The official business definition of cost avoidance vs cost savings is an important distinction to understand when managing a budget. Cost avoidance is the practice of taking steps to reduce or eliminate potential costs. This is usually done by making changes to processes or systems that will prevent future costs from occurring. Cost savings, on the other hand, is the practice of reducing existing costs. This is done by finding ways to reduce the cost of goods or services that are already being used.
Cost avoidance is a proactive approach to managing costs, while cost savings is a reactive approach. Cost avoidance focuses on preventing future costs from occurring, while cost savings focuses on reducing existing costs. Cost avoidance can be used to prevent future costs from occurring, while cost savings can be used to reduce existing costs. Cost avoidance can also be used to reduce the risk of future costs, while cost savings can be used to reduce the cost of existing goods or services.
Overall, cost avoidance and cost savings are two different strategies for managing costs. Cost avoidance is a proactive approach that focuses on preventing future costs from occurring, while cost savings is a reactive approach that focuses on reducing existing costs. Both strategies can be used to effectively manage costs, but understanding the differences between them is essential for successful budget management.