Hidden costs in business: How to control subscriptions

Business subscriptions should make life easier, right? It means you never run out of teabags or those reception magazines that nobody reads. And increasingly, it means that your team’s software needs are met with a minimum of fuss and upfront cost.

With the shift to remote work, more and more employees need a wide range of tech to work effectively and seamlessly together. Research shows that Software as a Service (SaaS) was the one of the few industries to remain resilient throughout COVID-19, experiencing an acceleration in or limited impact to their subscription growth rates. The demand for communication software subscriptions specifically – including video conferencing, document sharing, developer collaboration and other communication tools – saw a spike in growth of 1.4x in March 2020 alone.

But with new business subscriptions being adopted daily, things can easily spiral out of control. And for financial teams, this can be a lot less fun.

With spend on business subscriptions spread across countless individuals, (Blissfully cites that the average mid-size business subscribes to 123 SaaS vendors to work effectively!) it’s becoming harder and harder to maintain oversight of where company money is going.

Uh oh.

How much are your business subscriptions costing you?

In traditional workplaces, the IT department has full ownership over any new software that’s introduced. This centralised approach means that adopting a new tool can be long, tedious and not-at-all transparent.

In more modern companies, people are embracing SaaS subscriptions. It’s empowering for bosses and workers as productivity goes up and a spirit of innovation is fostered. 

As of 2018, the average spend on subscription services per company reached $343,000 (around £274,000) in the US. That averages out to just under $2,900 (£2,320) per employee, per year, spent solely on subscription services.

But that’s just the subs that are maintained. What about those that go unused?

Be honest: how many times have you discovered a former employee’s name still registered as the owner of a subscription? Somebody’s paying for that subscription – but who? How much is it costing the company every month?

Oh and it gets worse. If your SaaS spend has gotten out of control, your enterprise valuation (EBITDA) will be affected. An inflated SaaS spend that’s bloating your operating costs will impact how potential buyers see your business.

So the pressure’s on financial managers and CFOs to manage these growing costs in the right way. 

How can companies ensure they aren't overspending on sneaky SaaS subscriptions?

Greater visibility and financial overview of your subscriptions

Larger organisations tend to suffer from the problem of having orphaned and duplicate SaaS subscriptions. On average, companies with 1,000 employees and above will find that they have a whopping 12.5 duplicate memberships in their organisation [Blissfully 2019 report]. 

Poor visibility of these products is one of the biggest culprits behind duplicate and orphaned subscriptions. 

Implementing a company spending solution will offer you heightened visibility in real time. This will not only make it easier for you to forecast spend, but also to make strategic decisions on the best way to spend your company’s money when it comes to SaaS.

Complement this with a records system

According to research, the average company with 200 to 500 employees uses about 123 SaaS applications. So, creating a records system will be instrumental to give context and keep track. 

Be systematic: start by listing all the different SaaS subscriptions in your records, then include important detail for each one, such as: brief description of the service, stakeholders who use this service and why, renewal dates, current monthly spend, expected spend upon renewal, and account manager contact information. 

This may seem simple, but being organised and having one holistic document to refer to for your SaaS usage will go a long way towards preventing product overlap and tracking expenses. 

It will also encourage you to rationalize each service by looking at its benefit-cost ratio. If 10 employees are signed up but only 2 use the product to its full capability, then it begs the question if its benefits justify the monthly expenditure.

It also means you can stop unwanted renewals happening without your knowledge. Be sure to spend time going through each subscription’s contract dates, making a point to turn off auto-renewal by emailing your vendor representative or account manager.

Organise your payments methods

Many enterprise decision-makers pay for SaaS using their personal credit cards. The danger here is that using a personal card for a SaaS subscription, and other business transactions for that matter, can make reporting murky down the line, defeating any efforts of improving visibility within your organisation. 

The best way to manage the rising number of subscription-based services is through an automated spending solution. By offering a company spending card to each employee, that gives you full oversight of who is signing up to what subscriptions and how much they’re going to cost.

As each card can be set with custom spending limits, it also keeps your financial team in control of business spending. Plus if someone leaves the organisation, you will be able to seamlessly end or reallocate their payments, making the whole thing faster, easier and far more transparent.

 

Blog repurposed and updated from original article written and published on Pleo  

Pleo offers smart credit cards that entirely automate expense reports for teams, and gives managers real-time visibility of business spend. All Ecovis Wingrave Yeats clients enjoy exclusive discounts and benefits through our partnership.

To guarantee these rates and find out how Pleo can transform your business, contact Liz Sheldon directly:

Liz Sheldon

liz@pleo.io

+44(0)203 514 3158