smart subscription management

Smart subscription management: How CFOs keep track of things

Business subscriptions are important for making everyday work easier – not only since the expansion of remote work. Whether it is communication within the team, project management, regular image editing or CRM and marketing, there is a suitable tool for every part of a company and every subtask. Since programs have been set up as cloud solutions, the hurdles to implementation have been knocked down. Subscriptions are completed with one click and tools are up and running. There’s no question that this is great, but it also is only economical up to a certain point. For SMBs, software subscriptions are now the second highest cost after salaries.

But do CFOs and finance managers have an overview of which providers the company subscribes to, how much money is spent monthly or annually on the respective tools, and whether everything is used at all?

Managing subscriptions is one of those things you quickly loose track of. You might know it from your private life, too. Once they’ve been taken out, they tend to be forgotten – until the next bill reminds you that you once bought an annual subscription for quite a bit of money. However, you don’t use it as regularly as you initially thought (or even need it anymore) – otherwise it wouldn’t have been forgotten. You can imagine how wild subscriptions can become in a business context, where it’s usually not just one or two paid subscriptions, but 50, 90, or even hundreds of applications in larger companies?

Often underestimated: Software subscriptions are a huge cost item in companies

A three-digit number of subscriptions – that sounds quite oversized at first. In many companies, however, this is not at all uncommon. Just think about it: there’s the email program and the messenger that keeps colleagues communicating even when they’re at home. The Microsoft office subscription, the HR software, the project management tool. The marketing staff have their own tools that need to be paid for, as do the accounting and product teams. In larger companies, the threads usually come together in the IT department, but even these colleagues do not always have an overview of all subscriptions. Especially when programs come in the form of a cloud solution – and the former control step of only installing programs on the respective computers with admin rights is no longer necessary.

“Dead software” or even duplicate subscriptions are not uncommon. Especially when a company grows quickly and implements new programs for new workflows within a short period of time. And what about the subscriptions that are running on employees who have long since left the company? Then, in addition to double costs, also the issue of data security becomes relevant.

Manage subscriptions: Uncover hidden costs

As CFO, you not only have to keep track of your expenses, but also decide together with the respective teams which subscriptions really make sense and are relevant for the development of the company – and which are not. Even different software subscriptions that are similar in their functions and only used simultaneously because of preferences within the individual teams must be recognized and assessed from the point of view of profitability, but also the productivity of the teams.

Most of the time, only when the invoices arrive in the accounting department, financial managers get to see the extent of subscriptions. But even these invoices don’t usually come bundled, but rather in small chunks. A clear overview and ownership of financial statements? Dead loss. So how can you as CFO make informed decisions – and gain an overview in the first place?

How to get your subscription management in order

Get an overview

Unfortunately, you and your team cannot avoid taking inventory. Only if you know which software licenses you have purchased, you can decide which SaaS solution (“Software as a Service”) is really needed:

  • Which software do you use in your company – and why?
  • Which SaaS cover the same functionalities and can lead to team silos within your company?
  • Which licenses are duplicated and which subscriptions are not used at all?
  • Unused licenses (e.g., due to the departure of colleagues) should be reassigned or cancelled.

Make costs visible and manage them

Once you know which SaaS you use in your company, it may be worth investing in a financial tool where you can manage future subscriptions, but also integrate existing subscriptions. An invoice management tool allows you to centrally manage and pay for all subscriptions, giving you a direct overview of ongoing and upcoming costs.

Auto-renew without prior notice quickly adds another year of potentially unnecessary expenses. When a notification goes out, it’s usually to the employee who originally took out the subscription – and not the finance officers, who would also need to know about it. The solution: smart subscription management within an invoice management tool stores the date of the subscription and the payment frequency. This allows finance managers to see at a glance when a subscription is due for renewal.

Extra tip: Pay for each SaaS with a virtual card created specifically for the subscription. This minimizes the risk of a subscription not being charged due to a card error, while keeping an eye on your budget. Through the possible cost center assignment, you can further break down your expenses and have costs under control at all times.

If you also allocate the virtual card with exactly the budget the subscription costs, you prevent additional costs due to double debits or additionally added users. Yes, you’re correct: this is a massive amount of work at one point – after all, all the payment methods for the subscriptions have to be adjusted individually. In the long run, however, you will save time in accounting and ultimately money through smart subscription management.

Even better subscription management with linked finway cards

In figures: Here’s how company subscription usage is evolving

Zylo has produced a comprehensive report on “SaaS Management Index 2023” and compiled the key metrics that illustrate the evolution of SaaS usage in corporations.

  • The number of apps in use per enterprise will increase by about 30% year over year
  • Spending on software will account for about 42% of total tech costs in 2023, a significant increase from 34% in 2022
  • On average, companies use 177 apps and SaaS subscriptions
  • At the same time, users are upgrading existing software with add-ons and additional users
  • It is estimated that 30% of companies will move their mission-critical workflows exclusively to SaaS apps by 2025
  • However, “SaaS waste” – subscriptions and apps that are duplicated or left unused – is also increasing year over year. According to a study by Vendr, the proportion of costs attributable to SaaS waste, which could thus be saved, is around 1/3 of the total tech costs of companies
  • SMBs spend €7.2 million per year on 172 SaaS subscriptions – of which an estimated €1.6 million could be saved

If these numbers don’t speak for themselves yet: Subscriptions that are poorly managed, if at all, are burning money month after month – about 30 percent of subscription spend goes to duplicate or unused SaaS subscriptions, according to the Cledara report. Not only is this unnecessary and a severe drain on your liquidity, it can have a negative impact on companies at the latest when it comes to external valuations, as it drives up spending unnecessarily.

What’s worse, financial officers usually don’t even know about such dead software – after all, the billing statement doesn’t state whether the program is still being used at all. And duplicate subscriptions? Are most likely subscribed in different names or departments. The people in charge have to be very careful to detect duplicates. And it’s not always just the obvious costs on the invoices that cut into a company’s profitability.

So CFOs desperately need good subscription management as an overview – in the long run, redundant SaaS can hurt growth as well as company culture. In the early stages of small businesses, many different “best of breed” style subscriptions for small sub-areas may increase team productivity because each tool can fit and contribute effectively to success. But while too much software may not be significant for a company of 50 employees and can be chalked up as “collateral damage” from OKRs and goal achievement, can be massively detrimental to growth with 150 or 500 employees. Sooner or later, there comes the point when you have to face up to subscription management and set up a system that organizes all subscriptions in the long term.