I hope that you have enjoyed the article “Cost Savings Reporting: Dot The I’s”

An additional cost savings reporting formula with which you will want to be familiar is this:

Savings = (LYP x TYQ) – (TYP x TYQ)

Where,

LYP = Last year’s price

TYQ = This year’s quantity

TYP = This year’s price

If you explain this formula to managers in conjunction with the principles taught in the aforementioned article, they are more likely to understand how you are coming up with the metrics in your cost savings report. Let’s do an example…

LYP = $5

TYQ = 100,000

TYP = $4

Savings = ($5 x 100,000) – ($4 x 100,000)

Savings = $500,000 – $400,000

Savings = $100,000

I hope that the article and this blog post help you develop more believable cost savings reporting procedures. Good luck!

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Recommended Reading             

• 14 Procurement Best Practices
• A Reflection on Total Cost of Ownership
• Finance for Strategic Procurement (Advanced)
• Finance for Strategic Procurement (Fundamentals)
• Mastering Procurement Tactics
• Procurement Best Practice Execution
• Savings Strategy Development

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