A lot goes into ensuring that you can manage your spending with complete visibility. This article covers the need for proactive expense management and how it can change budgeting for SaaS (Software as a Service).

Let’s start with the basics - what is spend management exactly? Put simply, it is the practice of monitoring all the purchasing done by the company to ensure that money is being spent smartly and not wasted. 

As a result, every last cent is accounted for and the company is sure it’s getting the best out of every purchase. This leads to the company becoming more efficient and making profits rather than losses. 

When companies put all this effort into looking at every possible cost-saving tactic, why isn’t the same done for all SaaS subscriptions? Most employees overlook how large SaaS purchases may be for a company and don’t pay enough heed to SaaS usage. SaaS management is incredibly important. Let’s try to look deeper into what it means. 

Spend Management for SaaS solutions

The pandemic and shift to remote and hybrid working environments have only accelerated the adoption of cloud computing and SaaS products. As per Gartner, SaaS spending is the largest segment within the public cloud services market. It forecasts that end-user spending on SaaS solutions will reach $176.6 billion in 2022. That is a 16.05% growth.

SaaS tools are saving the day for many businesses, and more and more of them are being added to a business’s SaaS stack. The average number of SaaS applications used in an organization is 10X now. It went from companies using 8 SaaS-based applications in 2015 to a whopping 80 in 2020

Companies are increasingly adopting SaaS-based applications and in turn, spending a sizable amount of money on subscriptions.

If you're like most financial officers, you might have limited visibility into overall SaaS spending within your company. You might also be looking for ways to optimize spending and increase profits.

While there are many ways to accomplish this, one method that's often overlooked is SaaS spend optimization. Automating this process can help you get the most out of your software budget. Now that you know what it is, let’s cover the why. 

Why is SaaS Spend Management Important?

You might be wondering at this point, why is it even important to spend the time, energy, and resources on understanding SaaS spend management?

Almost 29% of SaaS software spend is either not utilized properly or entirely wasted. 

This is simply wastage based on the fact that purchase, maintenance, and budgeting for SaaS products were not optimized. That’s a huge chunk of any company's budget. The money could be put to better use and play a role in the company’s profits rather than losses. 

For instance, your company may have many different departments that are using different apps - planning and billing, project management, bookkeeping and accounting, content management, ecommerce, communications, human resource management, customer relationship management, video conferencing, internal communication, email marketing, document management, help desk - the list never ends. How can one manage so many tools and SaaS contracts? 

The need of the hour is clarity, SaaS optimization, and the streamlining of SaaS product subscriptions. More often than not, different products have overlapping functionalities, while others are redundant. 

Different departments within the company require a variety of different software. Specifically in businesses, where a CFO cannot keep track of the varied solutions being used by multiple departments. 

Let’s cover some of the things companies miss out on because they don’t manage SaaS  optimization properly: 

  1. Companies lose money when it comes to discontinued licenses. There is much paperwork to be completed when an employee is no longer with the company, including an exit interview and forms to fill out. But what about the licenses of the software they use? Many companies don’t use the licenses again, don’t account for these users leaving, and continue to pay for their subscription as per the SaaS contract - burning deeper holes into their bank accounts.

  2. Ad-hoc purchases. Another pitfall of unmonitored SaaS spending is when companies lose track of their SaaS products. They also make last-minute purchases when a particular software is suddenly needed. Rather than being aware of all the products they have at their disposal, they end up making ad-hoc purchases to fulfill an immediate requirement. This becomes a part of a vicious counter-productive cycle — where they are subscribing to the application they need at that particular moment, but don’t try the product before purchasing or even consider long-term use. Such counter-productive purchases continue in moments of panic; rather than taking the time out to look at existing software and how it can best be used.

  3. Managing SaaS spending in a manual way. It is important to remember that to err is human. It isn’t always easy to remember and keep track of which licenses are to be renewed and which ones are now redundant. So many solutions are being used by all departments, sometimes with overlapping functionalities, and it is humanly impossible to always be on top of this. Such tracking can get cumbersome and information does fall through the cracks. 

Tip: Spendflo is one spend management platform to manage all your SaaS applications. It lets you systematically understand all your SaaS solutions across departments, keep track of all the licenses, centralize purchase requests, manage renewals, and negotiate costs for you. 

The only way to move forward and grow sustainably as a company, without incurring unnecessary losses, is to be mindful of spending. You need to manage all SaaS vendors in one place to be able to streamline your spending better. Here is where SaaS spending optimization becomes relevant. 

Benefits of SaaS Spend Management 

It is important to take stock of SaaS subscriptions to ensure that money isn’t wasted. There are a few great benefits to optimizing your SaaS expenses with SaaS spend management software:

1. Increased Gross Margin 

Any company, regardless of the business they are in, hopes to make profits. After all, aren’t those the numbers to keep in mind when a company takes stock of whether it is successful or not? Spending money mindfully can make a significant difference in how a company manages its overall budget. 

Subscriptions to multiple SaaS applications can often get out of hand. Especially in a scenario where there are multiple individuals from different departments and sub-departments working within the company. The purchases of one, may not be tracked by the other. 

As a result, the company could end up spending far more money than necessary on SaaS products. These kinds of errors may seem small, but add up to a much larger issue.

Spending of this nature, especially spending that can be curbed with SaaS spend management software, can eat into the gross margin of a company. But not if you are using the right kind of saas management practices and solutions. 

Rectifying such oversights can help increase gross margins, curb unnecessary expenses and make the company more profitable.

2. Increased Spend Visibility 

For any business to function at an optimal level, it must be able to pinpoint exactly where the money goes. Doing this ensures clarity and visibility about where the money is being spent, and where it is being wasted.

When a company decides to undertake the task of SaaS spend management, they are ensuring increased spend visibility. This means that they can now plan further and better understand how to boost profits and move forward as an organization. 

While not many SaaS management platforms paint a complete picture of all SaaS vendor, licenses, or cost - tools like Spendflo give you full visibility. 

3. Gain Clarity on Unused Licenses and Redundant SaaS Solutions

The SaaS industry has boomed exponentially and increased by 500% in the last seven years. The kinds of software available on SaaS platforms are amazing and companies can find just about anything they need to fit the bill. 

The variety of software available means new software is available each day to you. And although this availability is exciting, it doesn’t account for the unused licenses of the past. 

As users subscribe to a new SaaS tool that ticks all the boxes of their needs, what happens to the old software? In an ideal situation, the IT department cancels the subscription. But we are far from that situation because they don’t have complete visibility. 

Unfortunately, cancellations can sometimes come with hefty fines; or other times, the IT department or you may decide that the application may come into use later. Using a SaaS spend management software allows for complete clarity when it comes to unused software – which is often a money pit for a company. 

Using a SaaS spend management platform also ensures a handle over SaaS spend and clarity about which software is redundant and need not be purchased again.

4. Prevention of Unnecessary Spends

On average, companies spend $2,623 per employee on SaaS products each year. However, this number doesn’t assure that all that spending is even required. Some of the software becomes redundant, while others have many overlaps in their features and functionalities. 

Using a SaaS spend management tool is essential as it reduces SaaS spending by understanding the company's needs vis-à-vis their SaaS product requirements.

This clarity helps in creating a streamlined process which further brings the SaaS cost of a company is under control.


5. Improved Operations

Overspending might seem like a concern strictly limited to CFOs and the top management, however, it influences all aspects. If you exceed budgets, it can take away from budgets assigned to employees or operations, and to compensate, companies might have reduced operations. Furthermore, unnecessary duplicate software can hinder operations as well. 

By getting a grasp on SaaS spending practices and managing duplicate and redundant apps proactively, a company can improve operations. One direct example of this is the lengthy approval cycles that exist in any SaaS purchase process - the workflows, getting approvals, assigning the right permissions, etc. A SaaS spend optimization solution like Spendflo centralizes all purchase requests, approvals, and contracts on a single platform, and streamlines the entire approval workflow. This makes it possible for companies to shift to thoughtful procurement, make purchase decisions faster, and support all departments with their needs. 

6. Gaining Granular Insights 

SaaS spend management software, like Spendflo tracks all the different solutions being used and also provides insights on spending and usage, based on analytical data. 

There are real and tangible data available to you to understand your SaaS spend, usage, subscriptions, and most importantly, wastage. 

SaaS spend management platforms provide insights based on the finer aspects of your SaaS spend, breaking it down to department-wise subscriptions and expenditure.

This means that when it is time to make actionable changes, you are able to pinpoint exactly where the changes need to be made. This makes SaaS management easier and conserves time.

Steps Forward 

We have covered the depths of how a SaaS spending management software can change the way you budget, increase spending visibility and software visibility, increase operational efficiency, and also improve your company’s gross margins. 

Platforms such as Spendflo help reduce SaaS spending by providing actionable insights, help give clarity about SaaS costs and also ensure that the SaaS buying process is streamlined and clear to avoid unnecessary spending and wastage. It is an all-in-one SaaS procurement and optimization tool. 

Not-so-fun fact: Companies spend 3.5 hours per contract in buying, negotiating, and renewing SaaS subscriptions

That's a lot of tech stack contracts to manage for the procurement and finance teams. A small miss can lead to an annual contract that is difficult to get out of. 

Free up the time and resources you are currently spending on, and let Spendflo do the rest. Don’t wait any further - start looking at optimizing your SaaS spends today. 

Vaishnavi Babu
Lead Graphic Designer
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