With SaaS defining how businesses operate and scale, companies with the best SaaS solutions are bound to drive better results. But the growth of a business does not lie in investing in multiple software but in utilizing these licenses right. But is SaaS spending regulated? Not really. 

Enter SaaS spend management. 

While the term spend management is quite common, SaaS spend management is something new in the business. Are you aware that companies waste up to 30% of their SaaS spending? They use multiple tools across the organization and departments and there is no limit drawn on optimizing the SaaS. As a result, the entire process of regulating it goes uncontrolled.

When an organization scales, there comes the additional task of managing your SaaS. This is to ensure that the right tools required are renewed on time, kept within the budget, and in accordance with compliance.

In this article, let's dive deep into managing your SaaS spending - its causes, benefits, and best practices. 

What is SaaS spend management?

SaaS spend management refers to monitoring and managing your SaaS spends to keep it under control. This is quite similar to your regular spend management. It involves setting limits, forecasting, and making necessary changes to ensure that your spends are within your budget. 

Managing SaaS spends for business is no easy task. It involves vast data, money, and workforce. But along with rapid digitization, we now have SaaS management software to help plan your SaaS spending better. Let's dive deep into the different causes of excessive SaaS spends. 

What are the major causes of excessive SaaS spends?

SaaS has been around for years now. But after the 2000s, the SaaS market grew tremendously and businesses started investing more. SaaS spending became uncontrolled leading to excessive spending. Here are a few reasons for excessive SaaS spends. 

1. Unused licenses

The IT team needs to keep track of the licenses offered to the employees. In most companies, their license isn't revoked when an employee leaves. This leads to paying for unwanted licenses.  

2. Forgotten cancellations

Another similar cause is not informing the respective team to cancel the licenses when you no longer need or use the software. Most SaaS software also comes with auto-renewal, leading to further money loss in these cases. 

3. Duplicate apps

Different departments tend to buy separate software to solve the same use cases. For example, various teams within the same organization use different project management software. Spending on multiple software for the same use case leads to excessive software spend. 

4. Off-the-shelf pricing

Most SaaS businesses offer different pricing models to companies purchasing a higher volume of licenses and those purchasing individual licenses. They tend to offer competitive prices to businesses purchasing bulk licenses. So when employees buy an individual license, pay using credit cards and apply for reimbursements, it leads to unneccesary spending.

What are the benefits of SaaS spend management?

One of the major benefits of SaaS spend management is cost saving. With cost-cutting and the right budgeting, your business can sustain and grow. These options also extend runways for start-ups. It also helps you save time during compliance without explaining expenses during auditing. 

Having the right SaaS spend management in place, will help you oversee all the software used by the different teams across the organization. In addition, you can track all your SaaS software and its usage, and double-check if a particular software is adding value to your team or the organization. This helps you streamline your buying for better productivity and cost-efficiency and curbs employee overspending. 

Managing your SaaS spends also offers other additional benefits to your business. Check out our blog on the benefits of SaaS spend Management to know more. 

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Eight best practices and tips for managing your SaaS spends effectively

A SaaS spend management platform will provide you control of your budget and offer better visibility on your products and licenses. Here are a few tried and tested tips to manage your SaaS spends effectively for better returns and savings. 

1. Streamline your SaaS procurement process

Employees now decide what software suits their team goals. But, with remote and hybrid work models, IT or the procurement team doesn't have an overarching view on the different software that individual employees purchase in various departments. 

Streamlining your SaaS purchase decisions will help reduce friction in the buying process while creating overall visibility for all stakeholders involved.

With the streamlined purchase process, your company can save money and time  and offer employees the right software resources to boost productivity.

Related Read: How to set up a strategic SaaS procurement process

2. Check for duplicate apps

Studies have shown that every tenth product users pay for remains inactive for the first 90 days. In many companies, several departments are allotted a budget to make purchases for their productivity needs. This lets them buy software applications that overlap with the existing ones offered by the organization leading to duplication in the apps. 

These duplicate and unnecessary apps or products can lead to poor SaaS management and can also take a hit on employee productivity. 

With a SaaS spend management platform, you can research and analyze if a particular software is crucial to your business or team. It prevents SaaS overlaps. 

3. Maintain a SaaS inventory

Having an up-to-date inventory of all your software/product subscriptions can be highly beneficial for your business. 

Have a list of all SaaS tools that were bought. Map the tools with individual accounts and respective departments using them. It helps keep track of all the required updates and add or remove licenses when required. Make sure to include the following details in your list.

• License 
• Price 
• Payment type (Recurring or on-time) 
• Start, end, and renewal date 
• Terms for cancellation
• Associated third-party integrations. 

A SaaS inventory offers you an overview and better visibility of the SaaS application and lets you keep track of renewals and unused apps. Furthermore, it also saves you from late fees in case you miss any payments. 

4. Double-check your contract

Sometimes, businesses don't pay explicit attention to the contract when looking to buy software quickly. Ignoring specific clauses in the contract, like auto-renewal, activation date, and SLA, could cost your company a lot of money. Here are a few critical features to look out for in your contract. 

Activation date: Activation or effective date is when your contract/license starts. Certain SaaS contracts begin on the day of signing, while some start at the beginning of the month or quarter. 

Always double-check with your SaaS vendor on your activation date. Also, never cancel your subscription without ensuring you have covered your contract date. 

Contract term: This refers to the period you have signed the contract. Most companies won't allow you to change the contract in this period. If you have any changes to the agreement, communicate with the SaaS provider before the start of the next contract or before the existing one expires. 

SLA: Service Level Agreement (SLA) is crucial to a contract. This determines the quality of support you'll be receiving during your contract term. Set clear expectations on metrics, penalties, and expected timelines for both parties to agree upon. 

Not setting the right SLA gives the leverage to your SaaS provider to hold you on the contract without delivering much. So always double confirm your SLAs before signing a contract. 

Contract termination period: Certain contracts come with a timeline within which you can cancel your contract without any charges. You'll have to consult with your SaaS provider on your termination clauses lest you pay more if you cancel the contract prematurely. 

There are more clauses in a SaaS contract that you should look out for when purchasing software. Our blog on 9 Clauses in SaaS Contracts will give you a clear idea of what to look for before signing your next SaaS contract. 

5. Manage your renewals and cancellations

Did you know that only 17% of active paying users use their SaaS tools daily? Managing your renewals and cancellations proactively will require time and effort but will reward you monetarily. 

Cancel auto-renewal for your subscriptions. Though they offer benefits like convenience, better partnership with your SaaS provider, and better subscription pricing, they curb you of opportunities like reducing your license, negotiating, and even looking out for a competitive alternative in the growing market. Look out for alternatives to auto-renewal to keep your budget under control. 

Use your SaaS inventory to keep track of your renewals without missing out on renewal and cancellation dates. 

6. Analyze unnecessary and unused licenses

If you don't keep track of your software usage per account, you might be losing out on your money. While one or two licenses won't turn up to be a big deal immediately, they will result in a significant increase in expense over a period of time. 

For example, certain SaaS providers bump their prices over a certain number of users. But if you carefully evaluate the number of licenses required, you can save money from spending on unwanted licenses and the bumped-up cost. 

Furthermore, not keeping tabs on unused licenses can pose security threats to your business. Therefore, it is another reason to cancel subscriptions/licenses you are no longer using. 

7. Review and track ROI on your subscriptions

What does it mean to invest without a Return on Investment? While having a SaaS inventory is necessary, reviewing your software purchases is essential to determine if you need them. 

Also, there are hundreds of SaaS software out there in the market. SaaS offering keeps changing, and newer options boom into the SaaS space. Analyze the time, effort, and money spent on your software stack regularly. Then track your returns in terms of efficiency, productivity, resource-saving, etc. 

Also, track the return on investment with the help of your finance department. You can also negotiate pricing with your SaaS providers to get the best deal for your company. 

8. Invest in SaaS spend management tool

All the above pointers involve a lot of manual work; a SaaS spend management software will help you do all the heavy lifting. It might sound like another SaaS investment, but this is a game changer. Here’s why you need to consider it: 

• You can centralize all your SaaS. You no longer need to have a sheet with all your subscriptions. Instead, spend management software will have it handled for you. 
• It helps you streamline your SaaS buying process with integrations to your communication tool. 
• Discover how employees are using your SaaS stack.
• Manage your contracts in one repository. 
• Enhance security and speed up your compliance roadmap. 
• Get insights on your spending trends. Plan your budget better. 

Offering you Spendflo, a SaaS buying and optimization platform. It optimizes SaaS buying by providing insights, buying and renewing your SaaS contracts, and negotiating to offer the best deal for your business. 

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