlapping tools that increase unnecessary expenses.

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3. Optimization and Control

Manage renewals: Stay ahead of contract renewals to avoid auto-renewals and negotiate better terms with vendors.

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Right-size licenses: Adjust license counts based on real usage and decommission tools no longer needed.

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Consolidate tools: Combine applications with similar functions to simplify management and reduce costs.

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4. Governance and Automation

Set clear policies: Define procurement and usage policies to ensure accountability and budget discipline.

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Automate workflows: Automate approvals, renewals, and reporting to reduce manual effort and improve accuracy.

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Ensure compliance and security: Maintain visibility to prevent shadow IT risks and stay compliant with internal and external regulations.

What are the challenges to SaaS spend management?

Managing SaaS spending can be complex. As businesses scale and adopt more cloud-based tools, tracking costs, contracts, and usage across teams becomes harder. Without the right processes and visibility, organizations risk overspending, missing renewals, or getting locked into inflexible vendor agreements.

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Here are the most common challenges to SaaS spend management, and how to solve them.

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1. Lack of Information

Challenge: Most companies use dozens of SaaS applications across departments, but only a fraction are actively used. When each team buys its own tools, finance and procurement lose sight of what’s being spent and where. This lack of visibility leads to duplicate tools, unused licenses, and missed opportunities for savings.

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Solution: Gain complete visibility into your SaaS ecosystem. Centralizing subscription data, including costs, renewal dates, and usage metrics, helps you make informed renewal and budgeting decisions. A unified SaaS inventory ensures you know exactly what’s being used, by whom, and for what purpose.

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2. Tedious Data Collection

Challenge: Collecting SaaS spend data from multiple sources is time-consuming when done manually. Many teams still rely on spreadsheets or documents, making it difficult to get accurate or timely updates. This slows down decision-making and increases the risk of errors.

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Solution: Automate data collection and reporting. SaaS spend management platforms consolidate data from finance, procurement, and IT systems into a single dashboard. This provides real-time visibility into spend patterns and usage. For instance, Urban Company improved transparency and achieved a 15x ROI by centralizing its SaaS procurement data.

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3. Vendor Lock-In

Challenge: While SaaS vendors make onboarding simple, exiting isn’t always easy. Some contracts include strict lock-in periods or hidden clauses that make it costly or technically difficult to switch providers. This can trap companies in expensive or outdated solutions.

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Solution: Review vendor contracts carefully before signing. Check for lock-in clauses, data portability options, and migration support. Ensure that your agreements include clear exit terms and confirm that you’ll receive your data in an accessible format. Open communication with vendors early on can help prevent these issues later.

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4. Unexpected Vendor Practices

Challenge: Some vendors may increase pricing without notice, alter online agreements, or complicate data retrieval when switching platforms. These changes can disrupt budgeting and compliance efforts.

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Solution: Protect your organization with proper contract management. Always request a signed, uneditable agreement rather than relying on web-based terms. Clarify data retrieval and integration clauses before committing to a vendor. Building a proactive vendor review process reduces risk and avoids surprise costs.

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5. Lack of Central Ownership

Challenge: In many organizations, no single team owns SaaS spend management. Finance tracks costs, IT manages access, and procurement handles contracts, but without coordination, important details fall through the cracks.

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Solution: Assign ownership to a dedicated function or cross-team process. Bringing finance, procurement, and IT together around shared visibility ensures accountability and alignment. A single source of truth makes it easier to manage renewals, compliance, and savings opportunities.

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The Silent Budget Leak: Common Causes of Runaway SaaS Spend

SaaS tools are essential for running modern businesses, but without proper oversight, they can quietly drain budgets. Hidden inefficiencies, unused licenses, and lack of visibility are some of the biggest SaaS spending culprits. Understanding these issues, and knowing how to prevent them, is the first step toward smarter cost control.

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Underutilized Licenses and User Inactivity

Cause: One of the most common causes of SaaS overspending is paying for licenses that employees no longer use. Over time, as teams change or projects end, many licenses remain active but idle. Without regular tracking, these underutilized SaaS licenses can account for thousands of dollars in unnecessary costs each year.

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How to avoid: Conduct quarterly license audits to track actual usage by user and department. Deactivate or reassign inactive licenses and set up automated usage alerts. SaaS spend management platforms like Spendflo can help by continuously monitoring utilization and flagging unused accounts for reassignment.

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Shadow IT

Cause: Shadow IT refers to software and apps purchased or used by employees without IT or procurement approval. While it often starts with good intentions, like trying a tool for convenience, it quickly leads to duplicate subscriptions, compliance issues, and security vulnerabilities. These untracked tools are among the most overlooked SaaS spending culprits.

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How to avoid: Implement company-wide procurement policies that define who can buy software and how. Use a discovery tool or SaaS management platform to automatically detect all active applications, including unsanctioned ones. Regularly review and approve these tools to minimize shadow IT risks and maintain compliance.

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Redundant and Overlapping Applications

Cause: Many organizations pay for multiple tools that do the same job, think of having three project management apps or two CRMs. This overlap usually happens when different departments make purchasing decisions in isolation. Over time, this redundancy leads to fragmented workflows and unnecessary spending.

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How to avoid: Centralize SaaS procurement and encourage collaboration across departments before approving new tools. Maintain a unified software inventory and evaluate existing apps for overlapping features. Where possible, consolidate into a single, multi-functional tool to streamline workflows and reduce spend.

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Complex and Opaque Pricing Models

Cause: SaaS vendors often use complex pricing structures with multiple tiers, usage-based fees, or hidden add-ons. Without transparency, it’s easy for costs to rise unexpectedly. Renewal terms, user limits, and hidden upgrade clauses can also make budgeting difficult and lead to overspending.

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How to avoid: Negotiate clear, written contracts that spell out pricing terms, renewal clauses, and any potential fees. Review vendor pricing regularly and benchmark against market rates. Using a SaaS spend management platform gives procurement and finance teams real-time visibility into vendor pricing and helps identify areas for negotiation.

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Common Pitfalls in SaaS Spend Management and How to Avoid Them

Global SaaS spending continues to grow rapidly, projected to surpass $208 billion by 2023. Yet, a large portion of that investment often goes unused due to poor visibility, unmanaged renewals, and redundant applications. Understanding these pitfalls helps businesses tighten control and prevent unnecessary SaaS overspending.

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Overlapping Subscriptions

Pitfall: Duplicate or overlapping SaaS subscriptions are among the biggest causes of SaaS overspending. Different teams often purchase similar tools for collaboration, design, or analytics without realizing others already use one. This leads to redundant costs and fragmented data.

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How to avoid: Use a centralized SaaS dashboard to monitor all active subscriptions in one place. Before approving new purchases, check for existing tools that serve the same purpose. Platforms like Spendflo provide real-time visibility into your SaaS stack, helping businesses eliminate duplicate apps and cut costs just as Crownpeak saved 30% of its annual SaaS expenses through Spendflo’s insights.

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Underutilized Licenses and User Inactivity

Pitfall: Underutilized SaaS licenses are a silent drain on budgets. Many companies pay for licenses that employees rarely use or forget to cancel after team changes. Over 70% of SaaS licenses go unused in some organizations, resulting in significant wasted spend.

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How to avoid: Perform regular license audits to track actual usage and revoke inactive accounts. Automate license monitoring with SaaS spend management software that identifies idle users and reallocates unused seats. This ensures every license adds value instead of becoming an overlooked cost.

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Shadow IT

Pitfall: When employees independently buy or use software without IT or procurement approval, it creates what’s known as shadow IT. These unapproved apps not only inflate costs but also increase compliance and data security risks, one of the most dangerous shadow IT risks for growing businesses.

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How to avoid: Establish clear procurement and approval processes for new tools. Enable automated discovery of all active applications, including unauthorized ones. Spendflo’s unified dashboard provides complete visibility into approved and shadow apps, helping teams manage usage safely and maintain compliance.

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Exceeding Usage Limits

Pitfall: Usage-based pricing models can surprise companies with unexpected overage fees. Without active tracking, teams may exceed their plan limits, leading to inflated invoices and unplanned budget hits.

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How to avoid: Set automated usage alerts to track consumption in real time. If your usage regularly exceeds the plan limit, upgrading to the next tier it’s often cheaper than recurring overage costs. SaaS management tools can help forecast usage trends so teams can plan budgets confidently.

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Missed Renewal Dates

Pitfall: Managing renewals across hundreds of SaaS contracts manually is nearly impossible. Missed reminders or overlooked emails can result in auto-renewals for unused or outdated tools, locking companies into another billing cycle.

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How to avoid: Use renewal tracking systems that send alerts well before contract expiration. Platforms like Spendflo automate renewal management, so no critical date slips through. Airmeet, for example, saved 80+ hours of manual tracking with Spendflo’s dedicated SaaS buying team.

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Missed Cancellation Cut-Offs

Pitfall: Some vendors bury cancellation terms deep in the contract, requiring notice weeks before the renewal date. Missing this window means paying for another full term even if the software is no longer needed.

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How to avoid: Centralize all SaaS contracts and review cancellation clauses early. Automate reminders for notice periods and maintain vendor documentation in a shared repository to prevent contract lapses and unwanted renewals.

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Security and Compliance Gaps

Pitfall: Unmonitored SaaS tools create major security vulnerabilities. Without proper access controls or two-factor authentication, sensitive data can be exposed. High-profile breaches like Equifax’s 2017 incident show how costly these lapses can be.

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How to avoid: Establish security policies for SaaS usage, including mandatory 2FA and regular audits. Track user access and data sharing through a centralized platform. A comprehensive SaaS management solution ensures compliance while safeguarding sensitive information.

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How SaaS Spend Management Benefits Finance, IT, and Procurement

SaaS spend management is the basis of accounting for every last cent of a company’s software spending. Subscriptions can get out of hand when multiple individuals from different departments purchase tools as per their needs without looking at overlaps in functionality.

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SaaS spend management provides companies with concrete data about the number of active cloud software subscriptions along with information about applications that are being underutilized or overutilized. 

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When companies can pinpoint their spending trends, it helps boost cash flow and reduces pointless overspending. Here are a few of the ways that companies can benefit from a cloud cost management software:
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• Provides real and tangible data about SaaS spend, usage, subscriptions, and wastage
• Pinpoints exactly where SaaS costs are spent or wasted
• Protects from redundant SaaS stack and unused software
• Streamlines the SaaS buying and approval process
• Promotes mindful spending which can increase a company’s gross margin

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To understand this in-depth, you can read more about the six benefits of SaaS spend management you didn’t know about, and make the best choice for your business. 

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You can start the process of reeling in your SaaS spend by implementing the simple strategies given below.

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SaaS Spend Management Strategies: A Step-by-Step Playbook

A smart SaaS spend management strategy aligns cost efficiency with business goals. As cloud adoption grows, it’s easy for subscriptions, renewals, and unused licenses to spiral out of control. The right plan helps you stay organized, avoid overspending, and maximize ROI.

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Here’s a step-by-step playbook to guide your approach.

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1. Discover and Audit Your SaaS Stack

What to do: Start with a complete SaaS audit checklist. Identify every application in use across departments, including those purchased outside procurement (shadow IT). This step brings visibility into what’s being paid for, who’s using it, and which tools are underperforming.

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How to do it:

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• Compile vendor details, contract dates, license types, billing terms, and renewal schedules.
• Track usage statistics to find inactive or low-value applications.
• Use a centralized dashboard or SaaS spend management platform to automatically collect and update this data.

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Example: Urban Company discovered that decentralized procurement and poor visibility were inflating costs. By centralizing its SaaS audit through Spendflo, it achieved 16% average savings and complete transparency in procurement.

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2. Optimize Licensing and Usage

What to do: After visibility comes SaaS license optimization. Many companies overpay for unused licenses or keep tools that no longer meet their needs. Reducing waste starts with understanding real usage patterns.

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How to do it:

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• Monitor login frequency and active usage per user.
• Reallocate or cancel unused licenses instead of renewing them automatically.
• Consolidate similar applications to eliminate overlap.
• Review performance quarterly to align your SaaS stack with evolving business goals.

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Example: Drip Capital scaled rapidly with over 70 SaaS tools, leading to inefficiencies and negotiation challenges. By implementing Spendflo’s automated license monitoring, it streamlined approvals, cut waste, and achieved 4x ROI in one quarter.

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3. Negotiate with Vendors

What to do: Strong vendor relationships are key to managing costs. Vendor negotiation for SaaS isn’t only about lowering prices, it’s about securing the best terms for renewals, compliance, and flexibility.

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How to do it:

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• Benchmark vendor pricing against market averages before renewing.
• Negotiate terms for data ownership, security standards, and cancellation clauses.
• Plan renewal discussions well in advance to avoid auto-renewals at higher rates.
• Use historical usage data to justify discounts or custom pricing tiers.

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Example: Companies using Spendflo’s procurement experts gain access to proprietary pricing benchmarks and negotiation support, ensuring every renewal is data-driven and cost-effective.

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4. Automate and Govern the Process

What to do: Manual tracking and fragmented communication lead to inefficiency. Automation enforces policy consistency, prevents missed renewals, and gives decision-makers real-time visibility into spend and usage.

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How to do it:

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• Set automated workflows for purchase approvals, renewal reminders, and spend reports.
• Establish clear governance policies that define who can buy, approve, or manage software.
• Integrate finance, procurement, and IT systems to keep all SaaS data in sync.
• Use dashboards to monitor compliance, renewal deadlines, and overall savings.

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Example: By automating its renewal and compliance processes, Airmeet saved more than 80 hours of manual tracking and avoided unexpected renewals, freeing teams to focus on growth.

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Need for SaaS spend management software and how to choose one

There are several benefits to using SaaS spend management tools. Here is a list of functionalities to look out for while picking the software that suits your company’s needs:

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Manage all SaaS contracts in one place

SaaS spend management software can help companies consolidate and access important information without getting lost in mail trails. When all contracts and documents are in one place, it helps businesses stay ahead of their SaaS spend and renewal dates. It is the best way to manage your SaaS inventory. 

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Discover similar products which might be a better-fit

Companies can get access to SaaS market intelligence and find services that better suit their needs. SaaS spend management products recommend other similar products and provide complete context of new products so that businesses can make well-informed decisions.

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Data-backed insights

Organizations can make better SaaS spend choices with detailed data about app usage, spending trends, and active or inactive licenses. SaaS Management platforms like Spendflo analyze all of this for you and go a step ahead by providing actionable insights so that businesses can plan better

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Do a free savings analysis and see how much you can save with Spendflo.

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Accelerate security reviews

A great SaaS spend management software helps you collaborate efficiently with vendors and internal stakeholders. It ensures that security reviews don’t end up being a bottleneck to the end-user. 

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Quick workflow approval

Businesses do not have time to sift through email threads and multiple messages. On average, companies take 3.5 hours per contract and approval takes much longer. They need a quick and easy system for approval, negotiation, renewal, and procurement. 

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Must read: Eight ways to manage SaaS spend effectively.  

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Spendflo - A one-stop solution

SaaS costs are rising faster than most teams can keep up. Unused licenses, forgotten renewals, and duplicate tools quietly drain budgets and slow growth. Without a centralized way to manage it all, businesses risk losing visibility, time, and capital.

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That’s where Spendflo makes a difference.

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Finance, procurement, IT, and security teams use Spendflo to gain complete visibility into their SaaS ecosystem, from discovery to renewals. The platform’s AI-powered dashboard and integrated Slack workflows keep every department aligned and in control of spend.

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• Finance teams save hours of manual work and achieve up to 3x ROI through data-backed cost optimization.
• Procurement teams set approval workflows, track renewals, and hand off vendor negotiations to certified experts.
• IT and security teams maintain visibility, reduce shadow IT risks, and simplify compliance.
• Legal and infosec teams collaborate seamlessly on vendor due diligence and contract reviews.

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When Drip Capital struggled with scattered renewals and inconsistent data, they turned to Spendflo. Within one quarter, they streamlined procurement, centralized SaaS visibility, and achieved a 4x ROI.

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The truth is, managing SaaS manually isn’t sustainable. As stacks grow, even small inefficiencies can cost thousands each year. The longer businesses wait to take control, the more hidden costs and compliance risks pile up.

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Spendflo brings everything together, visibility, savings, and automation, so teams can focus on growth instead of chasing contracts.

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Ready to take back control of your SaaS stack? Book a demo with Spendflo and see how leading teams are cutting costs, improving efficiency, and gaining complete spend visibility.

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Frequently Asked Questions

1. How does SaaS spend management differ from IT asset management (ITAM)?

 While both aim to control software costs, SaaS spend management focuses specifically on cloud-based subscriptions and usage visibility, while IT asset management (ITAM) covers a broader range of IT assets, including hardware, on-premise software, and licenses. SaaS spend management provides real-time tracking of renewals, usage, and vendor contracts, whereas ITAM primarily manages ownership and lifecycle of physical and digital assets within an organization.

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2. What are the key benefits of using a SaaS spend management platform?

 A SaaS spend management platform helps companies gain visibility into their entire SaaS ecosystem, eliminate unused or duplicate tools, and track renewals automatically. It improves financial control, reduces waste, and ensures accountability across teams. With automation and analytics, platforms like Spendflo also help procurement and finance teams make data-driven decisions and achieve measurable ROI.

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3. How can I identify unused or underutilized licenses?

 The best way to identify underutilized SaaS licenses is through continuous monitoring of login frequency and activity levels across tools. A SaaS spend management solution can automatically flag inactive users, highlight low usage patterns, and recommend actions like reassigning or canceling licenses. Regular quarterly audits also help maintain license accuracy and prevent overspending.

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4. What is the role of a procurement team in SaaS spend management?

The procurement team plays a critical role in SaaS spend management by standardizing purchase approvals, negotiating contracts, and ensuring vendors meet pricing, compliance, and performance expectations. They act as the link between finance, IT, and department heads, centralizing SaaS purchases and preventing shadow IT. By using Spendflo, procurement teams can access vendor benchmarks, automate renewals, and negotiate better deals faster.

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5. How does a strong SaaS spend management strategy help with compliance?

A robust SaaS spend management strategy ensures that every application in use is approved, monitored, and compliant with company and regulatory standards. It reduces security risks associated with shadow IT and simplifies audits through centralized reporting. Visibility into vendor certifications, data-handling policies, and renewal terms helps businesses stay compliant while maintaining control over their entire SaaS ecosystem.