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09thAugust
What is the difference between cost control and cost management?

Cost control is about the application of procedures to monitor expenditures and performance against progress of projects or manufacturing operations; to measure variance from authorized budgets and allow effective action to be taken to achieve minimum costs. Tight cost control gives a company considerable influence over its cash flows and reported profits.

As a cost controller you have to actively expedite the scope of work and analyze its progress. Basically, you continuously have to be aware of these elements:

  • Know what has to be done: you use a detailed budget estimate and tracking profiles which provide a cost control and scheduling bases
  • Know what has been done: you setup reports providing actual performance data that is consistent with the detailed budget, in timely fashion
  • Know how actual performance compares with performance norms: make analyses of the performance to date
  • Know what remains to be done: forecast the potential result of the current situation
  • Identify and implement corrective actions: provide control in order to bring the project’s performance in line with the expectations 
  • Check results of corrective actions: verify if the goals of corrective actions were achieved

Cost control is a function within project cost management, together with resource planning and estimating:

 

Project Cost Management:

 
Resource Planning
Cost Estimating
Cost Budgeting
Cost Control

 

Cost management is a continuous process that takes place during the project to determine and control the resources needed to perform activities or create assets:

Cost Management Cycle

 

Starting a project with cost management in mind will help to avoid certain pitfalls that may occur otherwise. If expectations of the project are not clearly defined at first, or are changed during the course of the project, cost over-runs will be more likely. If costs are not fully researched before the project, they may be underestimated, which might give false indications about the project's success.

A dollar gained in revenue is a very good thing, but remember: only a small portion in the end reaches the earnings.  A dollar saved from cost, however, goes directly to the bottom line. Focusing on understanding and managing costs is a path to ensuring long-term value creation.

Interested in how you can benefit from dedicated project controls software? We'd be happy to show you our cost control functionality in Cleopatra Enterprise.

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