A few years ago, before I founded Provalido, I worked for a outsourced procurement services provider, managing indirect spend for a large FMCG company.

Delivering ongoing, sustainable procurement savings was the primary focus. Ensuring a direct return on investment was the key performance metric. One-off procurement savings were not recognised.

Sustainable cost savings were defined as those that could be delivered year-on-year. In other words, the goods or services being procured had to be for a predictable and repeatable spend.

This approach had significant implications.

It meant that savings on capital spend – which are usually one-time projects – were rarely recognised. It also removed any incentive to pursue one-off rebates or temporary cost reductions. The focus was, thus, purely on long-term savings.

Of course, the goal and the logic behind this approach was understandable. But, considering the opportunities left untouched as a result, was this the right approach?

Should procurement ignore one-off savings?

Cost savings in Procurement essentially depend on balancing short-term reductions with more sustainable, long-term value.

One-off savings may provide immediate financial relief. Some valid examples include:

• Discounts for bulk purchases

• Successful contract terms renegotiations

• Spend or volume-based rebates

These are hard savings.

They directly impact budgets through measurable reductions, making them valuable for improving bottom-line results. However, over-relying on one-off events can disrupt strategic alignment if broader value creation is overlooked.

Evaluate the sustainability of one-off savings before deprioritising them.

While one-off savings address immediate needs, they lack repeatability and sustainment. Compared to cost avoidance in procurement or long-term spend optimisation, the focus is on a one-time activity. Effort, therefore, has to be expended over and over, in order to deliver the gains.

For example, addressing unforeseen supplier overcharges is a singular saving with limited future impact. Focusing solely on these temporary gains, instead of adopting measures such as a continuous improvement culture, supplier performance management (SPM), or post-signature contract management, can have an impact on overall procurement efficiency.

Integrate one-off savings within a broader procurement strategy.

Utilising one-time savings effectively in procurement requires complementary strategies. These should include how to manage longer-term supplier collaboration, as well as how to tackle cost avoidance in both tail spend transactional purchasing and more strategic supplier relationships.

Why one-off savings are different to cost avoidance?

One-off savings focus on hard cost reduction or price-downs.

Whereas cost avoidance addresses preventing, reducing, or delaying any future expenditure.

One-off savings can be considered as hard savings, in the sense that they should be visible to the P&L. Savings achieved from unique events could include renegotiating an existing contract, or securing a lump sum payment as a rebate or a volume discount.

These savings should visibly appear in budgets or financial statements.

Cost avoidance aims to mitigate future costs.

These can be proactive measures, such as minimising or postponing supplier price increases, or considering a more cost-efficient alternative for a one-time purchase.

Unlike one-off savings, cost avoidance in procurement does not directly trickle down into financial statements, making it harder to quantify with precision. This is where alignment with Finance around the metrics and methodology of procurement savings reporting is crucial.

One-time savings deliver short-term cost reductions.

An ongoing strategy of pursuing cost avoidance, on the other hand, contributes towards deferring or eliminating a proposed expenditure.

Negotiating the original quote for a new packaging machine down by 15% represents cost avoidance versus what was planned in the budget. The money has not yet been spent, so it can’t show as a hard saving against a last price paid. It does, however, free up this budget to be spent on something else that can deliver top or bottom line value.

Whereas negotiating a 15% discount on bulk purchasing of an existing good or service demonstrates a one-off cost saving.

Both methods offer value to the business, but align with different procurement objectives.

Repeatable spend management separates the two concepts, as it benchmarks similar purchases over time.

One-off savings lack repeatability due to unique negotiations, but they are based on a previous spend.

Cost avoidance provides mitigation by systematically averting potentially higher costs for goods or services. However, because these higher costs are not projected in budgets or in standard costing, they don’t appear on financial statements as savings.

Why is it useful to track one-off savings?

Tracking one-off savings provides insights into immediate financial impacts, allowing you to quantify measurable savings and identify opportunities for optimisation. By monitoring these hard savings, you can differentiate between short-term gains and long-term strategies to improve procurement effectiveness.

While these savings may not reduce long-term budgets, they still provide immediate financial benefits. The challenge comes with how to account for them properly.

1. Separate Targets for Repeatable Savings

One solution is to categorise and report one-off savings separately from procurement cost savings derived from repeatable, predictable spend. Each should have its own targets.

For industries or categories of spend where a large portion of spend is non-repeatable, sustainable savings will be harder to deliver.

If procurement teams continually deliver one-off savings every year on different items, they effectively become ongoing savings. The only difference being they require continuous effort to identify and then negotiate them.

By defining separate metrics, procurement remains incentivised to pursue both types of savings. This ensures that short-term gains are not overlooked, simply because they do not fit into a somewhat narrow view from Finance Departments of how they define cost savings in procurement.

2. Treat One-Off Savings as a Cash Injection

An alternative approach is to treat one-off savings as a financial boost to the business rather than a cost reduction. While these savings do not lower future budgets, they provide additional cash flow. At any given time, this has its own financial value.

One way to quantify this is through a cost-of-capital (CoC) adjustment.

If a company has a cost of capital of 10%, a £1 million one-off saving equates to £100,000 in sustainable savings (£1m x 10%). This method helps normalise one-off savings into a comparable financial metric.

Regardless of the specific approach, alignment with Finance and educating them about how procurement works is essential.

Alignment between Procurement and Finance is key

Achieving procurement savings requires a well-coordinated approach that aligns procurement goals with your organisation's financial objectives. Purchasing savings must be measured in a way that gives your team credibility within the organisation.

By fostering collaboration between Procurement and Finance, you can create a unified strategy that balances immediate cost reductions with sustainable value creation.

This alignment ensures that short-term savings - like one-off cost reductions - are effectively leveraged to complement longer-term initiatives such as innovation, technology adoption, and continuous improvement activities.

It also helps maintain clarity in budget planning and decision-making. Every hard saving contributes meaningfully to your organisation's growth. It just might mean agreeing a different model with regard to how each type of saving is calculated and reported.

Finance is the owner of budgeting, P&L reports and financial performance metrics. We in Procurement are never going to be the single source of truth for this. The only way to gain recognition for all of the savings we can deliver is to educate our colleagues in Finance, and to work to get their buy-in on how we report our deliverables.

Final Thoughts

Procurement should not ignore one-off savings, but they must be treated differently from cost or price reductions on repeatable spend. Whether through separate reporting or financial normalisation, these savings can provide significant value, if properly accounted for.

FAQs

1. Why don’t one-off procurement savings count as sustainable savings?

Sustainable savings must be repeatable year after year, whereas one-off savings provide a one-time financial benefit.

2. How can companies measure one-off savings effectively?

They can be reported separately from repeatable spend savings, or converted into an equivalent financial benefit using cost-of-capital adjustments.

3. Should procurement teams be incentivised to pursue one-off savings?

Yes, especially in industries or categories of spend where sustainable savings are more difficult to achieve due to low quantities of repeatable spend. Separate targets help ensure one-off savings are still valued.

4. How can Finance and Procurement align on savings measurement?

By using financial metrics that reflect accounting principles which then provide trust and credibility for a procurement team within the wider business.

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