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Cost Management
The
term ‘Cost Management’ has not been defined as such. However it can be
said that cost management identifies, collects, measures, classifies and
reports information that is useful to managers and other internal users in cost
ascertainment, planning, controlling and decision making. Cost management aims
to produce and provide information to internal users and personnel working in
the organization.
know more about "Cost Accounting" and "Financial Accounting"
Techniques of
Cost Management
Below
are mentioned some of the techniques through which the overall cost of the
business can be controlled and maintained within the required limits.
Capitalize on technology
Time management
Budgeting
Inventory management
Outsourcing
Updated
market sense
Control
of headcount
The
system accumulates and classifies expenditure according to the elements of
costs, and then, the accumulated expenditure is allocated and apportioned to
cost objects i.e. cost centres and cost units. We should, therefore, know what
are cost elements, cost centres and cost units.
Cost management
in 4 easy steps
4 steps of project cost management details as per below
Planning Cost
Management: - Planning Cost Management is
defined as activities used to estimate, monitor, and control costs of a
project. Each phase of project cost management will have specialized techniques
to help the project manager accomplish the goals.
Estimating Cost:
- Estimating
cost is the first step in project cost management. It provides a basis to judge
the merits of the project and results in a budget for the project.
Determining your
Budget: - Cost budgeting can be viewed as
part of estimation or as its own separate process. Budgeting is the process of
allocating costs to a certain chunk of the project, such as individual tasks or
modules, for a specific time period. Budgets include contingency reserves
allocated to manage unexpected costs.
Controlling Cost:-
Cost control is the process of measuring cost variances from the baseline and
taking appropriate action, such as increasing the budget allocated or reducing
the scope of work, to correct that gap
Cost
control is a continuous process done throughout the project lifecycle.
Need for Cost
Management
Effective
management of cost makes an organization more strong, more stable and helps in
improving the potentials of a business. The organization calls for a system
that would monitor the full economic impact of the business, on resource
acquisition and consumption. This provides supplying of information to the top
management for exploring various alternatives by which cost effectiveness can
be improved. Cost management also helps in optimizing resources which will
improve overall efficiency of the organization and help the firm to achieve its
objectives.
Factors
affecting cost management
Growth
in information technology
Global
and overall domestic competition
Growth
of service and manufacturing sectors
Advances in Information Technology
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