The savings management module within oboloo is designed to align with most organizations' savings methodologies and calculations. This guide will explain how savings are calculated within oboloo, including the concepts of cost reduction, cost avoidance, and the steps to calculate projected and realized savings.
All savings can be categorized into two main types: cost reduction and cost avoidance.
- Cost Reduction: These are savings achieved by reducing the actual costs incurred.
- Cost Avoidance: These are savings achieved by avoiding potential future costs.
If you are unsure which category your savings fall under, consult your procurement team or refer to oboloo's article on the topic: Cost Avoidance vs. Cost Reduction.
Projected Savings
Once you have determined the appropriate category for your savings, you can enter the projected savings amounts into the respective fields within a milestone.
Tip: Projected savings are the total savings you expect to achieve at the start of the savings project.
Baseline Spend
Each milestone must have a 'baseline spend' amount.
- Baseline Spend: This is the estimated project cost at the beginning of your project. For example, it could be the total cost of a contract over a year. The projected savings might be the savings made from renegotiating the contract.
Total Savings Calculation
Once all values are populated, oboloo can calculate the projected savings per milestone. Here’s how:
- Input Values: Enter the total projected savings under the milestones (either in cost reduction or cost avoidance).
- Calculation: oboloo will divide the total projected savings by the total baseline spend across all milestones.
Example:
- If there are £40 of projected savings split over two milestones and the total baseline spend across both milestones is £200, the total projected savings for the whole project will be £40, which is 20% of the baseline spend (£40/£200=20%).
Therefore, your project has a projected overall saving of 20%.
Realizing Savings
After calculating projected savings, the next step is to determine realized savings.
- Realized Savings: These are the actual savings achieved when the project is completed (Marked As Complete), which may differ from the initially projected savings.
Realized savings are calculated similarly to projected savings:
- Input Realized Savings: Enter the actual savings achieved into the milestone upon project completion (see the milestone completion guide for details).
- Calculation: oboloo will apply the same calculation method as for projected savings, dividing the total realized savings by the total baseline spend across all milestones.
Tip: For example, if the last milestone had a projected savings of £20 but the actual realized savings were £35, oboloo will calculate the realized savings percentage accordingly.
By following these steps, you can accurately calculate and track both projected and realized savings for each milestone within oboloo. This ensures a clear understanding of your savings performance and helps in achieving financial efficiency.