Cost Savings (Hard & Soft)
Also known as: Hard savings, Procurement savings
Cost savings are the measurable reductions in spend procurement delivers, split into hard savings that lower actual costs and soft savings that avoid potential costs.
Hard savings are concrete, budget-visible reductions — a lower price on the same item, or consolidating suppliers to cut total cost. Soft savings, or cost avoidance, prevent costs that would otherwise have occurred. Both are legitimate, but finance treats them differently because only hard savings reduce the budget.
Credible savings reporting defines the baseline, methodology and category clearly, and separates hard from soft. Overstating savings — or double-counting — erodes procurement's credibility, so disciplined measurement matters as much as the negotiation itself.
Frequently asked questions
- What are hard and soft savings?
- Hard savings are measurable reductions in actual spend against budget. Soft savings (cost avoidance) prevent potential future costs. Both are valid but reported separately.
- How are procurement savings measured?
- Against a defined baseline — usually the previous price or budget — with a clear methodology, and split into hard versus soft so finance can reconcile them.
Related terms
Cost Avoidance
Cost avoidance is procurement value that prevents future or potential cost increases, rather than reducing current, budgeted spend.
Read definitionSpend Analysis
Spend analysis is the process of collecting, cleaning and categorising an organisation's purchasing data to understand what it buys, from whom and for how much.
Read definitionVolume Discount
A volume discount is a reduced unit price a supplier offers when a buyer purchases larger quantities or commits to higher total volume.
Read definitionBaseline Spend
Baseline spend is the reference level of spending for a category, usually based on historical data, against which savings and future performance are measured.
Read definitionGo deeper
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