Home / Calculators / Negotiation savings calculator
Supplier performance and risk
Negotiation savings calculator
Enter the old price, the new price, your budget price and the yearly volume. You get the savings against each baseline, as a percent and as a yearly amount.
Negotiation savings are the difference between the baseline price and the price you agreed, times the volume. At the default numbers you save 7.5% against the old price, worth USD 90,000 a year.
Written by Procurement VMS Editorial Team · Reviewed by Michael, Procurement Advisor Expert · Updated
Your numbers
The boxes start with an example so you can see how it works. Replace them with your own figures.
Your result
The new price is 7.5% below the old price, saving USD 90,000 a year, and USD 40,000 a year against budget. Record the type of saving, since finance may count cost savings and cost avoidance differently.
| Saving per unit against the old price | USD 3.60 |
|---|---|
| Saving against the old price | 7.5% |
| Yearly saving against the old price | USD 90,000 |
| Saving against the budget | 3.5% |
| Yearly saving against the budget | USD 40,000 |
The currency box changes the label only. Enter amounts in the currency you choose.
Free PDF and Excel
Save this result as a PDF guide and an Excel model
Free to download. You enter your name, work email and phone number, and the files are ready at once.
- PDF guide with the formula, a worked example and a checklist of what to enter
- Excel model with live formulas, so your own numbers recalculate at once
- Ready at once after the form, with no account to create
The files open with the example numbers from the page. Type yours over the blue cells in the Excel file. The calculator on this page is free to use without a form.
How the negotiation savings calculator works
The formula
Saving % = (old price - new price) / old price. Yearly saving = (old price - new price) x yearly volume.
Savings figures cause arguments when each person uses a different baseline. Comparing with last year price gives one answer, comparing with the budget gives another, and comparing with the first quote gives a third.
State the baseline every time and report the savings against both the old price and the budget. Finance then sees the real effect on the P and L, and procurement keeps credit for avoiding increases.
The example numbers are illustrative and are not benchmarks. Use your own data for any decision.
How to use it with your own data
- Choose the baseline you will report against and write it down.
- Use the volume you will actually buy, not a forecast.
- Record the result and the type of saving in your cost savings tracker.
Mistakes that skew the answer
Using the first quote as the baseline
Savings against an inflated opening quote do not show in the accounts.
Counting savings on volume you do not buy
Use actual volume. Forecast volume overstates savings.
Mixing cost saving and cost avoidance
Keep them apart. A price held flat in a rising market is avoidance, not a reduction.
What to do with the result
Plan the talk with the contract negotiation guide and the procurement negotiation page. Use the purchase price variance calculator to check later that invoices match the agreed price.
Questions about the negotiation savings calculator
How do you calculate procurement savings?
Subtract the new price from the baseline price and multiply by the volume. Divide by the baseline to get a percentage.
What baseline should I use?
Use the previous price or the budget price, and say which. Reporting both is the safest approach.
What is the difference between cost savings and cost avoidance?
Cost savings lower spend compared with the past. Cost avoidance prevents a rise that would have happened.
How should I report savings to finance?
As a yearly amount against a stated baseline, with the date it starts, and track it in a savings log.