A manufacturer’s improvement program had lost credibility because claimed savings never appeared in the accounts. A finance-validated method lowered reported savings but narrowed the claimed-versus-validated gap from 48% to 6%, more than doubled project approvals and nearly doubled the program budget.
Key numbers
The improvement program had a problem nobody wanted to say out loud. Every quarter, project teams reported impressive savings. Every quarter, the finance director looked for those savings in the accounts and could not find most of them. Over time, the program's numbers had stopped meaning anything to the leadership team, and new projects were becoming hard to approve.
The situation
An analysis of the previous year showed the gap: claimed savings were nearly double what finance could validate. Some claims counted cost avoidance as hard savings, some used baselines from unusually bad months, some ignored volume changes, and a few savings had been claimed by more than one project.
What changed
The program adopted the approach described in benefits tracking: making savings your CFO believes:
- Benefit categories defined with finance: hard savings that appear in the profit and loss, cost avoidance and soft benefits, reported separately and never added together.
- Baselines agreed before each project started, using a representative period and adjusted for volume changes.
- Finance sign-off required before a project could close, with a follow-up check a few months later to confirm the saving had been sustained.
- One owner per saving, so nothing was double counted.
What the data showed
In the first quarter under the new method, validated savings were half of what teams claimed. By the fourth quarter, claimed and validated savings were almost the same, as teams learned to measure properly from the start. The gap between claimed and validated savings narrowed from 48% to 6% over the year.
Results
Reported savings fell, but the numbers were now trusted. Leadership approved more projects, nine per quarter instead of four, and nearly doubled the program budget, from $220,000 to $410,000, because it could now see a credible return.
Why lower numbers built more support
Credibility is worth more than size. A smaller saving that finance can see in the accounts supports investment decisions; a larger one that nobody believes undermines them. Once leaders trusted the numbers, they treated the program as an investment rather than a cost.
Lessons for your operation
- Agree definitions and baselines with finance before projects start.
- Separate hard savings, cost avoidance and soft benefits.
- Require finance validation before projects close, and check again later.
- Expect reported numbers to fall at first, and trust to rise.
