Gartner says that companies will spend almost $912 billion on software in 2023, marking an increase of 13.5% compared to 2022. Companies need to figure out if they’re spending it wisely.
In this blog post, we’ll take a close look at:
- How to build a SaaS budget from scratch
- What are some common SaaS budgeting mistakes to avoid?
- 6 reasons to implement powerful SaaS budgeting software
How to build a SaaS budget from scratch
The success of a company depends on whether it is consistently able to deliver valuable products or services to its customers. However, it takes time to become a SaaS budgeting expert, especially if the company is growing fast.
Here are the steps to take when building a SaaS budget from scratch:
1.
Start with what you already spend
Begin by taking stock of your current software expenses. This helps you understand how your money is being spent and what software tools are currently in use.
You may discover that your marketing team is using multiple analytics platforms, leading to unnecessary duplication of costs.
2.
Loop in key stakeholders
Once you’ve figured out the software you need, clearly define the department or team accountable for SaaS expenditures. Collaborate with relevant teams and individuals within your organization.
Involve department heads, IT managers, and finance teams. Including these stakeholders ensures that the budget aligns with your organization’s overall strategy and operational needs.
If you find that multiple departments are independently purchasing software, you may set up an IT procurement team to centralize these decisions.
3.
Set your budget
This part can be tricky because there’s no one-size-fits-all answer. Determine a realistic budget based on your organization’s financial capacity and strategic objectives. Trust your instincts and consider growth, scalability, and any upcoming projects that may require new software.
If you plan to expand into new markets, allocate a portion of your budget for localization software or CRM tools to support sales efforts. See how much such a program typically costs before deciding on a budget.
4.
Research your software options
Go online and identify software solutions that align with your business needs. Prioritize options that offer the most value for your budget. Word of mouth can help you get the best in terms of SaaS procurement. Look for software that your peers recommend.
5.
Identify and eliminate duplicate software
Companies could be using similar or the same SaaS tools across departments due to lack of visibility. Audit your existing software portfolio to identify redundancies. Eliminate duplicate tools to optimize your budget and streamline operations.
Consolidating to a single platform, for example, can lead to cost savings if both your sales and marketing teams are using separate email marketing platforms.
6.
Review current contracts
You may want to switch to a different SaaS software provider before your current contract ends because the concerned team is not utilizing the tool well. Check existing software contracts to understand renewal dates, terms, and costs. This information is important for budget planning and negotiation.
If you discover that a contract for project management software is up for renewal in three months, you can plan your budget accordingly and explore alternative options or negotiate better terms. Spendflo’s contract management module pulls all your contracts to a central place and provides visibility over ownership, cost, status, start and end dates, renewal dates, and so on.
7.
Invest in a SaaS spend tool
SaaS budget planning can be tough because there’s a lot of information to handle, like many users, different departments, and lots of budget items. Consider implementing specialized SaaS budgeting tools like Spendflo to simplify the budgeting process. These tools provide visibility and control over your expenditure.
8.
Analyze and adjust
Regularly analyze your SaaS spending against your budget. Adjust as needed to align with changing business priorities and ensure efficient resource allocation.
If a certain department consistently exceeds its allocated software budget, you can investigate the reasons and adjust future budgets accordingly. Keep track of your spending to make sure it’s on track.
What are some common SaaS budgeting mistakes to avoid?
As companies build sophisticated portfolios with hundreds of SaaS tools, the following SaaS budgeting mistakes should be avoided:
1.
Don’t undersell or underestimate the budget
One common mistake is setting a budget that’s too conservative, leaving little room for unforeseen expenses or growth. For instance, if you underestimate the budget for customer support software, you might need more resources to provide quality support during a sudden increase in customer inquiries.
Setting a more realistic budget gives you the financial flexibility to adapt to unexpected challenges or seize growth opportunities. This helps in greater financial resilience for your organization.
2.
Don’t create your budget in a silo
Failing to involve key stakeholders in the budgeting process can lead to misalignment and missed opportunities. Imagine this scenario: Your IT department decides on a budget for cybersecurity software without consulting the finance team. As a result, the finance team may not allocate sufficient funds for critical security measures, potentially exposing the company to risks.
Collaborative budgeting ensures that all stakeholders are on the same page. This promotes better alignment with organizational goals and fosters accountability among teams.
3.
Avoid buying software that can’t grow with you
Selecting software that lacks scalability can hinder your organization’s growth and flexibility. If your chosen SaaS solutions can’t adapt to changing demands, you may find yourself needing to replace them or work around their limitations, which can disrupt workflows and increase costs over time.
6 reasons to implement powerful SaaS budgeting software
SaaS budgeting software prevents you from overspending on SaaS subscriptions. Here are 6 reasons to invest in such software:
1.
Integrated budgeting best practices
Implementing SaaS budget software ensures that your budgeting methods align with proven strategies for financial management, minimizing the risk of overlooking sensitive budgeting considerations.
These best practices include:
- Making budget decisions focusing on results and outcomes ensures that your financial choices directly contribute to your organization’s mission
- Creating strong connections between your budget and your organization’s broader objectives
- Taking a long-term perspective, which means considering not only short-term financial needs but also your organization’s goals for the future.
- Actively involving all relevant stakeholders and maintaining effective communication with them
This SaaS financial planning software also lets you link your strategic plans to your budget, create forecasts, and get deeper insights into your budget.
2.
Elimination of Excel spreadsheets from the budgeting process
For a long time, manual spreadsheet-based budgeting has been used in the public sector. However, they have some big problems, such as:
- Spreadsheets are static, making it challenging to analyze and adapt your budget dynamically.
- They require a substantial amount of time and effort to set up and manage, often leading to lengthy and labor-intensive projects.
- The reliance on manual data entry and calculations increases the risk of errors in your budgeting process.
SaaS budgeting software eliminates these issues and makes budgeting faster and more accurate.
3.
User-friendly, collaborative features
Legacy software and spreadsheets can be difficult to use. On the other hand, cloud-based budgeting software helps with the following:
- Automated workflows and approval processes ensure a collaborative platform that lets your team work together seamlessly.
- Interactive dashboards offer visually rich representations of your financial data, simplifying budget comprehension.
It also connects with other systems, such as tax management, payroll, and financial analytics, to keep your budget up to date. Collaboration features promote teamwork, enabling different stakeholders to contribute efficiently to the budgeting process.
4.
Actionable information for data-driven decision-making
Companies need to make quick decisions and adapt to changes. Traditional systems can’t always keep up because they lack important features like:
- Detailed reporting capabilities that provide detailed insights into your financial data
- Scenario-planning tools that allow you to prepare for various budgeting scenarios
- Support for multi-year budgeting, ensuring long-term financial planning
- Advanced allocation functions that help distribute funds optimally
SaaS budgeting software gives you these features so you can make better decisions based on data.
5.
Cost-effective access
SaaS budgeting software reduces the labor and time required for manual budget management. It is also cost-effective because of the following reasons:
- The scalability of the subscription model allows you to adapt your costs to your actual usage.
- It operates on a subscription-based model, which is typically more budget-friendly than the upfront costs of traditional software.
6.
Increased stakeholder transparency and engagement
To gain trust, being open about your budget is important for companies. This is where SaaS budgeting software comes handy. Maintaining high transparency, even in challenging times, fosters trust, and accountability. It simplifies the understanding of where your company’s funds are allocated, helping taxpayers comprehend budget data.
SaaS budgeting software is easy to use and doesn’t need lots of IT help. It’s a cost-effective way to replace traditional systems. It makes budgeting easier and gets everyone involved, making sure your decisions are based on data and keeping everyone in the loop.
SaaS budgeting with Spendflo
Our research revealed that 56% of companies do not have a monthly cadence for SaaS spend review. Of them, 16% don’t have a pre-established cadence; they review as and when the leaders want them to.
This can lead to confusion and wasted money.
Spendflo, a SaaS management platform, can make budgeting easier for you. The centralized view helps you stay in control of your company’s SaaS contracts, cut your buying cycle in half, and streamline procurement.
Get a free saving analysis today to learn more.
