What Is Cost Management in Accounting Terms?

Cost management in accounting terms is an integral component of managerial accounting systems. It is the means by which companies report, analyze, plan and control the costs of doing business through a series of specific accounting procedures.

Identification

The term "cost management" is used interchangeably with the terms "cost accounting," "management accounting" or "managerial accounting." Managerial accounting is concerned with providing information to the individuals who control and direct a company's operations, as opposed to financial accounting, which provides information for stockholders and creditors of a company.

Function

A cost management accountant prepares timely reports on the performance of company managers, departments, customers, employees and products, comparing plans and goals to actual results achieved. They also provide analytical reports used to scrutinize the profitability of a product line or an emergent business opportunity.

Significance

Cost management allows a company to make knowledgeable decisions about future actions. If a company is successful with cost management, it should result in lower costs for production of goods and services, more effective budgeting, increased profits and greater customer satisfaction.

References

• Business Dictionary: Cost Management Definition
• Accounting for Management: Introduction to Managerial Accounting
• Investor Dictionary: Cost Management Definition

Resources

• Management and Accounting Web: Management Accounting Terminology
• Project-Management-Knowledge: Cost Management Plan