Cost Reduction Impact Analyzer
Quantifies the financial impact of proposed cost-cutting initiatives. For each initiative, it calculates projected savings, implementation costs, net benefit, and payback period so you can prioritize by ROI.
Business - Cost Reduction Impact Analyzer.xlsx
Excel (.xlsx) — No macros — Works in Excel, Google Sheets, LibreOffice
What This Spreadsheet Solves
- No structured way to compare cost reduction initiatives against each other
- Difficulty quantifying the net benefit after accounting for implementation costs
- Unclear payback timelines for cost-cutting investments
- Risk of cutting costs that hurt revenue more than they save
- Inability to present a ranked list of savings opportunities to leadership
Who This Is For
- Operations managers evaluating efficiency improvements
- CFOs building cost optimization roadmaps
- Consultants presenting savings recommendations to clients
- Department heads justifying budget reallocation requests
Inputs
- textInitiative Name
- $Current Annual Cost
- $Projected Annual Savings
- $Implementation Cost
- #Implementation Timeline (months)
Outputs
- Net Annual Benefit per Initiative
- Payback Period (months)
- 3-Year Cumulative Savings
- ROI per Initiative
- Ranked Priority List
How Calculations Work
Each initiative's projected savings is reduced by ongoing costs and one-time implementation expenses. The payback period divides implementation cost by monthly net savings. Initiatives are then ranked by ROI and cumulative 3-year benefit, giving you a clear priority order.
Example Use Case
Scenario: Three initiatives: renegotiating a vendor contract (saves $60K/year, $5K implementation), automating invoice processing (saves $40K/year, $25K implementation), and consolidating software licenses (saves $18K/year, $3K implementation).
Result: Vendor renegotiation ranks first with a 1-month payback and 1,100% 3-year ROI. Automation ranks second with a 7.5-month payback and 380% ROI. License consolidation ranks third with a 2-month payback and 1,700% ROI by percentage but lower absolute savings.
What You Get — 5 Sheets
Technical Details
Frequently Asked Questions
How do I handle initiatives with variable savings over time?
Enter the average annual savings in the INPUT sheet. For more precision, override the year-by-year values in the LOGIC sheet where each year is broken out separately.
Should I include soft savings like employee time freed up?
Only if you can assign a dollar value. Convert hours saved to a dollar amount using a fully loaded labor rate. Otherwise, note it qualitatively but keep it out of the financial model.
What if an initiative has ongoing costs after implementation?
Subtract the ongoing annual cost from the projected annual savings before entering. The model works with net annual savings.
Can I compare initiatives across departments?
Yes. Add a department column in INPUT and use the OUTPUT sheet filters to view by department or across the entire organization.
How is the priority ranking determined?
By default, initiatives are ranked by 3-year cumulative net benefit. You can change the ranking criterion in CONFIG to ROI percentage or payback period instead.
Download Cost Reduction Impact Analyzer
Ready to use immediately. Enter your data in the INPUT sheet, see results in OUTPUT.