The results of the financial and economic activities of the enterprise determine primarily the costs, and it does not matter what activity the company is engaged in, which has the legal form. It is the volume of costs that is the determining element in the analysis and calculation of key performance indicators. Therefore, it is important that cost management in a business entity is a single and most coordinated process.
It implies the presence of control over the occurrence of costs even at the stage of planning financial and economic activities. In addition, business processes must be structured to manage costs in the enterprise. This allows you to enter control into the system. It should be noted that it will determine the organizational structure of the entire enterprise.
Not always the enterprise needs a cost management system. It will be effective only when it can have a real impact on the results of the company, that is, when the goods, products and services of the enterprise are profitable.
Cost management, among other things, must take into account the nature of costs. They can be both external and internal. Specialists in the field of cost management advise, first of all, to reduce external costs (raw materials, materials, interest on loans and others), since they are much less flexible compared to internal ones (labor costs and general business expenses). In addition to the above classification, costs, depending on the volume of output, are conditionally constant, conditionally variable, and mixed. Typically, cost management uses a method such as costing, which can be carried out both by item and by costing item. Cost management at the enterprise can be carried out using a variety of methods of strategic and operational management. It all depends on the goals of management and, of course, on the availability of the conditions necessary for their application. The control method is understood as an algorithm of actions.
Cost management using ABC analysis has become quite popular. Its essence is as follows: the costs of the functional activities of the enterprise, for example, production, marketing, sales, etc. are calculated. Thanks to this, not only the cost of goods becomes visible, but also what level of costs falls on certain business processes.
It should be noted that factor analysis should occupy an important place in cost management . It allows you to determine the main cost-forming factors, as well as the degree of their influence on the total cost and dependence on each other. This makes it possible to manage the costs of quality assurance in the long run, as well as have a direct impact on the total costs of the organization.