Cost Management Strategies For An Organization

Budget management analysis is used by mangers as a tool and helps determine that all resources available are being used efficiently. The budgets are determined yearly and are based upon the previous year’s budget and variances. This paper will discuss specific strategies to manage budgets within forecast, compare five to seven expense results with budget expectations, describe possible reasons for variances, give strategies to keep results aligned with expectations, recommend three benchmarking techniques, and identify those that might improve budget accuracy, and justify the choices made.

Cost Management is used to outline the costs of planning a project. Estimating costs through data collection, design planning, and budgeting are used throughout facility planning to reduce costs

According to Epstein and Buhovac, (2014), costing system is a process designed to monitor the costs incurred in a certain business. Costing systems are meant to advise the management on how to choose the most appropriate course of action with cost efficiency and capability. According to Cardinaels and Labro (2009) costing system provides detailed cost information needed by management needs to control current operations with the aim of improving the future. Below are some of the costing systems that are common to many organizations (Epstein & Buhovac, 2014).

This research paper is a brief discussion of budget management analysis. Budgeting is the key to financial management, and is the key to translates an organization goals or plan into money. Budgeting is a rough estimate of how much a company will need to get their work done, and provides the basis for evaluating performance, a source of motivation, coordinating business activities, a tool for management communication and instructions to employees. Without a budget an organization would be like a driver, driving blinded without instructions or any sense of direction, that’s how important a budget is to every organization and individual likewise (Clark, 2005).

A cost centre is a department within a company that does not produce direct profit and adds to the cost of running a company. However, all cost centres perform an important job. It improves the satisfaction of customers and indirectly increases sales.[1] The manager and employees of cost centre are not accountable for its profit and investment decision but they are responsible for its cost.[2] They are liable for keeping their cost in line or below budget because cost centre does not produce directly from its activities.[3] The performance of the managers is assessed by comparing the actual expenses incurred with the budgeted expenses for the cost centre. Basically cost is the control data in the cost centre. [

Registering cost of centered budgetary destinations. Choosing the cost of different budgetary objectives is a fundamental framework that can incite achievement of needed cash related target. Cost check should be adequately versatile to alter future money related fluctuations and Companies' helper changes. Finding out

However, budget management is a tool which forces the management to look ahead, to set out detailed plans for achieving the target for each department and operations. Therefore, the following techniques should be used to manage the budget that is set good budget in the first place, Monitor expenditure and identify patterns, assess the financial consequences of trends and new actions, identify reduction strategies and keep the foot on the brake to monitor over spending (MW Dirsmith, 2008).

By linking cost management efforts to budgeting, companies improve the quality of information available for managers to use in developing their budgets. Accurate cost information is fundamental to budgeting. Companies that use accurate cost management techniques and provide budget developers with ready access to cost information improve both the accuracy and the speed of their budget process.

An organization costing system is a system that helps the management with the strategy planning while the system plays an important role in providing accurate cost information about the products and customers (Curtin, 2006). UPS utilizes the Activity-Based Costing (ABC) system. ABC assumes that activities cause costs and that cost objects create the demand for activities (Marx,

Bhimani, A., Horngren, C., Datar, S., Rajan, M. et al. (2012) Management and Cost Accounting. 5th ed. Edinburgh: Prentice Hall, p.369 - 378.

Most entities and organization create budgets as a guide for controlling its spending, prediction of profit, and it expenditure as they progress toward a set goal. Budget involves pulling resources together to achieve a specific goal. According to Gapenski (2006), budgeting is an offshoot in a planning process. A basic managerial accounting tool use in holding planning and control functions together is referred to as set of budgets (p. 255). One major setback manager or budget developer encounter is trying to design a future, a process that cannot be created with the precision just right. This article highlights some financial management

Budgeting is crucial in the well-being of a company especially the financial health status of a company. In fact, no professionally managed firm would fail to budget, since the budget establishes what is authorized, how to plan for purchasing contracts and hiring, and indicates how much financing is needed to support planned activity. It is routine for a company to budget for its expenses. Expense budgets act as a guideline of how much revenue a company would require keeping the activities running. It is used to set the company’s targets for a certain period.

The budgeting system allows the managers of each department monitor their expenses in which budgets have been set for materials, salaries and legal expenses amongst others.

According to an accounting textbook, cost is defined as a resource sacrificed or foregone to achieve a specific objective. It is something given up in exchange. It is necessary for project managers to understand project cost management since project costs money and consumes resources.

Budget and budgetary control practices are undeniably indispensable as organizations routinely go about their business activities and operations. These organizations are constantly on the alert on how actual levels of performance agree with planned or budgeted performance. A budget expresses a plan in monetary terms. It is prepared and approved prior to a particular budgeted period and explicitly may show the income, expenditure and the capital to be employed by organizations in achieving their goals and objectives.