Here are six important principles for cost control about financial control summarised by the editor, I hope it will be helpful to you.
(1) Cost forecasting
It refers to the study of changes in the external environment and internal influencing factors of the enterprise according to the historical data of enterprise cost statistics, and market research forecasts, the influence of cost changes, and the use of special methods to scientifically estimate the cost target, cost level, and cost change trend within a certain period of time.
Forecasting is the basis for cost decisions. Only on the basis of cost forecasting, providing multiple ideas for different cost control, can there be optimal decision-making.
Cost forecasting is also the basis for cost planning and the basis for preparing cost planning. Without cost forecasting, cost control plans are necessarily subjective. Such plans, and the budgets on which they are based, are also ineffective.
(2) Cost decisions
It is a process of selecting the best solution from a variety of feasible options based on the full collection of cost information.0 The use of scientific decision-making theories, and methods in accordance with the set overall goal. An optimisation choice base on improving economic benefits. As the ultimate goal, emphasising the delineation of controllable and uncontrollable factors. Comprehensively analyzing various constraints in the scheme and analyzing and comparing costs and effects.
It is the core of cost management, and the ideas and methods of cost management must be determined by cost decisions.
(3) Cost planning
It is a feasible cost control planning system comply on the basis of cost forecasting and cost decision-making. According to the production tasks and profit targets of the planning period, through the two routes of “bottom-up” and “top-down”. On the basis of giving full play to and mobilising the enthusiasm of all employees. Once the cost plan is approves by the decision-making body. It has authority, and must be resolutely implement, and must not be arbitrarily change.
It is the basis for cost control and cost assessment.
(4) Costaccounting
It is to determine the cost control effect through a series of activities such as the confirmation, measurement, recording, allocation, and calculation of costs. Its purpose is to provide accurate information on all aspects of cost management. Only through cost accounting can we comprehensively and accurately grasp the effect of enterprise production and operation management. The level of labor productivity of enterprises, the utilization degree of fixed assets, the consumption of raw materials and energy, the management level of production units (workshops), etc., will all be directly or indirectly reflected in costs.
(5) Cost analysis
It mainly uses the information provides by cost accounting, through peer comparison and association analysis. Including the actual completion of cost indicators and target costs. The implementation of cost plans and cost responsibilities. The actual cost and responsibility cost of the previous year. The average level and best level of the cost of similar products at home and abroad, Analyzes, and determines. The reasons for the cost target, plan implementation gap, and the potential space that can be tapping. At the same time, through analysis, grasp the law of cost changes, summarize lessons learned, and seek ways to reduce costs.
(6) Cost assessment, rewards, and penalties
It is to compare the actual completion of the cost with the cost responsibility. To be borne and assess and evaluate the completion of the target cost plan. Its role is to affirm the efforts and contributions made by each cost responsible unit. And responsible person in reducing costs and give corresponding rewards according to the size of the contribution. So as to stabilise and enhance the enthusiasm of employees for further efforts. At the same time, for units and individuals that lack cost awareness, cost control is not in place, and waste is cause, penalties will be given to promote their improvement.
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These principles for cost control are essential for any nature of business.