Tech companies grow quickly, aiming to increase their sales rapidly. They need the right strategy to support their goals, including managing the money they spend on software services (SaaS). This management has become more important recently, and it is more than just something to worry about when it gets complicated. In fact, according to BetterCloud, 40% of IT experts are eliminating redundant SaaS apps to cut costs. Still, the average company's use of apps has risen by 18% to 130 in recent years.

If your finance or procurement team still uses paper or basic computer spreadsheets to manage procurement and licenses for these SaaS products, you might lose control of your spending. This is concerning, especially considering that the average company now spends about $9,600 per employee on SaaS software, with over 50% of these licenses going unused for over 90 days​.

So, how should you manage SaaS expenses effectively?

At Spendflo, we help growing companies save money on SaaS by offering efficient software to manage these costs. We'll explore how quickly company expenses can become excessive and why SaaS procurement spend management is necessary to keep your SaaS spending in check.

What is procurement spend management? 

Procurement spend management is about wisely managing processes such as choosing the right suppliers, negotiating good deals, and keeping track of all purchases to find savings. It helps the company understand where its money is going, prepare for future needs, and ensure it gets the best value from its spending.

Good procurement spend management means the company will avoid overspending, and ensure quality access to SaaS services and products. Many companies now use cloud software to simplify procurement spending management. This software helps track spending, manage supplier relationships, and automate purchasing tasks, leading to better spending decisions and cost savings.

Procurement spend management software enables chief procurement and financial officers to view all spending clearly, streamline procurement processes, and improve the organization's financial health.

Challenges in tracking SaaS procurement spend

Managing software costs can be tricky for companies. Problems include tracking spending, ensuring different software systems work well together, and following rules. Here are a couple of challenges in monitoring SaaS procurement spending.

1. Overlapping products

Redundancies occur when different departments acquire SaaS products with overlapping functionalities. This leads to unnecessary spending and complicates the IT landscape, making system management and integration more challenging. 

2. Excessive shadow IT

Shadow IT refers to employees using unsanctioned SaaS applications that can bypass organizational controls and policies. This practice increases security risks and creates unmonitored costs, as the organization may be unaware of these subscriptions and their associated risks and liabilities.

3. Unclear purchase policies

The buying rules, or how the company spends its money, are written in a policy document. This document explains who can spend money and what the limits are. If these rules are not clearly explained or followed, teams might not understand what to do. This confusion can cause mistakes in following procedures, skipped approvals, and maverick buying.

4. Compliance and security

SaaS applications must adhere to legal, regulatory, and security standards relevant to the company's industry. Managing compliance involves regularly assessing SaaS tools for data handling practices, security measures, and regulatory adherence, which can be complex and time-consuming.

5. Lack of centralization

Often, different department leaders manage their budgets, but the finance team handles overall budgeting and ensures it's correct. With clear oversight and precise data, monitoring spending as it happens is possible. This can cause budget problems as the year ends.

6. Multiple subscriptions

Companies often sign up for various SaaS subscriptions to meet different business needs. Managing these subscriptions becomes complex as each has its own billing cycle, usage terms, and renewal conditions, leading to potential overlaps and inefficiencies. According to the Productiv report, the average company department uses 87 SaaS products.

Why is SaaS procurement spend management necessary?

Companies are spending a lot on SaaS, and it's worth it. However, the cost savings are significant. For example, the SaaS market in countries like China, India, and Brazil is set to double from 2020 to 2025, and Germany's market will grow from €6.85 billion to €16.3 billion. By managing their spending better, companies can save millions. Already, many have saved by using efficient spend management software. 

So, what can effective spend management software achieve for you?

1. Prevent shadow IT

Shadow IT can cause extra costs, security problems, and budget issues. Often, employees buy software they don't need because the company already has something similar that works better, leading to unnecessary duplicates. Good SaaS procurement spend management can alert you early when unauthorized software is found. This helps you catch Shadow IT quickly and manage your spending better.

2. Recognizing saving opportunities

Spend management also prevents companies from losing money due to wasteful spending practices. Finance teams can spot problems in the existing system and recommend solutions to fix them. 

For example, slow approval processes and delays in processing invoices might cause extra fees for late payments or loss of discounts for early payments. However, effective spending management allows administrative work to be completed faster and doesn't hinder other activities.

3. Better visibility 

A SaaS app might have been useful when you first got it, but it can become unnecessary as your needs change, leading to less use of the software. Sometimes, this software must be fully removed because people must keep track of it properly, which uses up resources without any real benefit. 

With a good plan, you can spot these unused apps, eliminate them, and save money. Software that helps manage SaaS spending allows you to see all about your apps, including how much they cost and how much they're used. This complete view enables you to make better choices about which apps to keep or cut.

4. Better risk management

Managing spending can reveal weaknesses in buying and getting products, allowing for the identification of potential risks and finding methods to reduce their chances of happening. For example, there might be a department that consistently pays late, or the cost of a particular item might be steadily going up. 

Or, someone could be authorizing payments that are too high. If these risky situations or actions are spotted early, acting and addressing such concerns becomes easy.

5. Better sourcing opportunities

Professionals can identify the best deals in the market by examining all the expenses related to sourcing and procurement. Since the strategic sourcing process costs money, managing expenses involves evaluating the costs of hiring a vendor and keeping a good relationship with them. This includes considering the prices of the vendor's products or services and their delivery. 

With this data, supply chain managers can choose suppliers who provide the most benefit. Concrete numbers and information helps companies gain an advantage and build trust during supplier negotiations. This leads to better deals, which help improve the company's profits when secured by the negotiator. Additionally, keeping spending in check enhances supplier relationships, as the company can demonstrate its reliability as a partner to suppliers and vendors.

6. Accurate and centralized financial data for spending insights

Implementing an effective procurement spend management system ensures organized financial records. To control spending, it's crucial to record all expenses first. This data is typically collected, compiled, and stored in a single, central software system. Actual spending data from different departments provides the most reliable insight into the company's expenditure.

Maximizing ROI in procurement spend management

Get more out of your spending via the right procurement spend management software.

1. Real-time visibility into SaaS spend and usage analytics

Understanding how to manage spending on SaaS effectively can lead to higher ROI. Advanced analytics tools that connect directly to SaaS platforms can obtain real-time data on costs, usage, and user engagement. This data is crucial for predicting trends, identifying inefficiencies like duplicate subscriptions, and ensuring that every subscription contributes to the organization's goals.

2. More than just cost optimization

Optimizing SaaS spending goes beyond saving money. It involves evaluating SaaS tools based on their strategic value in achieving key business outcomes, such as improving customer satisfaction or speeding up product development. This requires a comprehensive cost-benefit analysis considering factors like reducing time-to-market and enhancing team collaboration.

3. Procurement spend optimization for SaaS is holistic

Optimizing spending on SaaS requires a holistic approach that includes contract management, usage monitoring, and performance evaluation. Centralized SaaS management platforms are crucial in providing a complete view of subscriptions, contract terms, and renewal deadlines. This enables procurement teams to make informed decisions about renegotiating contracts or discontinuing services that no longer align with the company's strategic objectives.

4. Understand team-wise and department-wise usage and allocate licenses where needed

Tracking user activity and engagement across different teams and departments is essential for optimizing SaaS usage. Specialized software asset management tools can provide detailed insights into how software is used, allowing IT and procurement managers to allocate licenses efficiently based on actual usage needs.

5. Evaluate user sentiments and make informed choices with thorough procurement spend management

When managing how much you spend on software, listening to what your team likes and needs is really important. Using tools that can analyze how people feel about the software they use helps you figure out what's working well and what's not. Spendflo's Sentiment Hub lets you easily find out what your team thinks about their tools by asking them directly through surveys. With this, you can choose which software to keep or stop using. Spendflo makes it easy to see which tools are worth your money by looking at what your team uses and likes, helping you maximize your budget.

Save on SaaS costs with Spendflo

Optimizing your SaaS procurement spending doesn't have to be complex. Spendflo's approach to SaaS management, coupled with its Sentiment Survey feature, makes managing procurement spending effortless and more strategic. This innovative platform allows you to streamline your software expenses effectively. 

Using real-time insights from your team's feedback, Spendflo ensures that every dollar you spend on SaaS is fully justified, enhancing your procurement strategy and saving costs in the long run. It's a simple yet powerful way to align your software investments with your team's actual needs and preferences. 

To learn more, book your demo for free saving analysis with us!