I hope that you enjoyed the article, “3 Different Cost Savings Definitions.”
As you read, the same deal can result in one person calculating $3,000 in cost savings, another calculating $1,200, and a third calculating $600.
There may not be a universally “right” cost savings definition. But, what is important, is knowing what type of cost savings calculation will be accepted by management in your organization.
If your management recognizes what we called “contractual cost savings” in the article, and is willing to accept pricing from a year that is not the previous fiscal year as the baseline in your cost savings calculations, great! If not, it is important to understand how your management thinks and to either (a) use their cost savings recognition method, or (b) present a case for them to adopt yours.
Just remember something that we teach in our SPSM Certification courses: financial statements are the “official” scorecard of an organization’s performance. The better you can tie the results you’re claiming to a noticeable difference on the financial statements, the more likely your cost savings claims will be recognized.