Cost savings / Cost avoidance
Different meaningsCost savings reduce an existing or budgeted cost; cost avoidance prevents a new or higher future cost.
Cost savings
Use when
You have a measurable reduction in existing or budgeted expenditure with a direct financial effect.
Example
“The consolidated licence reduced the approved annual budget by $80,000.”
Cost avoidance
Use when
You prevented or reduced a new future cost that would otherwise have been incurred.
Example
“Negotiation prevented the supplier's proposed $80,000 price increase.”
Quick check
avoided increase reported as savings, savings without a baseline, combined benefits without classification
Usage note
State the baseline, time period, calculation method and whether savings are cashable. Do not add savings and avoidance figures together without explaining their different financial effects.