2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
The results of the financial and economic activities of an enterprise are determined primarily by costs, and it does not matter what activity the company is engaged in, what organizational and legal form it has. 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 an economic entity is a single and maximally coordinated process.
It assumes the existence of control over the occurrence of costs at the stage of planning financial and economic activities. In addition, business processes must be structured to manage costs in an 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.
The enterprise does not always need a systemcost management. 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 will be profitable.
Cost management, among other things, must take into account the nature of the costs. They can be both external and internal. Experts in the field of cost management advise, first of all, to reduce external costs (raw materials, materials, interest on loans, etc.), since they are much less flexible than internal ones (wages and general business expenses). In addition to the above classification, costs, depending on the volume of output, are conditionally fixed, conditionally variable and mixed. Typically, cost management uses a method such as costing, which can be carried out both by elements and by costing items. Cost management in 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 necessary conditions for their application. The control method is understood as the algorithm of actions.
Cost management using ABC analysis has become quite popular. Its essence is as follows: costs are subject to costing for the functional activities of the enterprise, for example, for production, marketing, sales, etc. Thanks to this, not only the cost of goods becomes visible, butand what level of costs falls on certain business processes.
It should be noted that factor analysis should take 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 the relationship between them. This makes it possible to manage the cost of quality assurance in the long term, as well as have a direct impact on the overall cost of the organization.
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