How Do I Develop a Cost Management Plan?

Cost management refers to a series of scientific management behaviors such as cost accounting, cost analysis, cost decision-making and cost control in the production and operation process of an enterprise. Cost management is composed of cost planning, cost calculation, cost control and performance evaluation.

Cost management

Cost management refers to various cost accounting, cost analysis,
(1) the value of the materialized labor consumed in the production of the product (that is, the value of the transferred means of production that has been consumed);
(2) The value created by workers for their own work
The key word of management is "activity"; what is it? Is a coordinated activity; what is a coordinated activity? Coordinate activities of command and control organizations;
It is not management without implementing activities;
Command and control are two basic things of an organization
Strategic cost management was first proposed by British scholar Kenneth Simmonds in the 1980s. He explored strategic management theory from the perspective of the competitive position of enterprises in the market. He believed that strategic cost management was "through Analyze relevant cost data of the company itself and its competitors to provide managers with the information needed for strategic decisions. " Later, Professor Michael Porter of Harvard Business School in the United States proposed the general value of strategic cost analysis using value chains (vertical value chain, horizontal value chain, internal value chain) in two books, "Competitive Advantage" and "Competitive Strategy". method.
American management accounting scholars Jack Shank and V. Govindarajan published the book "Strategic Cost Management" in 1993 based on the results of Michael Porter's research. Study the role of cost information in the four stages of strategic management (simple formulation of strategy, communication of strategy, implementation of strategy, control of strategy), and define strategic cost management as "one or more in strategic management The staged use of cost information. "
In 1995, the European Cranfield School of Business Administration proposed a strategic management model, which is characterized by applying strategic cost management tools to problem diagnosis and proposing strategic positioning options, and based on cost-benefit analysis, Evaluate and plan the plan, then implement it, and start a new cyclic process by evaluating the results of the implementation and continuous learning. The model believes that strategic cost management tools should include the following main contents: the formulation of competitive strategies; analysis of competitors and target targeting; analysis of industry trends; analysis of cost drivers; assessment of the challenges facing the organization and determination of its own goals.
In 1998, British professor Robin Gooperand proposed a strategic cost management model with activity cost system as the core. The essence of this model is the comprehensive introduction of activity cost method in the traditional cost management system, focusing on corporate competition. Changes in status and competitors' movements constitute a new type of accounting positionStrategic Mangement Accounting (SMA).
Since the 1990s, the theoretical and business circles of Japanese cost management have also begun to strengthen research on strategic cost management and the application of competitive intelligence, and proposed a representative strategic cost management model-cost planning. This strategic cost management model starts from the initial point of engaging in things, and implements a thorough and thorough cost information analysis to reduce or eliminate non-value-added operations; applying the Reverse Engineering method, while designing products, with competitors Product comparison also designs the cost of the product so that the cost is minimized. Its essence is an intelligence research process that strategically manages the company's future profits.
Domestic Research and Application Trend of Strategic Cost Management
With the rise of corporate strategic management and the deepening of research, a number of influential research results have also emerged. For example, the Strategic Cost Management Research Group of the Accounting Institute of Southwestern University of Finance and Economics has conducted a systematic study on the implementation of strategic cost management in China; Xia Kuanyun Mr. Chen published a monograph "Strategic Cost Management" in 2000, which introduced a comprehensive and systematic introduction to the content of strategic cost management; Mr. Chen Qiu published a monograph "Research on Enterprise Strategic Cost Management" in 2001, mainly from basic theory and application The theory and method of strategic cost management and the construction of its information system are systematically studied at two levels of theory. However, in terms of research methods, domestic scholars are mostly limited to purely theoretical analysis rather than combining theoretical analysis and empirical research for comprehensive investigation. There are very few qualitative and theoretical empirical studies with theoretical basis. Moreover, the research on corporate strategic cost management is seriously lagging behind the domestic strategic cost management practices. For example, in the face of internal and external difficulties, Handan Iron and Steel Co., Ltd. carried out a strategic positioning analysis in order to get rid of the predicament, and targeted the product costs of major competitors to promote The management system of "simulating market accounting, realizing cost vetoes, and taking the road of intensive management" resulted in the cost of the company falling year after year and maintaining a sustained low-cost advantage, but this successful experience has not been able to rise to the theoretical level. To guide strategic cost management practices. One of the main reasons for this problem is the lack of long-term and in-depth research on the construction of information structure systems, strategic positioning, and relationships with supply chains, strategic alliances, and outsourcing in strategic cost management. Therefore, corporate strategic costs Management practice lacks the guidance of real scientific theory, and at the same time the theoretical research is disconnected from practical application. The existing traditional cost management information system is also difficult to provide information guarantee for enterprises to carry out strategic cost management.

Modern theory of cost management

I. Activity Cost Management
In the early 1970s, Professor Staubus first proposed the concept of homework and homework accounting, but it did not attract enough attention at that time. After the 1980s, with the improvement of the degree of production automation, people realized that the traditional cost accounting method has become more and more unsuitable to the actual production. After analyzing the disadvantages of traditional cost accounting, Cooper and Kaplan and others proposed an activity cost calculation method. This method can more accurately allocate the various costs incurred by the enterprise to the cost of the product through the cost driver, thereby providing more accurate product cost information for the decision maker of the enterprise.
Activity-based costing is the basis of activity-based cost management. Activity-based cost management uses activity-cost information. Its purpose is not only to rationalize the products and services sold, but more importantly to explicitly change activities and processes to increase productivity. It deepens the focus of cost management to the supply chain operation level, eliminates "non-value-added operations" as much as possible, improves "value-added operations", optimizes "operation chains" and "value chains", and transforms operations and reorganizes operation processes from the perspective of cost optimization. And carry out cost-benefit analysis of various operations in the supply chain, identify key operating points, and perform key control on key operating points. It should be said that the emergence of activity-based cost management has brightened people's eyes, it has broken through the traditional people's various understandings of costs, and expanded the way for managers to reduce costs for enterprises.
Second, strategic cost management
In the early 1980s, the British scholar Simmonds proposed the concept of strategic cost management. He believed that strategic cost management was "the provision and analysis of management accounting data of relevant companies and their competitors for the construction and supervision of corporate strategies." Wilson defines strategic cost management as: "It is a management accounting method that clearly emphasizes strategic issues and concerns. It uses financial information to develop superior strategies to achieve lasting competitive advantage, thereby further expanding management accounting. range."
Strategic cost management is the combination of the company's cost management with the company's strategy. From a strategic perspective, it implements a comprehensive understanding, analysis, and control of the cost behavior and cost structure of the company and its affiliated companies to provide decisions for the company's strategic management. Information to improve corporate competitive advantage. Different from the traditional cost management model, the characteristics of strategic cost management are mainly reflected in the continuous expansion of cost content, and more attention is paid to the environment and the impact of environmental factors on the company, including the advantages and disadvantages of the company, the threat of competitors, etc. And adjust its competitive strategy in a timely manner according to its own competitive position; the cost range continues to extend from the internal value chain to the external value chain of the company; the cost management methods are constantly being enriched, which has surpassed the traditional formatted cost reports and cost analysis Model, pay attention to the impact of qualitative factors on the enterprise, and use financial and non-financial cost information to serve enterprise management and promote the realization of corporate strategic goals.
Product life cycle cost theory
In the early 1960s, in order to control defense expenditures, the United States Department of Defense worked hard to keep the purchase cost of materials and use costs and disposal costs as low as possible during the entire use period after purchase, thus creating the concept of product life cycle costs. Product life cycle cost refers to the total costs incurred within the enterprise and its related parties, specifically the costs incurred by the product producer in the process of product planning, development, design, manufacturing, marketing, and logistics. Consumers incurred after purchasing the product. Cost of use, maintenance, and disposal of the product. Since the 1970s, as a management accounting practice, product life cycle costs have begun to tilt from the military industry to the civilian industry. In order to obtain a competitive advantage, enterprises strive to make the cost of users' use and disposal as low as possible, so they pay more and more attention to the life cycle cost. This concept embodies the social responsibility assumed by enterprises as economic cells in society, and is in line with the concept of sustainable development. The emergence of product life cycle theory has prompted companies to control product costs from the source of product development and design, and gradually formed a cost design method system.
Fourth, cost planning
In the mid-1960s, in order to control the cost of products, Japan's Toyota Corporation began to estimate costs during the development of new products, and gradually formed an integrated cost planning activity including collaborative enterprises. This method is a method for reducing costs in the product design stage. It requires that during the new product development stage, in order to meet the interests of the entire company, plan products that meet customer quality requirements. In a certain medium and long-term target profit and market Under the circumstances, determine the target cost of the product. In the following years, this method has received people's attention, has been continuously enriched and developed, and is widely used in corporate practice.
V. Comprehensive Cost Management
In the 1980s, Ostrenga comprehensively discussed the theoretical thinking of total cost management and the main methods of management process analysis, ABC, and continuous improvement that constitute total cost management. He believed that to achieve total cost management in an enterprise, the management process must first From the perspective of analysis, comprehensively examine the existing business process of the enterprise and look for existing problems from it; second, continuous improvement, and comprehensive and continuous improvement.
These theories and methods of cost management are produced in the new economic environment. They break through the limitations of traditional cost management theories and methods, can accurately reflect the cost of products, and provide scientific basis for decision makers to make decisions. However, we should also see that these theories and methods are not perfect. There are still many unsolved problems in each of them, which need to be continuously improved. In addition, there is a lack of certain systemicity among the methods, which requires greater investment from later people Effort to integrate various methods.
Reasons for Cost Management Evolution
1. The line between production and service companies is becoming increasingly blurred, such as McDonald's.
2. There are more and more service businesses in production enterprises, and the service scope of service enterprises is expanding, and service costs are rising, which may even exceed manufacturing costs.
3. The emergence of ERP has enriched the perspective of cost management.
4. Infiltrate or reach the customer's cost management system to customers, which results in customer return on assets (Customer ROA) = customer profitability, the customer's use of the company's resources (such as B / S Accounts receivable or inventory, etc.).
Strategic cost management
Strategic Cost Management (STRATEGICCOSTMANAGEMENT) is a newest, comprehensive and forward-looking modern management method that emerged in the 1990s. With great attention, the role of modern enterprises in their survival and development has become more and more important, and their status is becoming more and more important. Its characteristic is that when enterprises face increasingly competitive environment, gradually attaching importance to overall strategic planning has become a major trend in modern management. The combination of cost management and corporate strategies will inevitably make the enterprise step beyond the single role of internal control and welcome New areas of external analysis to consolidate and win the long-term competitive advantage of the enterprise.
Key aspects of cost management
Specifically, the typical ERP cost management involves the following aspects:
Cost center accounting
Support cost budget (determination of standard costs), comparison of differences between standard costs and actual costs, cost reporting and analysis, etc. Relevant costs are recorded in the corresponding cost center for separate accounting, and the relevant data are transmitted to the product cost module and profit analysis module in batches at the same time or periodically for further processing.
Order and project accounting
It is a comprehensive networked management accounting system with detailed procedures for order cost settlement. The system collects costs and uses comparisons between plans and actual results to assist in monitoring orders and projects. The system provides alternative cost accounting and cost analysis schemes, thereby helping to optimize the planning and execution of an enterprise's business activities.
Product Costing
Not only has the function of cost accounting and cost sharing, but also includes the collection of relevant logistics and technical data, the analysis of the results of individual products and services. The product costing module can be used to monitor the cost structure, cost elements, and operating processes, and generate forecasts for individual items or for an entire period. It can also perform cost simulation estimates based on value or quantity. Information derived from cost analogies can be used to optimize business operations.
Profitability analysis
Which type of product or market will produce the best benefits? How does the profit of a particular order form? These are the two most common questions. The profitability analysis module will help find the answer. At the same time, modules such as sales, marketing, product management, and strategic business plans will be further analyzed and processed based on the first-hand market-oriented information provided from profitability analysis, so the company can judge it in the existing market. Location and assess the potential of new markets.
Profit Center Accounting
It provides a software solution for companies that require regular profitability analysis of their strategic operating units. The system uses period accounting techniques to collect business activity costs, operating expenses, and results. From this information, the profitability of each business area can be determined.

Cost management approach

I. Basic tasks of cost management
Earnestly implement the law of financial and brokerage, and strictly control the scope of cost and expenditure standards; through forecasting, control, analysis and assessment, tap the potential of reducing costs and improve economic benefits.
Second, cost management should implement a centralized management responsibility system
1. Production department: responsible for formulating quotas for spare parts, quotas for operating materials consumption, and quotas for maintenance materials consumption. Efforts will be made to improve the health of the equipment, tap the potential of the equipment, and propose annual, quarterly operation, maintenance, and equipment major and minor repair cost plans.
2. Security department: Responsible for the safety and security and management of fire protection facilities and equipment, and propose annual, quarterly fire protection, security, and militia training expenses.
3. Human labor department: responsible for formulating labor quotas, controlling total wages and the scope and standards of labor protection supplies. In accordance with the principle of territoriality, formulate social security measures, control social security expenditures, and propose annual and quarterly wage and labor insurance expense plans.
4. Material supply department: responsible for formulating the consumption quota of industrial appliances, and doing a good job of saving substitutes and repairing old and waste.
5. Office: Responsible for the management of low-value consumables, telephone and telecommunications. Propose annual and quarterly low-value consumables purchase plans and telecommunications and telephone expense plans.
6. General affairs department: responsible for the management of houses, buildings and welfare facilities, and propose annual and quarterly repair cost plans for assets under their jurisdiction.
7. Finance department: It is a comprehensive department of cost management, which compiles and prepares cost plans; masters the scope and standards of cost expenditures and controls costs; participates in the formulation of various quotas for cost; accurately calculates costs and conducts comprehensive analysis.
Third, the cost range and standards
1. Wages: Wages and allowances and subsidies for production management personnel and temporary workers who are organized and paid by the unit; various holiday wages according to national regulations; over-production awards and safety awards according to regulations.
2. Employee benefits: Expenses drawn according to the range of total wages and withdrawal ratio.
3. Depreciation expenses: The expenses that are accrued based on the original value of the fixed assets that are accrued, using the average life method and the prescribed deposit rate. The basis for depreciation is that the original value of fixed assets should be accrued at the beginning of the month. Depreciation will not be accrued in the current month for fixed assets added in the month, and depreciation will be applied for the reduced fixed assets in the month.
4. Taxes: Real estate tax, land use tax, stamp tax, etc., paid according to regulations.
5. Insurance premiums: insurance costs for property and materials participating in the insurance.
6. Unemployment insurance: pay according to the total wages of the employees and the local insurance rate.
7. Endowment insurance: pay according to the total wages of incumbent employees and local insurance rates.
8. Housing Provident Fund: It shall be paid according to the total wages of serving employees and local rates.
9. Labor insurance premiums: the salary of sick leave workers for more than six months, the death funeral subsidy and pensions for employees.
10. Water resource fees and hydrological reporting and reporting fees: Fees paid based on the amount of electricity generated and local rates.
11. Union funds: Expenses drawn according to the total salary range and withdrawal ratio.
12. Educational expenses: Expenses based on the total salary range and withdrawal ratio.
13. Land use fees: fees paid for the use of land.
14. Material Consumption: Various materials and spare parts for production operation, maintenance, overhaul, accident overhaul; small technical innovation materials that do not constitute fixed assets; workshop ventilation, lighting and fire protection, sanitary materials; production and management of transportation vehicle consumption Combustible materials; maintenance materials for houses, buildings, equipment, instruments, meters of production and management departments.
15. Repair costs: repair costs for large, medium and small repairs of fixed assets, production and management equipment, and non-motor vehicles.
16. Office expenses: production and stationery, paper, printed matter, cleaning and sanitary supplies, newspapers and magazines, and telecommunication and telephone expenses used by various administrative departments.
17. Water and electricity fees: Water and electricity fees for production and management departments and public places.
18. Travel Expenses: Travel expenses for employees on business trips, transportation costs in the city, live-in allowances and meal misses; employee subsidies for visiting relatives and commuting to work. Subsidies for travel expenses shall be in accordance with local financial regulations.
19. Amortization of low-value consumables: household appliances, desks and chairs used by production and management departments, and instruments and meters that do not constitute fixed assets.
20. Labor protection fees: labor insurance clothing supplies, safety protection supplies, heatstroke prevention supplies and bedding on duty issued to employees in accordance with regulations.
21. Transportation costs: transportation costs of goods incurred by the production and management departments; rental fees for renting cars and cranes; road maintenance fees for motor vehicles for transportation, tolls for bridge crossings, annual inspection fees, management fees, and minor repairs and maintenance by commissioned units.
22. Lease fee: The rent paid by production and management departments for various fixed assets (except automobiles) and tools temporarily rented from external units for production and operation.
23. Business entertainment expenses: According to the reasonable needs of business operations, according to the prescribed standards according to the actual expenses.
24. Other costs: Expenses that do not fall into the above areas should be included in costs. Such as: consulting fees, litigation fees, militia training, security fire protection, green environmental sanitation, conference fees, group membership fees, health care for only children, party and group activities costs, test and inspection costs, etc.
Fourth, the rational division of production costs and expenses management boundaries
In order to standardize management and make units comparable, the following items are listed in production costs:
1. Wages of direct production personnel (referring to total wages) and welfare fees drawn in accordance with regulations.
2. Labor protection, protective equipment and heat-stroke cooling fee for direct production personnel, bedding on duty.
3. It is directly used for production of various materials, spare parts and low-value consumables.
4. Repair costs for production houses, buildings and production equipment.
5. Depreciation fees for fixed assets.
6. The rent of fixed assets rented from outside units due to production needs.
7. Water resources fee and hydrological survey report fee.
In addition to the above costs, the rest are included in management costs.
V. The following expenses cannot be included in costs
1. Expenditure on the purchase and construction of fixed assets, intangible assets and other assets.
2. Expenditure on equipment technological transformation.
3. Expenditures for foreign investment.
4, confiscated property, late fees paid, fines, liquidated damages, compensation, and sponsorship, donation, joint school expenses, etc.
5. Social insurance other than national regulations, such as simple personal insurance.
6. Laws and regulations stipulate that various costs that cannot be included in costs.
Preparation of cost plan
1. The preparation of the cost plan must be based on the production plan and expense standards issued by the company. Under the leadership of the unit manager, the financial department is responsible for the organization, and the centralized management departments must work together to ensure the advancedness and feasibility of the cost plan indicators. .
2. In addition to the numbers shown in the cost plan, a text description should also be attached. The main content is: analysis of the expected completion, ensuring the completion of the plan's main measures, the problems existing in the plan, and opinions on solving the problems.
3. Procedures for compiling cost plans: One month before the start of the year, the central management department compiles the department's expense plan on a quarterly basis. If there is a fixed amount standard, according to the fixed amount standard, if there is no fixed amount standard, it is based on the production and operation management work. The actual needs are compiled in the spirit of saving; then the financial department comprehensively summarizes them and submits them to the manager. The manager organizes the relevant personnel to make cost forecasts based on the annual production plan. After the balance, the number of cost plan recommendations is reported in December (this plan does not include overhaul costs) The overhaul cost should be reported on a special basis).
Control of cost plans
After receiving the formal cost plan issued by the company, each unit shall decompose and implement its expenses according to its nature to the centralized management department or individual, which shall be responsible for control. All departments should pay close attention to the daily control of costs, and formulate corresponding management methods: such as telephone charges, low-value consumable management methods, and so on.
Controllable expenses and non-controllable expenses in the cost cannot be diverted from each other, and each item of the controllable expenses can be adjusted and used.
Cost analysis and assessment
1. The cost analysis should be carried out on an annual and quarterly basis, including analysis of plans, actual differences, and reasons for differences, and a detailed explanation of the reasons for the cost rise and fall in order to amend the plan or propose improved management measures.
2. Welfare expenses or capital expenditures are not included in the cost according to the scope of cost and expenses, and blind expenses or false costs that are not analyzed or added to the breakthrough plan are deducted according to their nature and circumstances. Salary.
Nine, these measures apply to the unit directly under Youen company, holding company, entrusted business management unit. Participating companies and associates shall follow the instructions.

Cost Management Frequently Asked Questions

After the fall
This is the process and method of cost management, without control, just staring at the final result. If the cost control plan or target is exceeded, severe punishment will be imposed. The phrase that some people often hang on their lips is, "As long as the result is the result, only look at the result." As everyone knows, when the result appears, no matter how severely punished, the wasted resources cannot be recovered.
Only small accounts
Cost management also needs to be calculated and calculated. However, while struggling, we must also consider from a long-term perspective, and pay close attention to the impact of inputs on output and returns. Just counting small accounts can only be like a boss, at most being a miser, and it is impossible to inherit the family business developmentally and make the business bigger.
Just the current account
This is the lack of strategic vision of cost management control, separating inputs and benefits from future inputs and benefits. This is like the second child, holding silver and not letting go, changing to a restaurant, which is also tightly controlled by himself, so he cannot fully explore the efficiency of existing resources.
Ignore people's account
Some companies care about customers and employees, adding a small amount of investment to obtain customer and employee satisfaction, in order to consolidate and develop the market, enhance corporate cohesion, and obtain greater benefits and output. However, they have ignored this, because of small losses, especially the role of human heart. A small saving makes the stakeholders of the company's development lose the identity of the company, which also causes the company to lose its future. This is the least visionary cost management.
Separate accounts
In the actual process of enterprise organization operation, a common problem is that various units and departments are closed to each other, and only small accounts are calculated from their own units and departments, and large accounts are not calculated from the overall perspective of enterprise organization operation. The cost of each unit and department in the enterprise is controlled and saved, but from the perspective of the enterprise as a whole, this saving cancels each other out and causes waste. This is the biggest mistake of enterprise cost management.
Suggestions
Update cost management concepts
For a long time, Chinese companies' understanding of cost management has remained on one-sided reduction of cost levels, with emphasis on savings and savings. The narrow understanding of cost makes the cost management methods of Chinese enterprises lag behind or even fails. Looking at enterprise cost management in developed countries in the world, whether it is activity-based costing or cost planning, it uses a systematic and comprehensive cost strategy management concept. From the specific method used to the participating personnel, it all reflects this. . If the old concept of cost management is still stuck, the cost management of the enterprise will not provide useful cost information.
Improve the quality of corporate personnel
The reason why companies in developed countries such as Europe and the United States can run such a complex activity cost method and cost planning is inseparable from their advanced corporate culture, personnel quality, and organizational management methods. For example, in cost planning, the cost reduction plan is a process of full participation. Whether the production staff at the first line or full-time cost analysts have a clear understanding of the company's technical characteristics and production processes, and have Responsible participation and cooperation, not just the costing staff. This places high demands on the quality of personnel and the effectiveness of collaboration.
Combine with reality, do not move hard
It is no accident that the cost management models in Japan and the United States are so different, and they are closely related to the differences in their respective traditional cultural backgrounds and internal organizational methods. Japanese companies work in a way that emphasizes cooperation and trust. The organization is based on horizontal cooperation, which is different from the United States' vertical control. It has strict subordinates. This is the Japanese company s cost planning that emphasizes cooperation and coordination instead of Reasons for copying activity cost method. Chinese enterprises should also pay attention to combining their own realities when drawing on foreign advanced cost management experience.

Misunderstanding of cost management

First, companies blindly aim at reducing costs, cost management is disconnected from corporate strategy
Second, the basic work of cost is not enough, which brings difficulties to the management of cost planning and cost decision-making of the enterprise.
Third, the cost analysis system is not perfect, and it is difficult to make strong support for decision-making
Fourth, companies do not pay attention to "hidden costs", resulting in "hidden costs" as a stumbling block for corporate development
V. Cost control is limited to manufacturing cost
6. The cost assessment has not been fully implemented and it is difficult to effectively provide corporate benefits

Cost management

Experience-based cost management method
It is a process that managers use the past experience to control the management objects realistically, so as to pursue higher quality, efficiency and avoid or reduce waste. This is one of the most basic and lower-level, but it is most commonly used, and under certain conditions the effect is also a very good cost control method. The cost management of most enterprises starts from this, and the bottom part of every other cost control method is actually formed from this.
Cons of Experience Cost Management:
One is that experience has a serious personal color. When changing environmental problems exceed the scope of experience, experience may be ineffective.
The second is that experience is often "just talking about things", not the result of systematic thinking.
Cost control method based on historical data
Most enterprises have adopted this cost control method consciously or unconsciously, comprehensively or partially. The basic principle is that according to the costs that have occurred in history, the average value or the lowest value (managers usually require the lowest value) as the highest cost control standard for the current stage or the next stage. A hypothetical premise of this method is that prices usually go down while maintaining relative stability. Therefore, a disadvantage of using this method is that when the price rises cyclically and the company's mechanism is not flexible or responds slowly, the historical minimum price is overemphasized, which may miss the best trading opportunity or cause purchase quality. Decline or shortage.
Budget-based target cost control method
Among domestic enterprises, few companies adopt strict budget management. Although some enterprise managers understand the benefits of budget management from various channels, every year at the end, they always ask the finance department, or the sales department, or a department such as the "general manager" to do one for the coming year. Share budget. As everyone knows how to make a budget, the company usually does not accumulate the various data needed for budgeting, and the corresponding organizational environment required for budgeting, plus the time is very urgent (usually they will ask the relevant personnel in 1-7 Completed within days) and other reasons, the budget they make is actually a budget plan for the coming year after the budgeter has come up with his intentions.
Target cost control method based on benchmarking
The so-called benchmarking is a model, that is, others do better than themselves in some aspects, so they must use others as a model, even better than others, or that others have achieved that effect, so they also require themselves to achieve Even more than that effect.
"Others" has three meanings:
For one, it can be another business. When an enterprise achieves a certain degree of goodness in some aspects, a group of enterprises usually follow suit.
Second, take certain past performance of your own company as the standard to control as your future goal.
The third is to set a certain record created by a certain department or person of this enterprise as the target, and it will be used as a benchmark by other departments or others, and strive to surpass him.
Target cost control method based on market demand
Target control method based on market demand (sometimes referred to as "cost control method based on the will of decision-making layer", because the will of the decision maker will play a leading role in the use of this method). The following is a typical operation case of target cost control method based on market demand. This method has been adopted by many enterprises, that is, it has proven to be a very effective means of controlling costs. Initially, this method may have been created by a company's helplessness. It is widely used mainly in highly competitive industries.
Cost reduction method based on value analysis
This method is used by some large companies in the excellent manufacturing industry. These companies often have a dedicated department responsible for "reducing costs." They analyze existing work, issues, materials, processes, and standards. By analyzing their value and finding corresponding alternatives, they can reduce costs accordingly. This method is often used in advanced companies and institutionalized, that is, the company has dedicated personnel (usually engineers) to take this job responsibility. However, almost all companies seem to use this method more or less, but they are not doing it professionally. Specific analysis will find two situations: First, the value analysis performed by some companies is actually learning from the experience of other companies.

Basic content of cost management

(1) Cost forecast
Cost forecasting is also the basis of cost planning and the basis for cost planning. Without cost prediction, a cost control plan is necessarily subjective. Such plans, as well as budgets based on such plans, have no effect.
(2) Cost decision
Cost decision The core of cost management work, the ideas and methods of cost management must be determined by cost decisions.
(3) Cost planning
Cost planning is the basis for cost control and cost assessment.
(4) Costing
Cost accounting determines the effect of cost control through a series of activities such as cost confirmation, measurement, recording, distribution, and calculation. The purpose is to provide accurate information for all aspects of cost management. Only through cost accounting can we fully and accurately grasp the effects of enterprise production and management. The level of enterprise labor productivity, the degree of utilization of fixed assets, the consumption of raw materials and energy, and the management level of production units (workshops), etc., are directly or indirectly reflected in costs.
(5) Cost analysis
Cost analysis mainly uses the information provided by cost accounting, through peer comparison and correlation analysis, including the actual completion of cost indicators and target costs, the implementation of cost plans and cost responsibilities, the actual costs and responsibility costs of the previous year, domestic Compare the average level and best level of the cost of similar products, analyze and determine the reasons that lead to cost targets, gaps in plan implementation, and potential space. At the same time, through analysis, grasp the law of cost changes, summarize lessons learned, and seek ways to reduce costs.
(6) Cost assessment and rewards and punishments
Cost assessment and rewards and punishments are to compare the actual completion of costs with the cost responsibilities that should be undertaken, and to evaluate and evaluate the completion of the target cost plan. Its role is to affirm the efforts and contributions of each cost-responsible unit and responsible person in reducing costs, and give corresponding rewards according to the size of the contribution, in order to stabilize and enhance the enthusiasm of employees to further efforts. At the same time, units and individuals that lack cost awareness, cost control are not in place and cause waste are punished to promote their improvement.

How to manage cost well

Under the conditions of a market economy, if an enterprise wants to survive or seek to grow and develop, in addition to possessing advanced technology and strong capital, management plays an increasingly important role in it. Cost management is an eternal theme in enterprise management activities. The direct result of cost management control is to reduce costs and increase profits, thereby improving the management level of the enterprise and enhancing its core competitiveness.
In modern enterprise management, if the cost management control is not started from the basic work, its effect and the possibility of success will be greatly affected. So how to do cost management well?
1. Institutional building
In a market economy, the basic guarantee for the operation of an enterprise is one of system and culture. System construction is fundamental and cultural construction is complementary. Without system construction, the cost management operation cannot be consolidated, and the quality of cost control cannot be guaranteed. The most important systems in cost management are quota management systems, budget management systems, and expense review systems. In practice, there are two problems with system construction. First, the system is incomplete. First, in terms of the content of the system, the system construction is more from a normative perspective and looks like an order. The correct approach is to proceed from the construction of the system, so that the responsible person can find the correct location and be easy to operate. The second is the poor implementation of the system, which always emphasizes objective reasons such as poor management foundation and personnel restrictions. Shrinking eventually led to the system being ineffective.
2.Rule setting
Quota is the quantitative limit reached by the consumption of various resources such as human, material and financial resources under a certain level of production technology and organizational conditions. There are mainly material quotas and man-hour quotas. Cost management is mainly to formulate consumption quotas. Only when consumption quotas are formulated can they play a role in cost control. The establishment of working hours quotas is mainly based on factors such as the level of income in each region, the wage strategy of the enterprise, and the state of human resources. In modern enterprise management, the labor cost is getting larger and larger, and the working hour quota is particularly important. In work practice, according to the characteristics of the company's production and operation and the need for cost control, there will also be power quotas, cost quotas, etc. Quota management is the core of the basic work of cost control. The establishment of a quota collection system, the control of material costs, fuel power costs, the establishment of a manual contract system, the control of man-hour costs, and the control of manufacturing costs all depend on the quota system. There is no good quota. It is impossible to control production costs; at the same time, quotas are also the main basis for cost forecasting, decision making, accounting, analysis, and allocation, and are the top priority of cost control.
3. Standardization work
Standardization is the basic requirement of modern enterprise management. It is the basic guarantee for the normal operation of the enterprise. It promotes the rationalization, standardization and efficiency of the production and operation activities and various management tasks of the enterprise. It is the basic prerequisite for successful cost control. In the process of cost control, the following three standardization tasks are extremely important. First, standardization of measurement. Measurement refers to the use of scientific methods and methods to measure the quantitative and qualitative values in production and operation activities, and to provide accurate data for production operations, especially cost management control. If there is no uniform measurement standard and the basic data is inaccurate, accurate cost information cannot be obtained, let alone control. Second, price standardization. In the process of cost control, two standard prices must be formulated. One is the internal price, that is, the internal settlement price, which is a value scale for the "commodity" exchange between the accounting units within the enterprise and between the accounting units and the enterprise; It is the external price, that is, the settlement price of supply and sales with external enterprises in the purchase and sales activities of the enterprise. Standard price is the basic guarantee for cost control operation. Third, quality standardization. Quality is the soul of the product. Without quality, even the lowest cost is futile. Cost management control is cost control under quality control. Without quality standards, cost control will lose its direction, not to mention cost control.

Cost management reduces costs

(1) Develop new products, improve the design of existing products, use advanced equipment, processes and materials, and use value engineering to increase the functional cost ratio of products.
Innovation is the most effective way to reduce costs, and it is an inexhaustible source for enterprises to reduce costs and increase benefits. Scientific and technological progress enables advanced equipment, processes and materials to be used in the production field. Relying on technological innovation and giving play to the role of science and technology as the first productive force is an effective way to reduce costs and increase efficiency. On the one hand, it produces high-quality products that are highly competitive and can meet the needs of society, increasing productivity, including labor productivity and capital productivity; on the other hand, it also saves manpower, energy and raw material consumption, and achieves the goal of reducing costs.
(2) Improve employee training, improve technical level, and establish cost awareness.
(3) Carry out activity cost calculation, activity cost management and activity management.
Activity-based costing is a program that more accurately allocates costs to cost objects (that is, products, services, and customers). Its primary purpose is to improve the scientificity and effectiveness of profitability analysis. Activity-based cost management is the use of activity-cost information to rationalize the products sold and services provided, and to identify where opportunities to change operations and processes to increase productivity. Activity management is a combination of activity cost calculation, activity cost management, and non-cost problem management, including production cycle, product quality, delivery timeliness, and customer satisfaction, to create more value.

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