Cost control is an important term in the field of business administration and refers to the systematic monitoring and management of costs within a company or project. Effective cost control enables the optimization of economic efficiency and the improvement of profitability. This glossary entry explains the various aspects of cost control that are essential for successful cost management.
Cost control involves the systematic recording, analysis, and management of costs in a company or project. It is a fundamental part of cost management and contributes to improving economic efficiency and profitability. Methods of cost control include budgeting, cost accounting, and performance measurement systems. Controlling fixed costs, variable costs, and overhead costs is just as important as identifying cost drivers and potential savings.
1. Explanation of terms
The term cost control describes the systematic monitoring and management of the costs that occur within a company or project. The goal of cost control is to optimize economic efficiency and profitability. This includes not only the recording and analysis of current costs but also the adjustment of processes and structures to reduce or better manage costs.
2. Methods of cost control
There are various methods to implement cost control in a company or project:
- Budgeting: Creating and controlling budgets allows for the planning and monitoring of costs in advance. It serves as a basis for cost control and enables early detection of deviations and countermeasures.
- Cost accounting: Cost accounting allows for the recording and analysis of actual costs incurred. It serves as a basis for cost control and enables a detailed examination of cost structures.
- Performance measurement systems: Performance measurement systems, such as the Balanced Scorecard system, enable the integration of cost control within a comprehensive controlling framework. This allows cost control to be linked with other business-related performance indicators.
3. Types of costs
In cost control, it is important to distinguish and include the different types of costs:
- Fixed costs: Costs that occur regardless of production volume. Examples include rent, salaries, or depreciation. Fixed costs should be regularly reviewed and analyzed for potential savings.
- Variable costs: Costs that depend directly on the production volume, such as raw materials or energy. Effective cost control includes optimizing purchasing, inventory management, and consumption of these resources.
- Overhead costs: Costs that cannot be directly assigned to a product or service, such as administrative expenses. Effective cost control involves identifying shares of overhead costs and their targeted reduction.
4. Cost drivers and potential savings
An important aspect of cost control is the identification of cost drivers and potential savings. Cost drivers are factors that significantly contribute to the generation of costs. By analyzing cost drivers, companies or projects can identify potential savings and take targeted measures to reduce costs.
5. Implementation and success monitoring
The implementation of cost control in a company or project requires a systematic approach and the involvement of all relevant stakeholders. This also includes the regular review of the measures taken and their success. Effective cost control enables the improvement of economic efficiency and profitability and ensures long-term success.
Cost control is a central component of business administration's cost management and enables systematic monitoring and management of costs in companies and projects. By applying methods such as budgeting, cost accounting, and performance measurement systems, cost structures can be analyzed and optimized. The successful implementation of cost control contributes to improving economic efficiency and profitability and securing the long-term success of a company or project.