How to run a vendor audit before your annual budget review

Most software contracts renew automatically. Most organisations do not have a single place where all active contracts are listed. The combination of those two facts is why vendor audits tend to find more than people expect. Running one before your annual budget review is straightforward, but it requires someone to own the process.

Build the list before you evaluate anything ¶

The first step is to get everything into one place. That means centrally managed subscriptions, individually expensed tools, and any contracts that sit with specific departments rather than with finance. This step takes longer than expected because the information is usually spread across expense reports, credit card statements, and the memories of various team members.

Do not try to evaluate anything at this stage. Just build the list. Name of the tool, cost per month or year, who owns it internally, and how many people are supposed to be using it.

Check actual usage, not intended usage ¶

Once you have the list, check the usage data for each tool. Most software platforms provide admin-level usage reports. What you are looking for is the gap between the number of licences you are paying for and the number of people who have logged in in the past ninety days.

A tool with twenty licences and four active users in the past quarter is a candidate for reduction. A tool with zero logins in six months is a candidate for cancellation. The usage data is usually more persuasive than any argument about whether the tool is theoretically useful.

• Pull the admin usage report for each tool
• Note the last login date for each user
• Count active users in the past 90 days
• Compare active users to licences paid for
• Flag any tool with zero logins in 90 days

Look for overlap before you cut ¶

Before cancelling anything, check whether two tools are doing the same job. Overlap is common in communication tools, project management tools, and file storage. Consolidating two overlapping tools into one is usually more valuable than cancelling a low-use tool outright, because it also reduces the cognitive overhead of switching between platforms.

Overlap is also where the political difficulty tends to live. Different teams often have strong preferences for different tools, and consolidation requires someone with enough authority to make a decision and hold it.

Document what you decide and why ¶

The output of a vendor audit is not just a list of cancellations. It is a record of what you have, what you decided to do with it, and why. That record is what prevents the same problem from recurring in eighteen months. Without it, the list grows back.

If you are not sure where to start, the full list of engagements includes a standalone vendor audit that covers this process end to end.