Important: If you prefer to be able to listen to an audio version here is my Youtube video on the subject.
Step One: Scout your players
If you see players available that you like the look of, then scout them rather than dive right in, and go as deep into the scouting as you want, the more you scout the better you will know your transfer target. You don't want to be diving into buying a player and then finding out after you payed 9 million for a dud.
Step Two: Watch your finances
You always want to be able to make sure that the player you are after will not harm your finances, you don't want to be harming your finances by doing a 20 million 48 month payment agreement on a player that might not even bring anything to your team in particular.
Try to be as careful as you can when selecting the best of both value and quality. Loans are good options for lower budget clubs, and even some good deals are to be found in the free transfer market.
Step Three: Pick the player for what you want them to do
For this I mean, would you have a 30 year old player as an investment? Or a 20 year old to fill a gap? make sure the player you are bringing in suits the needs that you have, otherwise you might end up spending too much money on a player that might not be able to do the job.
I wouldn't recommend spending big money on anyone over the age of 30, because this is the age where most players, apart from maybe keepers and defenders decline, and I wouldn't buy young players to come in and do a job immediately in the first team, unless they are much better than your current squad.
Step Four: Negotiate Transfer Fees
NEVER spend what the club ask for the player unless you have to. 9 times out of 10 you can negotiate yourself into some big savings. If a club for example wanted £9m for a player, offer £5.5m.
They will then counter offer closer to your offer and you can counter offer closer to theirs. you can then meet them in the middle somewhere and hopefully save yourself some money in the process.
For example on FM13 I signed David Alaba for Barcelona. Bayern Munich wanted £22m for him. I offered £13m and eventually we settled at £17m. That's a £5m saving that I managed to save from the original asking price.
Step 5: Negotiate Wages
Push hard to lower the wages that every player asks for. If they want £115k why not try and lower it to £99k. They might even accept it. There is no need to always just rush through contract negotiations, and just get the player tied down. The only time i would recommend giving into player demands is if the player is irreplaceable. Ronaldo, Messi, Falcao, Rooney just to name a few.
One thing that I definately would look out for would be the Bonus's and Fees. I would try to cut down as much as I can off them, as they can add hidden costs to the transfer, and to the wage bill,and note what every player is earning on the side, so you know how it is effecting your wage bill.
I hope that this short guide has helped out some of the newer Football Managers, and hopefully you have learnt a thing or two about negotiating and sifting through players.
I also have wrote a Lower League Management Guide for FMScout before.