7 essential steps to reduce
your SaaS costs and optimize spending

SaaS costs can spiral out of control fast. One minute, you’re signing up for a handful of tools to boost productivity—the next, you’re drowning in redundant apps. 

The reality is, most companies are leaking money through the cracks in their SaaS stack. But it doesn’t have to be this way. With the right approach, you can rein in those runaway expenses, streamline your tools, and turn your SaaS environment into a well-oiled machine.

In this guide, we’re giving you actionable steps to slash your SaaS costs. From uncovering hidden subscriptions to leveraging benchmarking in negotiations, you’ll learn how to take control of your SaaS spending.

Step 1. Find strategies to reduce SaaS costs

Did you know the average enterprise deals with 4.3 orphaned apps and 7.6 duplicate apps? That’s a lot of wasted spend. You need to get a grip on your SaaS landscape to cut down on those costs. Here’s how to get a full view.

Scour internal resources

• Finance Department. Review departmental budgets and expense reports to track down recurring SaaS payments.
• IT Department. Check for centrally managed licenses and subscriptions in a spreadsheet or a SaaS management tool.
• Marketing & Sales. These departments frequently use specialized tools like marketing automation and CRM—don’t overlook them.

Inspect employee inboxes

Scan statements for recurring charges. And don’t forget to check individual employee cards if they’re expensing subscriptions—sneaky charges could be hiding there.

Review transactions

Look for recurring charges linked to cloud services on your statements. Don’t forget to check individual employee cards if the company allows expense reimbursements—hidden subscriptions might be hiding there.

Talk to your team

With companies spending $2,623 per employee annually on SaaS, it’s essential to get the inside scoop. Host meetings or send surveys to identify what tools your team actually uses. 

Keep an eye on “free” trials and freemium plans—they often become paid subscriptions before you know it. Providers love these models because freemium tools convert 25% more customers than free trials.

Go beyond the obvious

Shadow IT—those unauthorized tools employees use—accounts for 30% to 40% of IT spending, according to Gartner. Offer alternatives or set up a company-approved app store to keep shadow IT in check.

And watch out for integrations between SaaS tools. These can trigger unexpected fees, so make sure you understand the full cost of connected services.

Step 2. Prioritize applications by cost

Not all SaaS apps are created equal. Some will make a bigger dent in your budget than others. Here’s how to cut down your software spending and zero in on the subscriptions that hit your wallet the hardest.

Gather the data

Start by collecting the annual or monthly costs for each SaaS tool. Don’t forget to include those sneaky hidden fees—per-user charges, data overages, and the like. If possible, gather usage data too—active users, projects created, storage consumed. The more data, the better.

Calculate the total annual cost (TAC)

Take the monthly subscription fee and multiply it by 12. If you’ve got an annual fee, you’re already set. This gives you the total annual cost (TAC) for each application.

Prioritize based on cost

Now, rank your apps from highest TAC to lowest. This simple step instantly reveals the biggest budget-busters in your lineup.

Analyze usage data

For the top spenders, layer in usage data. Where do your apps fall into the TAC vs. usage quadrant?

Have you found a high-TAC app with minimal usage? That’s a red flag—it might be time to downgrade or cancel. 

Step 3. Eliminate subscription waste

Subscription waste—those underutilized or completely unused SaaS tools—can quietly drain your budget. Here’s how to cut the fat and reduce your SaaS costs:

Conduct a usage audit

Start by digging into the analytics that many SaaS platforms provide. These reports can show you which apps are collecting dust with minimal logins or usage. But don’t stop there—talk to the employees using these tools. Ask them how often they use the app, what value they’re getting from it, and whether it’s really worth keeping around.

Address free trials and freemium plans

Free trials have a sneaky way of turning into paid subscriptions that no one remembers. Set calendar reminders to review and cancel these trials before they convert. Freemium plans, while tempting, often come with limitations that can disrupt your workflow. 

Evaluate whether those limitations are holding you back, and if so, upgrading to a paid plan might actually save you money in the long run.

Turning waste into spend optimization

By cutting out subscription waste, you’re not just saving money—you’re freeing up resources that can be better spent elsewhere. With wise managing business spending, here’s where those recovered funds can go:

• Upgrade essential tools. Invest in additional features or higher tiers for the apps that are truly critical to your workflows.
• Explore new technologies. Use the savings to test and implement new SaaS tools that could boost your operations.
• Boost employee productivity. Redirect funds toward training programs or additional user licenses for tools that empower your team.

Step 4. Establish strategies for future purchases

Curbing subscription waste isn’t just about cleaning up the past—it’s about controlling spend and making smarter choices moving forward. Here’s how to set yourself up for success with future SaaS purchases:

Define needs before shopping

Before you even start looking at tools, pinpoint the specific business goals or challenges a new SaaS solution needs to address. Involve key stakeholders from the departments that will actually use the tool—get their input on the features, functionalities, and integrations they need.

And don’t just grab the first option that pops up. Take the time to research alternatives that might offer better features, more flexible pricing, or seamless compatibility with your existing tech stack.

Leverage free trials for smarter spend management

Free trials are your chance to kick the tires before you commit. Encourage potential users to explore the tool’s features and ensure it meets their needs. Use this period to test how well the tool integrates with your existing software—smooth data flow between apps can significantly boost efficiency.

During the trial, pay close attention to the usage data many platforms provide. This data is invaluable for understanding user adoption and determining if a paid subscription is worth the cost.

Establish a centralized approval process

With 65% of all SaaS apps being unsanctioned—purchased and used without IT’s approval—you need a standardized process for all SaaS acquisitions. This ensures proper vetting, enhances security and prevents impulsive, unnecessary subscriptions.

Set clear criteria for approving new SaaS tools. These criteria should include alignment with business goals, budget constraints, and how well the tool can integrate with your existing systems.

Step 5. Ditch overlaps to reduce SaaS costs

How many tools on your portfolio are truly necessary? Analyze your master list to spot where one tool’s features overlap with another. Focus on features that are critical to your workflows and user needs, and flag the less essential ones as potential areas for consolidation.

Conduct a feature inventory

Start by compiling a comprehensive list of all the features offered by each of your SaaS subscriptions. Include everything—from core functionalities to lesser-known or underutilized features. Organize these features based on their primary use cases, like project management, communication, or customer relationship management.

Explore consolidation options

It’s common for different departments to use similar tools that serve the same purpose. To streamline operations, consider consolidating these into a single platform that meets everyone’s needs. ClickUp is a great example of an app companies often choose when simplifying their software stack.

On the flip side, employees sometimes adopt feature-packed SaaS solutions but end up using only some of the features. If your team uses ClickUp for just one task, it might be overkill. In this case, switching to a more specialized tool could be a better fit.

Consider downgrading subscription plans

Many SaaS tools come with tiered pricing plans that include different feature sets. Consider downgrading plans for tools with overlapping functionalities—cutting out the redundant features you don’t need. 

It’s worth noting that the pay-per-use trend is here to stay, with 74% of SaaS businesses expected to offer usage-based pricing as part of their model.

You can also look into alternative SaaS options that bundle the features you’re currently getting from multiple subscriptions. Consolidating onto a single platform can streamline workflows and significantly reduce your SaaS costs.

Step 6. Leverage benchmarking for negotiations

Negotiating SaaS costs isn’t about sweet talk—it’s about cold, hard data. Benchmarking is your secret weapon. Here’s how to use it:

Gather market intelligence

Dig into industry reports and SaaS pricing trends. These insights give you the baseline you need to negotiate with confidence.

Talk to peers in your industry. Find out what they’re paying for similar tools—knowledge is power, and understanding the market gives you an edge.

Don’t skip online review platforms. They’re packed with user-submitted pricing info that can reveal what others are really paying.

Analyze your usage data

Before you sit down at the table, know your numbers. If you’re not using a tool to its full potential, that’s your cue to push for a downgrade or a discount.

Show the value the tool brings to your business—metrics like productivity boosts, better customer satisfaction, or cost savings. This isn’t just about cutting costs; it’s about proving what you’re willing to pay for.

Finally, think big-picture. Negotiate volume discounts for multiple licenses or lock in a better rate by committing to a multi-year deal. Leverage every angle of proper SaaS vendor management to get the best deal possible.

Step 7. Implement a system of record

Managing a growing stack of SaaS subscriptions can quickly spiral out of control. A System of Record (SoR) is your answer to regaining control, streamlining processes, and optimizing SaaS spending. Here’s how to make it work:

Define your needs

Start by identifying the critical data points you need to track for each SaaS tool—subscription details, user licenses, renewal dates, usage metrics, and costs. Think about who needs access to this data and how they’ll use it. Your SoR should be user-friendly and easily accessible to everyone who needs it.

Choose the right solution to reduce SaaS costs

For complex SaaS environments, go for SoR software with advanced features like automated data collection, robust reporting tools, and integration capabilities. Make sure it integrates seamlessly with your existing accounting or ERP systems. The goal? Avoid data silos and keep a unified financial view.

Populate and maintain your SoR

Regularly update your SoR to ensure accuracy and maximize cost savings. Schedule periodic audits to check license usage against subscription plans—this is where you’ll find opportunities to optimize spending.