What is Cost Management

Why we need to do planning and controlling for every project. The answer is when we do things with perfect plan and forecast the budget according to the plan then we able to manage the forthcoming hindrances very wisely without compromising our basic needs. And control as a management function, means that once a course of action has been decided, operational decisions and activities of management should coincide with plans. This implies that management needs some criterion for judging the results of operating decisions. And cost data constitute an important element of the financial information to accomplish it.

And by definitions ‘Cost Management’ is the process of planning and controlling the budget of a business. It generally produces information for internal users of the firm. It is useful in determining the cost of products, customers, and suppliers, and other relevant objects and for planning, controlling, making continuous improvements, and decision making. It is not only concerned with how much something costs but also with the factors that drive costs, such as cycle time, quality, and process productivity.

Cost management encompasses both the cost accounting and the management accounting information systems. Cost accounting attempts to satisfy costing objectives for both financial and management accounting. Cost accounting provides cost information and that information plays an important role for planning, controlling and decision making. Knowing cost of activities and their underlying causes is critical for companies engaging in such tasks as continuous improvement, total quality management, environment cost management.  And management accounting is concerned specifically with how cost information and other financial and non financial information should be used for planning, controlling, continuous improvement and decision making.

The focus of cost management has been broadened to enable managers to better serve the needs of customers and manage the firm’s business process that are used to create customer value. A firm can establish a competitive advantage by providing more customer value for less cost than its competitors.

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