Buying software is so early 2000s. In today’s cloud-based world, most software used by businesses is on a subscription basis.
Software as a service (or SaaS) is more common than you might think—even your favorite at-home streaming service is considered one. And while these applications can bring some serious value, startups often struggle to manage SaaS subscriptions effectively.
Data tells us that SaaS use has skyrocketed in recent years, and today, these apps make up 70% of company software use. And this is a good thing because SaaS apps can benefit your business. You can save money, easily scale, and enjoy a high level of flexibility and accessibility.
But because of how common and valuable SaaS apps are, organizations can quickly rack up a full roster. Studies show that companies with less than 100 people can use up to 24 SaaS applications on average, while large-scale operations use more than 170.
So, while SaaS apps can do a world of good for startups and other businesses, they can also be a bit of a headache when it comes time to pay the bills. But we have good news: you can manage SaaS subscriptions in a way that makes your life easier and reduces unnecessary spending. Let’s get started!
What Is SaaS Subscription Management?
When your business decides to add a new SaaS subscription to its tech stack, that’s just the beginning. A lot of nuance goes into these services which impact your business, such as how much your business is paying, who is using your subscriptions (or how many licenses you have), and where exactly these apps fit into your business operations.
Managing SaaS subscriptions can be done manually or with the help of apps or programs. Either way, there are a few key elements involved, including payment and vendor management, determining ROI, ensuring security, and streamlining onboarding and off-boarding processes. But we’ll dive into them in-depth a little later.
For now, let’s answer a question that’s probably popped up in your mind.
Can’t We Just Let it Auto-Renew?
The very nature of SaaS subscriptions is they’re just that—subscriptions. If there’s an option to auto-renew, should you just do that instead of manually managing them?
That isn’t a great idea, and here’s why.
When you’re letting your subscriptions auto-renew, there’s virtually no oversight in your SaaS subscriptions. This opens your organization up to a few vulnerabilities. Firstly, your business might be overspending and underusing.
If you’re auto-renewing, you might be paying for apps that your team doesn’t or rarely use, and you might have vendors on the payroll you’ve completely forgotten about. You also open up your business to fraud. You might have had a security breach or been exposed to fraud and not realize it.
Learning how to manage SaaS subscriptions can be helpful for things like:
- Tracking and reigning in spending
- Reducing financial waste
- Monitoring the security of your business
In short, this allows you to not only save money but also safeguard your business against potential security threats.
Aspects of SaaS Subscription Management to Consider
SaaS subscription management can take many different shapes and forms, but however you decide to tackle it at your organization, it should include a few main components. Here are some main features of SaaS subscription management:
- Vendors: Managing your vendors means actively monitoring the amount, number, and type of vendors you use and auditing if they’re effective. How many SaaS vendors are you using, and what software are they providing? If your number of subscriptions is high for your operation, can you consolidate or pair them down? Also, keep in mind that new SaaS applications are frequently launched. That means a better tool might be available today that meets several of your needs.
- Licenses: When using SaaS software, you’ll usually need to choose a licensing agreement. If you’re paying for active users, is that number still valid for how your business uses it? Have some of your licenses expired? If there are different tiers of licenses, ensure the one you’re using is the one you’re actually paying for. For example, watch for instances where you’re paying for a higher service tier but not using all the features.
- Administration: Someone has to keep track of the payments, logins, and licenses. What does the back end of your SaaS management look like? You can self-audit which budgets these payments come from, where logins and other data are kept, and who manages the subscriptions.
- Usage: Not everyone in your organization typically needs to access every single SaaS tool. Determining and monitoring usage can help ensure you’re not paying for extra licenses you don’t need.
How Does Spend Management Software Help?
While there might not be a one-stop shop to manage SaaS subscriptions, certain software can help, mainly spend management software. This software can offer you control and visibility into your SaaS spending.
For example, software like Divvy has a few main perks for managing SaaS subscriptions:
- Virtual cards: You can generate virtual cards for each vendor, minimizing fraud opportunities.
- Budgeting: You can see exactly who is paying for what and where that money comes from. You can also set a total for a set period that cannot be exceeded, so you won’t ever be overcharged. This can help with your overall business budgeting.
- Expiration: You can set expiration dates on virtual cards and budgets so you don’t miss any auto-renewals.
- Real-time visibility: With push alerts and real-time updates, you can see your software billing the moment it happens.
With the right tools, you can streamline your SaaS management and ensure you get the most out of your software investments.
4 Steps to Improve Your Subscriptions
Learning how to manage SaaS subscriptions means understanding the different elements of it. With that in mind, here are some steps to improve your subscription management.
1. Start With Your SaaS Payments
If you notice any suspicious activity in your business expenses, take immediate action to prevent it. Make sure to double-check that the amount you are paying is accurate and matches the service tier and license amount you have agreed on.
To ensure timely payments, consider setting up recurring billing on a virtual card and setting reminders for payment due dates. Keep track of your spending with spend management software to monitor where your money is going, how much is being spent, and which budget your payments are allocated to.
2. Then Take a Look at Your Vendors
Auditing your vendors is crucial in ensuring you’re actually using what you’re paying for. To start with, there should be an organization system around your vendors, whether it’s a list or other type of document.
Your system should track each vendor's service and how much usage it's getting. Then, you can quickly identify if you aren’t utilizing certain vendors.
3. Do Your Best to Track ROI
While specific ROI for SaaS subscriptions can be challenging to figure out, you should still determine each subscription's return on investment. If you have an expensive subscription that isn’t getting much use or providing value to your organization, it’s not worth keeping.
4. Monitor Your Security
To avoid security risks, it's important to choose software vendors that prioritize user data security and have strong security systems in place. Additionally, restrict the sharing and usage of data to only what is necessary and ensure it’s accessed on a need-to-know basis.
It Can Get Pretty Expensive if You Don’t Know What Subscriptions You Have
Managing SaaS subscriptions can be a challenging and costly task if not properly tracked. It’s important to learn how to effectively manage these subscriptions to ensure your expenses align with your business goals.
By actively monitoring your spending and keeping track of your subscriptions, you can avoid wasting money and put your cash to good use. It can be a nightmare managing multiple vendors, but with careful attention to your expenses and utilizing certain software, you can stay on top of your game and achieve your goals.
Our outsourced accounting services are the bread and butter of our business. We’re dedicated to assisting businesses like yours in achieving growth, with a focus on spend management solutions and bookkeeping.
Interested in partnering with hiline to take your business accounting to the next level? See how we can help you today!
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