Good Spend vs. Bad Spend: Where Growth-Stage SaaS Companies Leak Margin

There's a version of bad spend that's obvious to most of us. The CEO flying first class on every trip, the team dinner that cost more than the monthly software budget, the hire that made no sense on paper but felt right in the moment. Those are typically easy to spot and easy to fix once someone points them out.

The version I see builds more slowly, secretly. It lives inside departments, inside budgets that exist on paper but aren’t being tracked. By the time it shows up in cash flow, the damage is already a few months old.

When I start working with a new growth-stage company, and that can be any size from $1M in revenue to $50M+, I'm looking for a recurring set of small spending decisions being made without data behind them. That almost always points to the same root cause: no one is actually watching the spend.

TLDR

• A healthy spend culture is about spending with intention, toward a specific goal, with data behind every decision, not just “cutting costs.”
• The most common margin leaks in SaaS and tech are duplicate subscriptions, above-market salaries, unreviewed vendor contracts, and reimbursements with no approval process.
• Payroll is already 50%+ of expenses. When there are no benchmarks behind salary decisions, you lose visibility into what that payroll is producing.
• Budgets versus actuals reviewed monthly is the single most important habit a growth-stage company can build.
• A spend policy only works if managers helped build it and a finance team is maintaining it.

What a Healthy Spend Culture Looks Like

A healthy spend culture is one where every dollar going out has a purpose behind it, a goal it's moving toward, and someone watching whether it's delivering. Good spend leads to ROI, whether short-term or long-term. 

It's not about being conservative with money. A business needs capital and a cash cushion to operate comfortably, and you want your team to have the tools, the budget, and the spending power to do their jobs well. None of that is bad spend.

A team dinner when the business is healthy and the runway is solid is a good spend. It keeps people motivated and that has real ROI. The same dinner when the runway is short and cash flow is under pressure is a decision being made without looking at the numbers first.

The difference between the two isn't the spend itself. It's whether anyone checked before approving it.

Where Margin Leaks Start

The categories that get out of control first in SaaS and tech are almost always the same.

Technology is the biggest one. There used to be enormous spending in tech teams, a lot of trial and error, spending and re-spending with new agencies and contractors. With AI, that's no longer an excuse. Building with very low cost is genuinely possible now, and companies still running the old model are leaving real margin on the table.

That said, I'm seeing the same pattern repeat itself from tech stacks to AI tools now. Companies adopt them fast, spend freely, and rarely stop to ask what the goal is or how they're measuring the return. 

Beyond technology, the leaks I find most consistently are:

Duplicate subscriptions and overlapping tools. The average company runs well over 100 SaaS applications, and research suggests that 35% of SaaS licenses go unused or underused. When I go through a new client's vendor list and general ledger, I'm almost always finding tools that do the same thing, subscriptions that auto-renew for services nobody uses, and contractors still being paid for work that stopped months ago. 

That's exactly what we fixed for our client, AutoUp. Once their finances were structured properly, they could see "not just spend as a bucket, but drill down into which softwares were making up the expenditures."

Salaries above market. Payroll is already 50%+ of expenses. When salaries are consistently above market with no benchmarks behind the decision, there's no visibility into what that payroll is generating, no data connecting compensation to performance or revenue, and no process for reviewing whether the spend is justified. For SaaS companies, I always want to know the revenue per employee for anyone generating revenue for the business. That number tells you a lot about whether the spend is working.

Vendor contracts that nobody renegotiates. Growing companies accumulate vendors fast. What almost nobody does is go back and review them. Every vendor contract should be reviewed, approved, and negotiated. Vendor negotiations alone is one of the most effective levers for controlling costs, and it's one many growth-stage companies simply aren't using.

Reimbursements with no process. This creates chaos faster than almost anything else. If there's no documented policy, no approval chain, and no finance team maintaining the process, expenses get approved by whoever is most comfortable saying yes. No expense should be reimbursed without a manager or leader signing off. 

We like Ramp for this. But the tool is only as good as the process behind it. To learn how to build a clean AP workflow, check out our blog: A Scalable Accounts Payable Workflow for Growth-Stage Companies.

The Budget Versus Actuals Problem

The single most common issue I find in growth-stage companies isn't that they don't have budgets. It's that nobody's tracking them.

A budget that isn't monitored isn't a budget. It's a number on a spreadsheet. The companies with healthy spend cultures are reviewing budgets versus actuals every single month, having real conversations when something is off, and holding departments accountable for their numbers. When that process breaks down, things move fast. I've seen companies nearly run out of cash in two months simply because a new leadership team stopped maintaining budgets per department. What looks like a small operational detail can turn into a serious cash problem before anyone realizes what happened.

The other piece that matters just as much is who's involved in building the budget in the first place. These decisions should be made alongside managers, especially in companies where managers are expected to step in as leaders and own their outcomes. You need their feedback on what the budget should be, a real conversation about where it's going and what results are expected from it, and once it's locked in, it needs to be respected. When managers help build the budget, they're far more likely to take responsibility for staying within it.

For context, equity-backed SaaS companies spent 107% of ARR on average in 2025. That means the average equity-backed company is operating at a loss. In that environment, the difference between companies that stay in control and those that don't often comes down to whether someone is reviewing the numbers month-to-month.

If you want to go deeper on the budgeting side specifically, check out our video: Budget vs Forecast: Where Founders Get Confused.

Spend Policies That Work

Yes, most companies have some version of a travel and expense policy. 

No, most employees have never read it.

The policies that get followed are the ones that managers helped build. When you involve your team as co-owners of the budget, get their feedback on what the spend should be, have a real conversation about expected outcomes, and then hold the line once it's locked in, the policy becomes something people care about rather than something compliance sent over in an email.

A few things that need to be in every policy:

• Travel approvals. Every trip needs an approval process. Daily limits, flight limits, and department-level T&E budgets are the baseline. Not everyone flies business class. And yes, this applies to the CEO too. I've had situations where controlling CEO travel expenses alone made a meaningful difference on the bottom line. People often spend without realizing the cumulative impact on cash. Once that's visible, they're usually willing to adjust.
• Corporate card controls. Cards go to the roles that need them: business development, sales, and client-facing functions. Not everyone. Approval limits should exist so that anything above a certain threshold requires sign-off before it goes through, not after. You can also have a treasury person who controls cards and purchases on behalf of employees.
• Reimbursement approvals. As mentioned above, no expense gets reimbursed without a manager or leader signing off. No exceptions.

The Hiring Title Problem

One area that doesn't get enough attention is the cost of chasing senior titles too early.

I see this consistently with growth-stage CEOs. The instinct is to build a senior team fast, and that instinct isn't wrong, but it needs to be calibrated to the actual stage of the business:

• Sometimes you don't need a CFO yet; you may just need a bookkeeper.
• Instead of hiring a controller, a senior accountant might be exactly right.
• Instead of a CTO, you may just need another engineer.
• Instead of a sales director, you may just need an SDR.

Each of those mismatches represents significant spending that isn't moving the needle. The hiring plan is a finance decision as much as it is a people decision, and it deserves the same level of scrutiny as any other major spend.

What to Track

When I'm looking at spend across a growth-stage company, the categories I always want visibility into are:

These five views together tell you almost everything you need to know about whether the spend is healthy. Ben Nowlan, CEO of Sherpa, said this:

"We are literally looking at our minimum working capital and our profit hourly to make decisions as a CEO."

That's what happens when the right finance infrastructure is in place.

A Finance Function, Not Just a Tool

The trap I see is companies that buy an expense tool and assume the problem is solved. The tool is only as useful as the process and the people maintaining it. Budget versus actuals needs to be managed by your finance team. Vendor lists need regular reviews. Approval processes need to be enforced. And the hard conversations about where money is going need to happen every month, not once a year.

For a practical look at how to turn that data into decisions, Financial Dashboards: How CEOs Turn Metrics Into Decisions is worth watching alongside this.

Margin typically doesn't disappear in one bad decision. It leaks through dozens of small ones made without the right information, without benchmarks, and without a finance function close enough to catch them before they compound.

The companies that get this right aren't even necessarily the most conservative. They're the ones that spend with intention, build the processes to back it up, and have a finance team staying close to the numbers every month. 

If building that kind of finance infrastructure is something you're working toward, reach out to Cypher to start the conversation.

FAQ

How often should a growth-stage company review its vendor list? At minimum, once or twice a year. If you have a finance team managing AP, it should be reviewed monthly as part of the regular close process.

What's the difference between a spend policy and a spend culture? A spend policy is the document. A spend culture is whether people actually follow it and why. Companies with strong spend cultures build their policies with manager input, connect budgets to expected outcomes, and hold the line through regular finance reviews.

What categories should growth-stage SaaS companies track separately? R&D and tech, sales and marketing, and G&A should always be broken out separately. These are the three categories investors, boards, and lenders will look at first, and they're the three most likely to drift without visibility.

When does a team dinner become a bad spend? When it's approved without checking the runway, the budget, or what's already gone out that month. The spend itself isn't the problem. The decision-making process behind it is.

Should every employee have a corporate card? No. Cards should go to the roles that require regular business spending. Everyone else should go through a documented reimbursement process with approvals.

How do I know if my company has an unhealthy spend culture? Start with these five questions:

1. Does every department have a budget? 
2. Is someone reviewing actuals against that budget monthly? 
3. Are vendor contracts reviewed and renegotiated regularly? 
4. Do reimbursements require approval? 
5. Are salaries benchmarked to the market?

If the answer to any of those is no, that's where to start.

Follow Cypher's Founder & CEO Salma Hatim on LinkedIn for daily insights, and catch her on the Founder Files podcast, available on YouTube and Spotify.