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Efficiency and Cost Optimisation - Cost Management

Today’s article on Cost Management is a follow–up to our last article on Procurement published on April 5 and earlier articles on cost optimisation appearing in March issues of The Slovak Spectator.

(Source: Spiralis s.r.o.)

Today’s article on Cost Management is a follow–up to our last article on Procurement published on April 5 and earlier articles on cost optimisation appearing in March issues of The Slovak Spectator.

What is Cost Management?
Cost management is the process by which companies plan and control the costs of doing business. The most important issue is to integrate cost management into the company’s overall business model. This means that cost management is in the role of supporting the business. The result of effective cost management is cost savings that can reach significant amounts and therefore increase profits.

Tools and processes of cost management:
- cost accounting and controlling
- procurement and purchasing
- approval process for invoices, expenditures and investments
- cost reporting as a part of managerial reports
- cost budgeting as a tool of cost planning
- control mechanism for costs, their correct allocation and amounts
- specific expert methods and tools for cost reduction.

Results reached through cost management:
- cost savings
- better flexibility of business
- preparedness for potential problems and quicker reaction time for economy measures.

There are 5 primary developmental stages in cost management and procurementas shown below along with their related contribution to company performance (see above - the second picture).

When implementing cost management your goals are to:
- save costs
- increase profitability
- improve processes and transparency
- determine product and project profitability
- increase managerial and department responsibility for costs entrusted to them.


In our next article on May 10, 2010 we will take a look at Business Finance.

By Marek Fajčík, Spiralis s.r.o., www.spiralis.sk

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