Like others have mentioned, you have to take into consideration the seam allowance. If it calls for 2.5" strips, that is 2" plus 1/2 seam allowance (1/4 each side). You need to reduce the 2" by 20%, and then add back the 1/2" seam allowance to get it right. So it's larger than a 2" strip. I'm assuming if it's Lone Star, you are sewing strips and then subcutting on the diagonal. you have to adjust your subcut measures the same, subtract 1/2" for seam allowance, then reduce and add back 1/2" for seam allowance
I have done this with a lot of non-paper pieced patterns, and have a ruler that is marked off in 1/8 increments so I can get the pieces accurate, and i do cut them to 1/16" measures. I enjoy working with small pieces.