The software-as-a-service model has made it easier than ever for companies to access powerful tools. A quick sign-up with a card unlocks platforms for marketing, design, data analysis or project management within minutes. But this convenience has a hidden side. Unused licences, duplicate subscriptions and unapproved applications quietly pile up in the background, consuming budget and creating compliance risks. Across the UK and Europe, the scale of wasted spend is now impossible to ignore – for example, 31% of IT leaders report that over a quarter of their cloud spend is waste.
What are hidden SaaS costs?
Hidden SaaS costs refer to the expenses that companies fail to monitor or budget for properly. They arise from the way modern software is purchased and consumed. Unlike traditional licences, SaaS is often billed per user per month. Small changes in staff numbers or overlapping sign-ups can inflate spend without anyone noticing.
Typical hidden costs include:
- Unused licences – when staff leave or change roles, but their seats remain active.
- Duplicate subscriptions – different teams paying for the same software through separate accounts.
- Auto-renewals – subscriptions that roll over without review.
- Tier creep – upgrades triggered by hitting usage limits, often unnoticed until the invoice arrives.
Each of these issues looks minor in isolation. Together they can represent tens of thousands of pounds each year for mid-sized companies.
Understanding shadow IT
Shadow IT refers to the use of applications and services without formal approval from the IT or procurement team. Staff often turn to tools that make their jobs easier, whether that is a project management app, a design platform or a cloud storage service. While the intention is positive, the outcome can be costly.
Why shadow IT appears:
- Employees want fast access to tools without having to go through lengthy approval cycles.
- Departments have small discretionary budgets and sign up directly with corporate cards.
- Free trials convert to paid plans without anyone monitoring the transition.
The risks are twofold. First, unmonitored services generate hidden costs that bypass standard controls. Second, they create security and compliance gaps because IT teams are unaware of where specific data is stored. When regulators request proof of controls, shadow IT complicates the demonstration of compliance.
The financial impact of SaaS sprawl
As companies grow, so does their SaaS footprint. A single team may run a handful of tools, but across departments, the number quickly multiplies. Research from Cledara shows that organisations with 100-200 staff waste about 34% of their software budget through unused licences and uncontrolled renewals. Larger organisations can see this figure climb towards half of total SaaS spend.
Clothing retailers, digital agencies and tech firms are among the most brutal hit because they rely on a broad mix of specialised tools. Marketing teams often experiment with multiple platforms for analytics or email automation. Sales teams may sign up for several CRM add-ons. Without oversight, each subscription incurs additional costs with little cumulative benefit.
Shadow IT intensifies the problem. Studies show that more than 30% of SaaS applications used in large enterprises are outside official IT control. These untracked services drive up both spending and risk. For finance teams, the consequence is a software bill that grows faster than revenue.
Further Reading: SaaS Subscription Sprawl: How Virtual Cards Keep Costs Visible
How to identify shadow IT
The first step to reducing hidden SaaS costs is visibility. Companies cannot manage what they cannot see. Identifying shadow IT requires a combination of process and technology.
Here are the methods of uncovering hidden apps and subscriptions:
- Expense audits – reviewing corporate card transactions and supplier invoices for recurring SaaS charges.
- Employee surveys – asking staff which tools they use that may not be on the official list.
- Network monitoring – analysing web traffic to see which services are accessed frequently.
- Single sign-on logs – cross-checking authentication systems with known applications to detect gaps.
Responsibility for this process should be shared. Finance teams bring insight into payments, while IT teams assess technical and security implications. Together, they create a complete picture of which tools are approved, which are redundant and which require better governance.
Best practices to reduce hidden SaaS costs
Cutting waste is not about banning tools but about bringing structure to how they are acquired and managed. Best practices include:
- Centralise SaaS procurement. Require all subscriptions to go through a single approval flow.
- Assign application owners. Assign one person to be responsible for each tool’s budget, usage, and renewals.
- Conduct quarterly reviews. Compare the licenses purchased against the active users and cancel any surplus.
- Use virtual cards with limits. Provide teams with controlled payment methods that automatically track their spend.
- Educate employees. Explain the risks associated with shadow IT and promote transparency when adopting new tools.
When applied consistently, these steps help prevent duplication and highlight opportunities for consolidation. They also create a culture where employees feel part of the solution rather than blocked by policy.
Further Reading: The Ultimate Guide to Managing SaaS and Subscription Spend
The role of technology in SaaS cost management
Manual tracking quickly becomes impractical once a company runs dozens of subscriptions. This is where SaaS management platforms provide value. They connect payment data, user accounts and IT systems to give a live overview of spending.
Key features include:
- Integration with accounting software – automatic posting of SaaS invoices into ledgers.
- Renewal alerts – reminders before contracts roll over.
- Usage monitoring – tracking which accounts are active and which are idle.
- Analytics dashboards – reports on spend by department, category and vendor.
Vendors such as Cledara, Zylo and Spendesk offer specialised tools in this space. They allow companies to tag each subscription to a team, making ownership clear. Tokenised payments through virtual cards further tighten control, as subscriptions cannot be charged without a traceable record.
Wallester Business: combining virtual cards with SaaS spend visibility
Wallester provides an all-in-one solution for companies seeking tighter control over SaaS costs. The platform issues both virtual and physical corporate cards that can be tailored to specific subscriptions or departments. Each card has spending limits, expiry dates and real-time monitoring, giving finance teams immediate insight into where money goes.
Key features for SaaS management:
- Dedicated virtual cards for each software tool or supplier.
- Real-time transaction tracking to prevent hidden charges.
- Automated expense categorisation for clear reporting.
- Integration with leading accounting platforms.
- Instant notifications when subscriptions renew or exceed set limits.
This structure eliminates the risk of shadow IT slipping through unnoticed. Every subscription is tied to a card, every card to a budget owner. Finance teams can run detailed reports, while employees enjoy the flexibility to pay for tools they need within controlled boundaries. For companies struggling with subscription sprawl, Wallester Business turns scattered spend into a manageable, transparent process.
Conclusion
SaaS has delivered flexibility but introduced complexity. Hidden costs and shadow IT eat into budgets and weaken compliance if left unchecked. By understanding the sources of waste, applying best practices and leveraging technology, companies can take back control. Tools like Wallester Business show how virtual cards and expense visibility combine to deliver both financial discipline and user convenience. The result is a software stack that supports growth without draining resources.
