Cost Control and Cost Management

happay6

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Cost accounting, budgetary control, financial statement analysis, and project management are essential tools in financial management for reducing business and project expenses through cost control that results in cost savings.

What Is Cost Control?​

Cost control is the process of identifying, eliminating, or reducing unneeded business expenses in order to boost profits. Cost management begins with the budgeting procedure and examines vendor selection and negotiation, leveraging early payment and volume discounts, implementing spend management systems, and enhancing manufacturing or construction efficiency and product quality.

Cost Management Consists of Cost Control​

Cost control reduces costs and expenses by managing variances between budget and actual by cost centre, profit centre, department, or project and implementing corrective action. Cost control is a component of the process of cost management.

Cost management is a broader term that includes estimating methods to forecast required resources and perform cost estimation, budgeting, cash flow forecasting, funding the budget, controlling costs, and performing a post-project evaluation to identify future cost-saving opportunities. A company's cost accounting function contributes to the cost management procedure.

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Steps in Cost Management​

Among the steps of cost management are:
Cost Management in Project Management Cost

During the project's activities phase, the cost of project management must be monitored and attended to. In a cost control system, specialised project management software and metrics should be used to estimate cost baseline by task, control, and reduce project costs. Through a learning curve, post-project analysis can make future projects more efficient.

Control Techniques​

Expense and cost management control methods include target net income, variance analysis, and earned value management. Utilizing specialised cost management software for business and project management to improve cost budgeting and cost performance is another control method.

Examples of Cost Control​

Examples of cost management include:

Cost Control Software​

As a management system for a variety of business applications, cost control software is offered, which frequently includes dashboards for spend management and spend analysis.

Core ERP and Accounting Applications​

ERP (enterprise resource planning) and accounting systems incorporate actual vs. budget comparisons for detailed financial statements by account, with drill-down access to underlying data. These variance budget features are essential for cost management.
Standard versus actual costing can be implemented in manufacturing companies' ERP systems that are rich in features. Variations in standard costing include labour hours, labour pricing, material purchase price, material usage, and variances in overhead spending and overhead usage resulting from alterations in production volume or machine hours.

Financial Budgeting and Forecasting Software​

Full-featured software for business forecasting and budgeting may be offered as an ERP software module or as a standalone software product. Advanced software for financial forecasting and budgeting will generate a more accurate sales forecast and cost budget for variance analysis in cost control.
 
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