Cost management is concerned with the process of finding the right project and carrying out the project the right way. It includes activities such as planning, estimating, budgeting, financing, funding, managing, controlling, and benchmarking costs so that the project can be completed within time and the approved budget; and the project performance could be improved in time.
Cost Management
Planning & Optimization
Cost management covers the full life cycle of a project from the initial planning phase towards measuring the actual cost performance and project completion.
”Watch the costs and
Andrew Carnegie
the profits will take
care of themselves
Method Overview
Cost optimization is a business-focused, continuous discipline to drive spending and cost reduction, while maximizing business value. By taking a strategic cost optimization approach, business leaders can make more informed budgeting and spending decisions while investing for growth and digitalization.
Resource Planning
Resource planning is the process of ascertaining future resource requirements for an organization or a scope of work. This involves the evaluation and planning of the use of the physical, human, financial, and informational resources required to complete work activities and their tasks.
Cost Estimating
Cost estimating is the predictive process used to quantify, cost, and price the resources required by the scope of an investment option, activity, or project. It involves the application of techniques that convert quantified technical information into finance and resource information. The outputs of estimating are used primarily as inputs for business planning and cost analysis.
Cost Budgeting
Budgeting is a sub-process within estimating used for allocating the estimated cost of resources into cost accounts against which cost performance will be measured and assessed. This forms the baseline for cost control. Cost accounts used from the chart of accounts must also support the cost accounting process. Budgets are often time-phased in accordance with the schedule or to address budget and cash flow constraints.
Cost Control
Cost control refers to measuring variances from the cost baseline and taking effective corrective action to achieve minimum costs. This refers to monitoring expenditures and performance against the progress of a project. All changes to the cost baseline need to be recorded and the expected final total costs are continuously forecasted. When actual cost information becomes available an important part of cost control is to explain what is causing the variance.
Benchmarking
As a bonus step, it is wise to add Benchmarking to the project cost management process.