While there is always an urgency around annual budgeting, the current economic outlook will bring new challenges to finance teams. Now is the time to get a head-start on your 2023 budgeting process. Set your organization up for success in the new year by:
- identifying cost savings
- forecasting spend for long-term success
- and managing renewals with the future in mind
Identify Cost Savings Well in Advance
Researching early will help you secure the best savings opportunities! When it comes to SaaS, first look at what SaaS solutions you’re already using. This can help you surface future savings opportunities. When calculating SaaS cost, pay special attention to purchases on corporate cards or expense reports. Purchases outside the standard process and those with auto-renewal clauses contribute the most to expanding budgets, so identifying them is key to success.
Manage your SaaS budget challenges with a few simple steps:
- Audit all costs that have come in for SaaS, including purchases made on a corporate card or an invoice.
- Review contracts and invoices to ensure licenses aren’t automatically renewed on a card.
- Evaluate license seats and usage.
Forecast Spend for Long-Term Success
In uncertain times, fine-tuning your forecast is essential to success. Many Finance teams are moving to zero-based models, also known as the “use it or lose it” SaaS budgeting method.
Uplifts will play a role in spending for 2023 and beyond. Traditionally, SaaS buyers expect to see incremental increases in pricing — anywhere from 5-8%. This is a customary feature of the SaaS industry model, usually attributed to feature expansion and value creation. But in the current economy, buyers are seeing SaaS cost increases of 10% and beyond.
Where possible, negotiating out of these expanded uplifts is best practice. But plan for potential uplifts in your budget process to avoid uncertainty or stress in the future.
Manage Renewals With Future-Proofing Tactics in Mind
Renewals can be a source of savings or spending, depending on how you approach it. With margins on software sales approaching 70-85%, effective negotiation and future-proofing are vital. Future-proofing your renewals may take several forms:
- Negotiating off list price
- Removing auto-renewal clauses
- Negotiating better payment terms
Before reaching out to suppliers, start the renewal process by holding conversations with your own team. This can help provide important context for spend and identify priorities faster. These conversations don’t have to be complicated. Most of them are productive with a simple overview of the product’s value and the budget needed to maximize that. From there, the stakeholder may feel heard, and ultimately finance can make the business decision for the budget itself.
Year-end is a great time to identify overages and negotiate with suppliers. As a SaaS buyer, you should always be rewarded for becoming a better customer. While this takes some research, the benefits can be well worth the effort.
If your company has outgrown its previously agreed usage, communicate with your supplier to true up the plan. If you have significant overages, there may even be room to talk about waiving these in return for multi-year commitments, early renewal signatures, or logo usage as part of their marketing strategy.
The end of the year is also the perfect time to negotiate terms. Approaching suppliers about re-committing before year-end may unlock benefits like better per-user pricing, or additional discounting.
SCS Can Help
SCS provides our users with expert procurement and negotiation support and deep supplier insights alongside a fully integrated product, to centralize spend on your software solutions. As the longest running independent firm of its kind, we have thrived and grown over the years due to our vendor independence and sole focus on helping clients with IT cost reductions and optimization.We help you surface more opportunities to save and stay on top of every upcoming renewal. If you need more visibility, better procurement management, and a partner who truly gets SaaS spend management, we’re here to help. Contact us today!