SaaS spend management: How to control software costs and subscription spend

What is SaaS spend management

SaaS spend management is an organized process of tracking, controlling, and optimizing the spending of your organization on software subscriptions. This helps your company weigh the value driven through specific software investments and reduce unnecessary expenses by:

• Discovering underused or redundant SaaS applications
• Tracking usage patterns, costs, and contracts of SaaS apps
• Comparing software expenses against the measurable business outcomes
• Giving your finance, IT, and product teams a shared and data-driven overview of SaaS spend

With SaaS spend management, check whether a subscription meets its immediate purpose and if it serves your business objectives better than the alternatives available in the market.

The goal of managing SaaS spend is not just to eliminate costs by removing dead or rarely used tools within the system, but also to reduce spend by assessing the ROI of the ones being actively used.

Common challenges of managing SaaS spend

Today, employees can sign up for a new SaaS tool in 5 minutes with just a business credit card. Years down the road, the employee may not be associated with the company anymore, but the subscription they started still persists.

Due to this, a needless clutter of SaaS tools remains with you, resulting in bloated bills and extensive IT management hassle. This is a problem that a spreadsheet cannot tackle alone, and SaaS spend management is designed for the exact purpose.

However, choosing the best solution requires you to understand the challenges your organization is experiencing with managing SaaS spend, such as:

• Duplicate subscriptions: Poor cross-team communication often leads to overlapping tool purchases, and without any single accountable owner, no one knows when a subscription is no longer needed.
• Forgotten recurring billing cycles: The free trials silently convert into paid plans, and contracts auto-renew before anyone can review if the tool is still needed.
• Unused SaaS licenses: Seats stay active after the employees leave or stop using a particular tool, and teams often buy higher tiers or more seats than the actual usage requirement.
• Lack of visibility: No comprehensive view of the apps, their owner, costs, contract terms, and renewal dates.
• Difficulty in tracking SaaS contracts: Varying renewal periods or notice windows become unmanageable for founders as the vendor list grows.
• Vendor price increases: Prices rise at renewal without a system flagging it, so overpayment often goes unnoticed until someone reviews the invoices.
• Decentralized procurement: Teams buy software independently without IT or finance oversight, making consolidation harder as costs grow.
• Lack of pricing benchmarks: No visibility into what your competitors or other companies pay for the same tools, making it hard to know if a quote is fair.
• AI and shadow-AI spend: Employees adopt AI tools without approval or IT awareness, creating a fast-growing and hard-to-track blind spot.

How can SaaS spend management help

SaaS spend management helps your teams ensure the tools are actively in use across different workflows. Without such visibility into tool usage or ownership, your teams may struggle with overlapping software, hidden inefficiencies, and unclear accountability. Such issues not only waste the budget, but also slow down team collaboration and work delivery.

Managing your SaaS spend may eliminate license waste and reduce spending on tools you don’t need. Here are some more benefits of achieving a robust SaaS spend management system for your organization:

Reducing tech stack complexity

Consolidating the SaaS tools often reduces the amount of time your legal team spends on tracking and reviewing vendor contracts. Your finance team spends less time administering the contracts or paying invoices. Also, the IT and security team spends less time managing, securing, and supporting data and users.

Enhanced control and visibility

By simplifying management of SaaS apps, you can gain visibility into unauthorized software usage. This helps minimize the risk of Shadow IT instances, supports stronger data integrity, lowers compliance risks, and improves security. It works alongside your existing security and compliance measures instead of replacing them. Furthermore, effective management also helps determine if the software delivers enough value to justify the cost, which makes the recurring payment worth it.

Accurate SaaS spending insights

With proper management, you can see every SaaS app purchase, giving you insight into where you spend your money and if it’s wasted. After putting SaaS spend management into practice, it is easier to create and track a budget specified for the purpose.

Beyond looking back at past transactions, this visibility also lets you forecast upcoming costs, such as renewals due in the next quarter or the impact of adding new seats. This way, you can plan budgets ahead of time and won’t have to react to bills only after they land. Having the right solution in place prevents you from paying for extra SaaS licenses or apps that your team doesn’t need anymore.

How to get your SaaS spend under control

If SaaS spend is draining your working capital month-on-month, it’s time you invest some of your resources in managing it. Here are some practices you can implement to get the process started:

Regular audits of your SaaS spending

You must conduct regular audits of your SaaS spending, which must be done in two parts. Firstly, review every SaaS app to see which ones aren’t being used anymore by any team or department. Rather than cutting these off by default, categorize each one as keep, reassign, downgrade, renegotiate, consolidate, or cancel. This is because an unused app may still serve a purpose such as backup access or compliance.

Secondly, evaluate if the remaining SaaS tools are driving value or are being used enough to justify the recurring cost. It is a lengthier evaluation process, as you may have to communicate with different teams and employees to understand how they use the platform and how much dependency it has on the work they deliver.

Allocate SaaS software spending budget

A budget constraint pushes your team to be more deliberate about which SaaS tools are actually worth the spend. Set a limit on how much a team or department can spend on SaaS tools, and come up with ways to ensure the maximum value is derived from that money.

This way, any time an employee thinks of bringing on a new SaaS tool, they have to think about adjusting the expense by dropping a tool of less value or use. Similarly, adding a tool beyond the set budget usually calls for a clear case on the value it brings, rather than approval by default.

Establish centralized tracking of SaaS spend

Regular audits and budget allocation are valuable efforts, but managing SaaS spend is going to be difficult if you don’t have all the subscriptions centralized. The centralized tracking approach works best when it captures the vendor, department, application, owner, contract terms, spend, license count, usage, payment method, and renewal date, all in one place. So, you won’t have to piece it together from different sources every time you need an answer.

SaaS spend management software automatically categorizes your transactions based on the spending data. It’s more useful when it connects to other systems where this information is already live, such as your ERP platform, expense management, HRIS, or other such systems. A dedicated spend management platform for your SaaS expenses ensures you don’t spend unnecessary hours going through your transaction history to identify a subscription that you overlooked.

SaaS procurement and vendor negotiation

Getting your SaaS spend under control isn’t just about tracking the tools you’re already paying for; it also means negotiating better terms moving forward. Benchmark vendor pricing against what similar companies pay, prior to negotiating the quote with the vendor. Also, make sure to initiate the conversation well before the renewal window.

Consolidate similar tools with a single vendor, which helps you unlock volume pricing. Don’t accept automatic price increases without negotiating them. Beyond that, make sure you right-size the seat count to match actual usage before renewing the tool. Also, consider the multi-year terms with discounts, add-ons bundled into the renewal without consent, and use competing quotes to get better prices for the tools.

Reducing AI sprawl

AI tools are becoming the newest blind spot in SaaS spend. They often accumulate faster with less oversight than traditional software. Employees often sign up for AI tools without approval, create duplicate subscriptions across teams, and purchase individual accounts on team cards, also adding up quickly to the overall cost.

Many AI tools also use consumption-based pricing, making it difficult to predict the cost over a flat per-seat subscription. So, tracking the actual usage against the price you are paying matters here more than it does with any traditional SaaS.

Routing all the AI tool requests through a centralized approval process may help keep this problem in check. Following that, you must also monitor AI spend as its own category, keeping it separate from the rest of the SaaS spend. This way, you have visibility over it before it adds a heavy bill to your overall spend.

How to choose SaaS spend management software

Not every SaaS spend management tool on the market can solve the same problem. So, here are some of the factors you must consider before choosing one:

Centralized visibility

The software you choose should bring every subscription, cost, contract, and owner into a single unified dashboard, without leaving you to piece it together from different sources.

Integrations with existing systems

Look for a platform that seamlessly connects with your accounting, expense management, HRIS, and ERP tools. This way, your spend data stays current without manual entry.

License and usage tracking

The tool must flag underused, overprovisioned, or unused licenses automatically, without the need for a manual audit.

Renewal and contract alerts

Your SaaS spend management tool must track the notice periods, price changes, and auto-renewal dates, and also alert the owner with enough time to act upon the instances.

Approval workflows

Look for built-in routing features so the new SaaS and AI tool requests can go through finance or IT teams before they are purchased. This reduces shadow IT.

Reporting and forecasting

Apart from reporting on past transactions, your SaaS spend management software must also help you forecast your upcoming renewals and their impact on the budget.

How to measure SaaS spend management success

Once you have a robust spend management system in place, you can track the metrics below to determine if it is working in your favor:

• SaaS spend as a percentage of operating expenses: It shows how much of the overall budget goes towards software.
• Unused license rate: It is the percentage of purchased licenses that go unused.
• License utilization: How much of what you have paid for SaaS tools is actually being used. Compare it based on features and tiers.
• Savings realized: Track the actual dollar savings achieved through subscription cancellations, renegotiations, and downgrades.
• Identified savings: Potential savings that are flagged during reviews or audits, irrespective of whether they have been acted upon or not.
• Savings on renewal: These are savings specifically captured during the subscription renewals, either through negotiation or right-sizing of the tiers.
• Number of duplicate tools: Determine how many tools are similar in purpose across your teams, which leads to consolidation opportunities.
• Average contract value: Review the typical size of your SaaS contracts. It is useful for benchmarking vendor deals and spotting outliers.
• Spend per employee: It is the total SaaS spend, divided by headcount. It will help you benchmark efficiency against peers or over time.
• Renewal rate: It is the rate of contracts that renew as they are, versus the ones that get renegotiated, cancelled, or downgraded.
• Time to approve: Determine how long it takes for your new SaaS request to move from initial discussion to purchase stage.

Take control of your SaaS spend with Aspire

Spreadsheets can only take your SaaS spend tracking so far, and centralizing every subscription on a dedicated platform is what makes it easier to manage. Aspire¹ lets you create a virtual card² for each SaaS tool. This way, subscriptions stay isolated, are easier to track, and can typically be cancelled in just a few clicks.

No more struggling with reviewing a single card statement to spot the forgotten subscription payments. You can also set spend limits and merchant locks on each virtual card, ensuring each SaaS tool subscription stays within budget. Not just that, but Aspire’s virtual cards² also earn up to 1.5% unlimited cashback^ for all eligible SaaS purchases.

A centralized dashboard shows who owns which SaaS subscription and gives your IT or finance team shared visibility when those tools renew. With every subscription and owner visible in a unified dashboard, it’s easier to spot duplicate tools, catch shadow IT instances, and stay ahead of the auto-renewals before they are charged.

Explore Aspire’s expense management solutions to learn more.