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Be a Budget Hero: 5 Tips for Effective SaaS Budgeting

by | Jun 28, 2024

Introduction

Software as a Service (SaaS) has become an indispensable part of the operational infrastructure of business, often ranking alongside leases and payroll as a top three expense. Given its significant impact on the balance sheet, thoughtful and effective SaaS budgeting is crucial. This guide offers valuable insights to help finance and IT professionals optimize their SaaS expenditures and become budget heroes for their organizations.

1) Start with what you have

Before you can effectively budget for SaaS, you need a clear understanding of your current and recent spending. Begin by conducting a comprehensive audit of all the SaaS solutions your organization currently uses. Document each tool’s cost, usage statistics, and the business functions they support. In addition, analyze your organization’s SaaS expenditures over the past year or two. Identify trends such as seasonal peaks in usage, unexpected overages, or under-utilized subscriptions. This historical data will provide a baseline for future budgeting. Download this software contract tracker to get started in Excel, or if you have a SaaS Management Platform or Software Asset Management solution, like FinQuery Software Management, this should all be an easy data pull.

2) Loop in stakeholders

Don’t make your budget in a vacuum. SaaS tools serve various departments within an organization. Engaging department heads in the budgeting process ensures all necessary tools are accounted for and their value to different business units is understood. Conduct regular check-ins with stakeholders to get updates on how current SaaS tools are performing, if there are any issues, and if new needs have arisen. This practice helps in maintaining a dynamic and responsive SaaS budget.

3) Determine your SaaS needs

Not all SaaS solutions are created equal. Categorize your software into must-haves, nice-to-haves, and outdated or redundant tools. This prioritization helps in allocating your budget more effectively. Consider your organization’s strategic goals and growth plans. Are you expanding into new markets? Launching new products? Such initiatives may require additional SaaS solutions. Plan for these needs proactively.

4) Compare what you have to what you need and make adjustments

Compare your current SaaS inventory against your requirements. Identify and eliminate duplicate software, applications with similar functionality, and underutilized subscriptions. Tools like SaaS management platforms can help in this analysis by providing detailed usage reports. For gaps identified in your SaaS arsenal, research new tools that could fill these needs. Consider factors such as cost, ease of integration, and scalability. Engage in trial periods to evaluate effectiveness of new solutions before making a commitment.

5) Develop a realistic budget

With a clear understanding of your current and future SaaS needs, compile a comprehensive budget. Include all costs associated with each tool, including licenses, add-ons, and potential overages. Even the best-laid plans can face unexpected challenges. Allocate a portion of your budget as a contingency fund to handle unplanned SaaS expenses, such as emergency upgrades, unforeseen spikes in usage, or new software necessitated by sudden changes in business strategy.

Summary

Effective SaaS budgeting is integral to managing one of your organization’s largest expenses. By starting with an audit of current tools and expenditures, engaging stakeholders, identifying needs, analyzing your software stack, and crafting a realistic yet flexible budget, you set your organization on the path to both efficiency and innovation. Proper SaaS budgeting not only saves money – it can save the day by ensuring your teams have the tools they need to perform at their best.

SaaS Spend Management Guide