The adoption of new technology within companies has changed rapidly. In 2020, we’ve seen a decade of digital transformation in a matter of months. Finance teams have been left scratching their heads as technology costs surge to help employees become accustomed to a new norm of work.
Popular software such as Slack, Microsoft Teams and Zoom have been implemented company wide to make remote work easier. For only a few dollars per employee, it’s never been so easy to try a new piece of software. What many don’t realise though is that SME’s are spending a whopping $2500 (USD) per employee, per year and this amount is only expected to increase.
Finance teams are now being pushed to find ways to better predict and manage software costs across the whole company.
Quick recap: What is Software Management?
Software management is the process of monitoring and managing all “SaaS” applications within a company’s tech stack. The finance team traditionally manages the budget, with the individual apps and licenses managed by the departments. The challenge is however, finance doesn’t use 90% of these apps and it’s extremely difficult to track who’s using what.
Challenges with software applications
Software management is complex primarily because there is not a simple way to predict costs. Software apps charge per month based on usage, licenses and features so the monthly spend can vary materially each month. Other key challenges include:
- Costs are normally tracked in Excel spreadsheets which aren’t updated
- Costs are scattered across multiple departments and credit cards
- There is little incentive for the CFO to chase immaterial costs, which in isolation don’t appear worth it. What you find however is that these costs add up and become significant over time.
Steps your finance team can take:
1. Maintain records
Keep a complete record of who has access to every software i.e. billing owner and users. By doing so, you can stay compliant and manage costs across all departments.
2. Track renewals
Be aware of annual subscription periods. It’s easy for an existing piece of software to automatically renew, regardless if you use it or not. Most software companies also impose a 30 day cancellation period, so you need to stay on top of these dates.
3. Check billing currency
Many people don’t realise that any software paid in a foreign currency has 3-5% in Forex costs on top. To avoid this, pay for your software in the same currency it’s charged in and ideally via invoice (where possible).
4. Reduce shadow IT
Shading IT refers to the unauthorised use of software in a company. Shadow IT poses major security threats to a company’s data, while creating an easy way for a company to waste money. To minimise this threat, create a strict onboarding process for all new software purchases. This could include:
- Paying for new software only with a managers credit card
- Create onboarding/offboarding process for new purchases
- Track each piece of software every employee has access to
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