As the globe embraces an economic downturn with layoffs, budget cuts, and inflated markets, the need for effective SaaS budget management has never been higher.
SaaS (Software as a Service) applications for various use cases have become critical for businesses. They are flexible and easier to purchase, but the major hassle comes with managing them and their relevant subscriptions, as they can strain a company's finances.
To effectively manage and optimize spending on SaaS applications, finance teams need to establish a streamlined SaaS budgeting system to manage and optimize spending on SaaS applications effectively.
In light of the current economic uncertainty, developing a quick SaaS budget management plan is crucial to avoid incurring excessive SaaS subscription expenses and potentially losing millions of dollars.
"A budget tells us what we can't afford, but it doesn't keep us from buying it."
- William Feather, American author and publisher
So here are six clever ways to manage SaaS budgets and the advantages of adopting SaaS spend management software.
What is SaaS budgeting?
The process of anticipating and allocating cash to cover the cost of Software as a Service (SaaS) subscriptions and other associated expenses is collectively referred to as SaaS budgeting.
The SaaS budgeting process starts with identifying the SaaS apps and services a company uses or intends to utilize. The key is to understand the requirements and usage for effective SaaS budgeting.
Following this, businesses can start allocating funds relevant to the costs. This involves creating a separate budget for SaaS expenses, determining the amount of ROI to allocate to each application, and forecasting and monitoring expenditures to ensure that costs remain within budget. All of these steps are essential components of the process.
SaaS budgeting also involves evaluating SaaS usage data to find usage trends, patterns, and optimization opportunities.
Businesses, for instance, can use a SaaS management platform to discover SaaS apps or services that are not being fully utilized and can eliminate them to minimize subscription fees or usage costs. They may also spot opportunities to renegotiate contracts or negotiate better terms or discounts with SaaS vendors.
Why is SaaS budgeting important for businesses in 2023?
Impact on revenue
As businesses increasingly rely on SaaS applications for various functions such as marketing, sales, and support, SaaS expenses are becoming a significant component of overall operating budgets. If appropriate budgeting practices are not implemented, these costs may accumulate and begin to impact revenue.
Although SaaS solutions can enhance a company's productivity and efficiency when utilized effectively, uninformed SaaS investments like shadow purchases can be costly. Inaccurately assessed SaaS investments may draw resources away from other budget items and negatively impact overall profitability.
SaaS budgeting will clearly define the expenses so organizations can prevent shadow purchases and accurately plan for future expenses, reducing the risk of unexpected financial burdens.
IT teams can identify the most critical applications within the organization, and finance teams can allocate budgets to those resources and relevant applications, maximizing the ROI of each software investment.
Revenue impact, shadow purchases, and poor ROI forecasting are some challenges that can be avoided by initiating a proactive approach to SaaS cost management before expenses grow too complex to budget efficiently.
This is why following the six ways to keep your SaaS budget on track is critical. Businesses may optimize their SaaS spending, make informed technological investments, and enhance their overall financial health by doing so.
Clever Ways To Improve SaaS Budgeting
Are you tired of overspending on SaaS subscriptions?
Follow these clever ways to enhance your SaaS budgeting plan and take complete control of your spending.
Assess your company's needs
Before investing in SaaS applications, evaluate your company's requirements. What software programs are essential for your company? What features are you looking for?
In order to plan the budget effectively, finance teams must first understand the needs and requirements of their teams. A SaaS budget management process would be unnecessary without properly scrutinizing these requirements.
Set a budget for SaaS subscriptions
Once you've evaluated your company's needs, create a budget for SaaS subscriptions. You can use SaaS budget forecast software to set budgets.
Consider all your SaaS costs, such as subscriptions, licensing fees, and extras like support or training. This will assist you in avoiding overpaying and keeping your expenses under control.
Identify cost-saving opportunities
"Take advantage of SaaS provider discounts, such as annual contracts or volume-based pricing, to help save costs." Danny Allan, CTO at Veeam
Search for ways to lower your SaaS expenses. Improve vendor negotiations and automate SaaS renewals. Organizations often miss out on contact renewals and incur needless expenses; use an automation tool to stay ahead of renewals.
Use spend management software to broaden your cost-saving opportunities. You can leverage the app usage data and renegotiate for SaaS usage-based pricing plans to cut costs.
The software will also reveal duplicate, unused, and redundant applications. You can optimize or remove them from your tech stack to save on SaaS spending.
Improve your vendor negotiations
Dealing with vendors is a significant factor in managing your SaaS expenses. Consider contract terms, costs, and support choices when negotiating. You can get better pricing and contract terms by enhancing your vendor negotiations, which leads to substantial savings.
You can seek the help of assisted buying experts to enhance vendor negotiations. These experts will negotiate on your behalf and help you purchase the right application at the right price, well within your budget.
Conduct regular budget audits
Routine budget audits can help you discover areas where you may be overspending and make necessary adjustments. Auditing your SaaS spending regularly will help you stay on top of it and avoid incurring unexpected expenses.
Utilize SaaS budgeting software
SaaS spend management applications let you analyze expenses, manage subscriptions, and optimize utilization, making it easier to manage your SaaS costs efficiently. You can use this tool to understand your SaaS spending better and identify areas where you can improve usage and cut costs.
So, effective SaaS budget management necessitates a proactive strategy, starting with recognizing your business's needs and using helpful spend management software solutions.
What is a budgeting and forecasting software?
Businesses use budgeting and forecasting software to plan, track, and analyze budgets and economic predictions. It includes features such as data visualization, forecasting algorithms, and strategic planning tools to assist firms in modeling various scenarios and predicting financial consequences.
A SaaS budget forecasting software actively enhances financial planning and efficiency by providing a clearer understanding of cash flow and financial performance. It empowers users to make well-informed choices about investments and resource allocation, resulting in improved outcomes.
CloudEagle for improved SaaS Budgeting
CloudEagle is a comprehensive SaaS management software intended to simplify how IT professionals manage cloud-based application spending in their organizations.
CloudEagle allows you to organize, optimize, and monitor all of your apps from a single platform and will enable your finance team to enhance your SaaS expense management process.
The days of grappling with contradicting data in countless spreadsheets are over. To help you keep track of your whole SaaS environment, CloudEagle provides advanced discovery methods such as single sign-on, finance, direct integrations via APIs, and browser extensions.
You'll constantly be aware of which applications are being used, who is using them, and how much money is being spent.
CloudEagle can assist you in monitoring usage data, identifying redundant or duplicate apps, and reducing wasteful costs.
Usage reports will let you optimize your expenditures and make sensible SaaS spend management decisions. Also, CloudEagle tracks app usage consistently and provides cost optimization insights to help your finance team to optimize and stay within the budget.
“You don’t have to see the whole staircase; just take the first step.”
So take the first step towards SaaS cost optimization and get a CloudEagle demo today for effective SaaS budgeting.
Frequently Asked Questions
1. What are some firms' most common mistakes while budgeting for SaaS?
Some common mistakes include failing to monitor all SaaS costs, missing contract renewals regularly, overestimating usage, neglecting to negotiate with vendors, and failing to have explicit knowledge of the overall ownership costs.
2. How can businesses evaluate which SaaS subscriptions are required and which can be reduced?
Businesses can decide which SaaS subscriptions are required by analyzing their consumption and influence on business operations. They can track usage statistics and analyze data to discover which subscriptions are more frequently utilized and which might be reduced.
3. What are the benefits of utilizing SaaS expense management software?
SaaS spend management software can help businesses keep track of all SaaS spending, identify cost-cutting opportunities, improve vendor negotiations, and provide data-driven insights to support budgeting decisions.
4. How frequently should companies undertake a budget audit for their SaaS expenses?
Businesses must audit their SaaS bills at least once a year and more often if their usage or demands change considerably. This can assist in identifying any disparities, inefficiencies, or cost-cutting opportunities.