It doesn’t seem possible, but year-end is right around the corner. So, how’s your budget season so far?
While annual budgeting always features a sense of urgency, the current economic outlook will bring new challenges to finance teams. Savvy teams are getting a jump-start on the 2023 SaaS budgeting process. They’re eager to optimize their spend and set their organizations up for success in the new year.
Vendr is excited to help you navigate budget season successfully and save money on SaaS. To cut through the overwhelm of SaaS business expenses, we invited a panel of our Vendr executive buyers and procurement specialists for a discussion of the best ways to tackle these SaaS budgeting challenges.
In an informative session moderated by Sr. Executive Buyer Ellie Re, with Procurement Specialists Sofia Arteaga and Richard Hesse and Sr. Executive Buyers Hunter Bagnal and Michael Singer offered their most valuable insights on bringing calm and cash savings to budget season.
Check out the highlights here, or enjoy the entire session on-demand below.
As with holiday shopping, researching early helps secure the best savings opportunities. With SaaS, it helps to 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. “The reality is that procurement is not fast, and for individuals not in procurement, it’s a burden,” says Sofia. “This causes invoices to creep in which no one can project for.”
Purchases outside the standard process and those with auto-renewal clauses contribute the most to expanding budgets, so identifying them is key to success.
The team recommends managing your SaaS budget challenges with a few simple steps:
One word of advice from the team: cut costs, not corners. Eliminating software spend shouldn’t take precedence over investing in high-value tools.
In calmer economic waters, forecasting often follows a simple protocol. But in uncertain times, fine-tuning your forecast is essential to success. As Richard puts it, “We can’t rely on standard budgeting where you flip this year’s over and add 10% to next year’s. We have to be more intentional and tactical.”
In light of the current environment, many Finance teams are moving to zero-based models, the so-called “use it or lose it” SaaS budgeting method. The remedy isn’t to rush out a PO and seal a deal by year-end.
Instead, getting a jump on your planning ensures you fall within the projected budget next year. Vendr is already negotiating more than 40% of our customers’ year-end spend. The lesson: it’s not too early to begin planning for next year's budgets.
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. “There is a new pressure for SaaS companies to become profitable to increase their stock or valuation,” explains Hunter.
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. For expert advice on handling uplift negotiations with your suppliers, check out the full replay of our webinar below.
Renewals can be a source of savings or spending. It all depends 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:
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.
“I was in a conversation where the finance team was unaware of how large the contract grew, with additional add-ons, seats, and overages,” shared Ellie.
“Transparently, they were pushing really hard to have the tool ownership team move to new software to get better pricing. Especially with year end, it can be tricky to switch to a new platform with onboarding and transferring data. So if we can catch those conversations earlier, it is going to be a much smoother process for everyone involved.”
Hunter adds that these don’t have to be complicated conversations. 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.
“[Overage] presents us with a great opportunity to renegotiate contracts and take advantage of economies of scale pricing,” explains Michael.
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.
Vendr 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. 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.
Ready for more insights to boost your year-end budget process? Get all our best advice, including tips on navigating tricky uplift negotiations with your suppliers, in the full panel replay here.
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