SaaS Expense Management for Small Businesses
SaaS expense management is an essential part of business cost optimization. In part, the exploding adoption of software-as-a-service (SaaS) solutions in daily operations renders the management of expenses tied to these applications an inescapable part of small business activity.
SaaS expense management largely meanders through a series of activities aimed at making informed decisions about software investments. It starts at mapping user needs and then niching down to finding the most suitable software options based on those needs.
In this post, we’ll elaborate deeply on how SaaS spend management helps small businesses cut out unnecessary spending while securing a robust cash flow.
Table of Contents
SaaS Spending for Growing Businesses
SaaS spending lies at the heart of growing businesses; i.e. small businesses with diverse needs to streamline their operations. As it stands, the SaaS market is projected to grow from to $908.21 billion by 2030. It is estimated that the average business will spend at least $2,623 annually on SaaS applications per employee.
On the downside, this ease of adoption has also led to increased complexities in managing SaaS expenses. One notable trend in SaaS spending for SMBs is the shift towards subscription-based pricing. Rather than purchasing software outright, businesses are now subjected to monthly or annual subscriptions. This allows for more flexible payment options and enables SMBs to scale their software usage as needed.
Another trend is the increasing prevalence of decentralized SaaS spending. With the proliferation of easily accessible and affordable software, individual business units within organizations often procure their own SaaS tools, leading to a fragmented software stack and difficulties in tracking expenses.
To address these challenges, SMBs turn to all-inclusive expense management solutions. These platforms provide complete visibility into SaaS expenses, enabling finance teams to monitor spending patterns, identify cost-saving opportunities, and allocate resources effectively.
Effective SaaS Spend Management Matters for Small Businesses
SaaS spend management instills visibility in an otherwise cloudy area; cost control and accounting. Companies that invest in spend management make informed and data-driven decisions, optimize costs, and eliminate unnecessary expenses. In doing so, they’re able to maintain control over the procurement process and allocate resources more effectively.
Effective SaaS spend management further minimizes security risks associated with duplicate applications and unused licenses, while also enabling better vendor relationships and contract management.
Bolstering Cross-Team Collaboration
Today’s complex business demands cross-team collaboration as businesses increasingly rely on cross-departental collaboration to make informed decisions about their software investments. However, when these teams work in silos, it can lead to duplicated efforts, miscommunication, and missed opportunities for cost optimization.
The travel department, for instance, works in tandem with finance, accounting, supply chain, and top-level management. Software applications like TravelBank recognize the need for seamless collaboration between these departments.
Employees can submit quick purchase requests directly through the system, saving valuable time and streamlining the procurement process. Remote approval workflows ensure that decisions can be made promptly, even when team members are not physically present in the same location.
Sync SaaS Payments with Your Accounting Tools
Syncing SaaS payments with accounting tools negates needless end-of-year data entry. By integrating these tools directly into a SaaS spend management software, organizations can streamline their payroll activity and avoid needless human errors altogether. This not only saves valuable time but also ensures accurate financial reporting.
Another advantage is the automation of workflows. Integrating company accounting tools with the SaaS expense management software means that small businesses, too, can leverage automated workflows, such as auto-generating purchase orders, invoices, and setting up recurring payments for their SaaS subscriptions.
Popular accounting tools can be integrated with SaaS spend management software, including Xero, Quickbooks, SAP, and Netsuite.
Visibility Into Unused SaaS Apps
Unused SaaS applications in a company’s software stack can lead to unnecessary costs, further putting strain on the organization.
Besides, unused SaaS applications can create confusion and hinder productivity. Employees may struggle to navigate through a cluttered yet unused software stack.
Effective SaaS spend management reveals such challenges, enabling organizations to track and monitor the usage of their SaaS applications in real-time.
Avoid Bad SaaS Licensing Decisions
Committing to long-term service agreements without a clear understanding of actual usage or suitability can result in wasted resources, inflated costs, and hindered productivity. It’s crucial for organizations to make informed licensing decisions based on actual usage and requirements.
This is where an effective SaaS management platform comes in. Small businesses that invest in software as a service applications gain insight into their existing SaaS subscriptions, spot usage patterns, and make data-driven decisions.
SaaS Spend Management Best Practices
SaaS spend management platforms provide a centralized platform where businesses can track, analyze, and control their software costs, ensuring that they make informed decisions and drive cost savings.
To get the most out of your expense management policies, consider the following:
Manage SaaS Spending Centrally
Centralizing the management of SaaS spending offers businesses complete control, real-time visibility, and the ability to make informed decisions to optimize costs, improve spend efficiency, and maintain strong vendor relationships.
By consolidating all SaaS subscriptions onto a centralized platform, businesses can gain a comprehensive view of their software costs. This approach allows finance and accounting to make more informed decisions and smarter choices about their software investments.
Keep Track of Return on Investment
ROI is a measurement of the financial gain or loss generated by an investment relative to its cost. Monitoring the performance and utilization of each SaaS tool provides valuable insights into its effectiveness. Metrics such as user adoption, engagement, and performance can help gauge whether the tool is meeting its intended purpose and delivering the expected benefits.
To calculate the ROI for each SaaS application, businesses first need to identify the full costs of the software, including subscription fees, implementation, training, and ongoing maintenance. Next, they should determine the expected benefits, such as increased productivity, cost savings, or revenue growth. Usually, ROI can be calculated with the following formula: ROI = (Expected Benefits – Costs) / Costs * 100.
Leverage Technology to Support Your Efforts
A robust platform that offers real-time, data-driven decision-making capabilities can help businesses gain complete visibility into their software expenses and make informed, smarter decisions.
However, it is important to note that not all platforms provide the same functionality. Businesses must choose a platform that meets their specific needs and requirements.
A comprehensive SaaS spend management platform should offer features such as centralized dashboards, approval workflows, virtual cards, and contract management capabilities.
Why Small Businesses Need SaaS Expense Optimization
SaaS optimization is crucial for organizations as unmanaged spending can greatly affect cash flow. Without proper management of SaaS expenses, businesses run the risk of overspending on software subscriptions, leading inevitably to decreasing available capital for other essential operations.
Many businesses struggle with unused licenses, duplicate applications, and an inefficient software stack, resulting in wasted resources and unnecessary expenses.
This is why a comprehensive SaaS spend management strategy is necessary. By implementing SaaS optimization, businesses can leverage their software investments effectively and optimize their SaaS tech stack, leading to increased cost savings and improved cash flow.
This not only ensures that organizations are only paying for the software they need and use but also allows them to allocate resources more efficiently.
A Brief Introduction to SaaS Expense Reports and Best Practices
Expense reports are important because they provide a detailed record of the company’s spending and help ensure transparency and accountability.
By documenting expenses, companies can track and analyze their spending patterns, identify areas where costs can be reduced, and make informed financial decisions.
Expense reports also serve as evidence for tax purposes, allowing companies to deduct eligible business expenses and comply with government regulations. Additionally, expense reports help in monitoring employee spending and detecting any fraudulent activities or policy violations.
For more efficient SaaS expense reports, consider the following:
Setting Clear Expense Policies
Clear expense policies play a crucial role in effective SaaS spend management. Without clear guidelines and procedures in place, organizations may face challenges in controlling and managing their expenses, including software subscriptions.
A clear and detailed expense policy helps ensure consistency and control over expenses by providing employees with explicit instructions on what is considered a reimbursable expense and what is not. It eliminates the potential for misunderstandings and reduces the risk of employees overspending or making unauthorized purchases.
Regular Reporting and Review
Regular reporting and review play a crucial role in SaaS spend management. By regularly reviewing expense reports, businesses can ensure accuracy, timely detection of issues, and have up-to-date information for decision-making purposes.
Regular reporting helps ensure that expenses are accurately recorded, categorized, and allocated to the correct departments or cost centers. This accuracy is essential for financial reporting and budgeting purposes. Without regular review, errors and inaccuracies can go unnoticed, potentially leading to incorrect financial statements and misallocation of resources.
Using Expense Management Software
With expense management software, businesses can easily capture and track expenses, whether they are incurred via virtual cards, invoices, or reimbursements. This automation eliminates the need for manual spreadsheets and duplicate applications, thereby improving operational efficiency and providing complete visibility into SaaS spending.
Moreover, expense management software provides valuable analytics and actionable insights into spending patterns and trends. By analyzing this data, finance teams can identify cost-saving opportunities, optimize pricing tiers, and negotiate better contracts with vendors. This data-driven approach empowers businesses to make smarter decisions regarding their software stack and ultimately maximize their return on investment.
Regular Training and Communication Between Stakeholders
Training and communication are crucial components of successful SaaS spend management. Properly training employees on accurate expense reporting and ensuring they understand expense policies and procedures is essential for maintaining compliance and maximizing cost savings.
To begin, it is important to provide comprehensive training on how to accurately report expenses. This includes educating employees on the proper categorization of expenses, documentation requirements, and the use of expense management tools or software.
Training sessions should be interactive and provide hands-on experience to increase employee confidence and proficiency in expense reporting.
Bridging the Gap Between SaaS and Spend Management
With a strategic approach to SaaS spend management, businesses can effectively bridge the gap between SaaS tools and their overall spend management processes, saving valuable time and resources while enhancing operational efficiency.
SaaS spend management is crucial for organizations to control and optimize their software expenses. Businesses can automate and improve various roles, increase transparency, autonomy, and cross-team collaboration, leading to better financial management and significant cost savings.
SaaS Spend Management Will Minimize Your Expenses
SaaS spend management is a vital component of any organization’s cost-saving efforts. By effectively managing SaaS expenses, businesses can significantly reduce their overall expenditure and optimize their budget allocation.
Here are several ways in which SaaS spend management can help reduce expenses:
- Identifying inefficient products: A dedicated SaaS spend management platform allows organizations to gain complete visibility and control over their software expenses. By canceling these inefficient products, businesses can eliminate unnecessary costs.
- Negotiating better pricing: With full visibility into the organization’s SaaS spending, finance teams can track renewal dates and negotiate better pricing tiers with vendors. This means businesses can leverage their buying power, negotiate discounts, and potentially reduce their overall software costs.
- Centralized control and eliminating duplication: By implementing a SaaS spend management strategy, organizations can centralize all SaaS information in a single, easy-to-use dashboard. This eliminates the possibility of duplicate applications and ensures streamlined operations. With centralized control, businesses can avoid unnecessary expenditure on duplicate software and optimize their overall software stack.
Without proper management, these SaaS expenses can quickly spiral out of control, leading to wasted resources and overspending. That’s where a SaaS spend management strategy comes in.
Using Data and Analytics to Forecast Future SaaS Spend
Using data and analytics to forecast future SaaS spend is crucial for effective expense management. By leveraging accurate data and analytics, businesses can make informed decisions and allocate their resources more efficiently. Here are a few reasons why accurate forecasts are essential for managing SaaS expenses:
- Proactive budgeting: Accurate forecasts enable finance teams to proactively plan and allocate budgets for SaaS expenses. By identifying potential cost increases or fluctuations, businesses can anticipate and mitigate any financial risks associated with their software investments.
- Resource allocation: Accurate forecasts help organizations allocate resources effectively by identifying areas of increased SaaS usage or potential savings. This allows businesses to align their resources according to the projected demands and optimize their operational efficiency.
- Negotiating power: With accurate forecasts, finance teams have the advantage of negotiation when renewing contracts or exploring new SaaS solutions. They can leverage historical spending patterns, growth projections, and renewal dates to negotiate better pricing terms and optimize their software expenses.
- Risk mitigation: Accurate forecasts provide businesses with a clearer picture of their SaaS spend, helping them identify potential cost-saving opportunities and prevent overspending. By having insights into the future financial impact, businesses can be better prepared to mitigate any potential financial risks.
When using data and analytics for forecasting SaaS spend, it is essential to consider key factors such as historical spending patterns, growth projections, renewal dates, and market trends. By analyzing these factors, businesses can make more accurate predictions and take proactive measures to optimize their SaaS expenses.
Manage SaaS Spend with Platform that Truly Works for You
Managing SaaS spend efficiently is crucial for businesses to optimize costs and make informed decisions. By utilizing a robust SaaS spend management platform, companies can streamline their subscriptions, identify cost-saving opportunities, and gain complete visibility into their SaaS expenses.
It is important to point out that not all expense management platforms are made equal. Some go beyond just monitoring spend; they integrate seamlessly with finance, Single Sign-On (SSO), and HRIS systems, ensuring comprehensive visibility and a streamlined procurement process.
SaaS Expense Management FAQs
Frequently Asked Questions (FAQs) about SaaS Spend Management
What is SaaS expense management?
SaaS spend management is the process of effectively managing and controlling the expenses associated with software-as-a-service (SaaS) subscriptions within an organization. It involves monitoring, analyzing, and optimizing software costs to ensure efficient spending and maximize return on investment.
Why is SaaS expense management important?
SaaS spend management is important because it allows businesses to maintain total visibility and control over their software expenses. By gaining insights into spending patterns, identifying duplicate applications, and uncovering unused licenses, organizations can significantly reduce costs and avoid unnecessary expenses.
How can a SaaS spend management platform help automate and improve various roles within an organization?
Software as a Service (SaaS) spend management platforms automate and improve various roles within an organization. For employees, these applications may offer a user-friendly interface for submitting and tracking expenses. Managers benefit from automated approval workflows, enabling them to easily review and approve expenses while maintaining control over spending.
What are the benefits of increased SaaS transparency, autonomy, and cross-team collaboration?
Increased transparency allows organizations to have a clear understanding of their software expenses, enabling them to make informed decisions about optimizing their SaaS stack. Autonomy empowers employees to manage their own subscriptions and expenses within defined guidelines, reducing the burden on finance teams and improving efficiency.