The process of cost control is the process of calculating, adjusting and supervising all kinds of expenses in the production and operation of enterprises by using the principle of system engineering, and it is also the process of finding weak links, tapping internal potential and finding all possible ways to reduce costs. Scientifically organizing and implementing cost control can promote enterprises to improve their management, change their operating mechanism, improve quality of enterprise in an all-round way, and enable enterprises to survive, develop and grow in a highly competitive market environment.
Cost control refers to a series of management activities and processes that take cost as the control means, and achieve the purpose of effectively controlling economic activities by formulating the index value of the total cost level, the cost reduction rate of comparable products and the responsibility of the cost center to control costs.
Cost control refers to reducing the absolute amount of cost expenditure, so it is also called absolute cost control; Reducing costs also includes coordinating the relationship between cost, quantity and income, so that the growth of income exceeds the growth of cost and the relative cost savings are realized, so it is also called relative cost control.
As a part of cost management, cost control is committed to meeting cost requirements (CCA2101:Article 2.5. 10 in 2005). Meeting cost requirements mainly refers to meeting the cost requirements of customers, top managers, interested parties and laws and regulations. The object of cost control is the process of cost occurrence, including design process, procurement process, production and service provision process, sales process, logistics process, after-sales service process, management process and logistics support process. The result of cost control should make the controlled cost meet the specified requirements. In order to make the cost control meet the specified and expected cost requirements, appropriate and effective measures must be taken, including the techniques and methods of operation, cost engineering and cost management. Such as VE value engineering, IE industrial engineering, ABC activity-based costing, ABM activity-based costing management, SC standard costing, target costing, CD reduction costing, CVP cost-volume-profit analysis, SCM strategic cost management, quality cost management, environmental cost management, inventory management, cost early warning, momentum engineering, cost control scheme, etc.
The purpose of carrying out cost control activities is to prevent waste of resources, reduce costs to the lowest possible level, and maintain the reduced cost level.
Cost control opposes the practice of "settling accounts after autumn" and "checking afterwards", and advocates pre-control and process control. Therefore, cost control must follow the pre-control principle and process method, and consider and study why this kind of cost occurs before or during the cost occurrence. Should it happen? How much should happen? Who should happen? Where should it happen? Is it necessary? After decision-making, process activities should be monitored, measured, analyzed and improved.
Cost control should be the concept of overall control, including full participation and whole process control.
Some activities of cost control and cost assurance are interrelated.