Work out procurement savings realised instantly with clear inputs, formula shown and shareable results.
Procurement savings must be reported on a realised basis — the annualised saving pro-rated for the months actually elapsed since implementation — not on the annualised figure from day one. Confusing the two is the main reason finance and procurement report different numbers.
Annualised saving
Annualised = (Previous price - New price) x Annual volume
Realised saving
Realised = Annualised saving x Months elapsed / 12
Because procurement reports annualised savings at signature while finance sees realised savings against budget. Reporting both removes the argument.
Then realised savings fall proportionally. Savings should always be recalculated on actual volume, not the volume assumed at negotiation.