What is expense management

Cost management

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Features and tasks of cost management

The cost management is characterized by the active influence on the design dimensions of cost level, behavior and structure. The focus of cost level management is on the cost level, which usually needs to be reduced. As part of cost history management, the responsiveness of costs is to be optimized or made more flexible. The cost structure management serves to optimize the cost allocation, consequently decisions have to be made regarding the allocation between the individual cost categories. Figure 1 shows the design dimensions, their objectives and the corresponding influencing factors.

Figure 1: Dimensions of cost management

The three design dimensions are determined by the company's cost factors. They offer the possibility of influencing and can therefore also be referred to as design parameters. In this context, for example, changes can be made in terms of quantities, pricing and employment figures.

A change has a direct effect on the cost situation as the primary design object. This means that decisions about their use are always future-oriented (e.g. decisions on the degree of diversification, product differentiation, vertical integration, production processes, logistics). The cost management is therefore particularly active in the early phases of the product development in order to control the time gap between cost delimitation and cost causation in a target-oriented manner. For this reason, information about cost consequences must be shifted forward. An essential element of cost management is therefore its function as a source of impetus to anticipate inefficiencies and design leeway at an early point in time and in the right areas. Cost management is the responsibility of corporate management and should be viewed as a permanent process that encompasses all of a company's activities.

Cost management, cost controlling and cost accounting

The main task of cost accounting is the compilation and provision of information regarding the company's cost situation. Due to the reference to past-oriented data and the associated documentation, mapping and accounting functions, cost accounting is the basis for cost management. Cost management, on the other hand, is more future-oriented, especially with regard to the control function.

Cost controlling supports cost management by fulfilling support and service functions. Accordingly, the collection and processing of information as well as the resulting information transfer are among the tasks of cost controlling. Cost management uses this information to make decisions about influencing and structuring costs.

Reasons for the cost management

Cost management established itself as an independent research area at the beginning of the 1990s. Increased requirements due to a changed corporate environment have made it necessary to further develop cost accounting. The triggers for this development are the opening of the Eastern markets and increasing globalization, which has led to increased competitive pressure from competition from the low-cost emerging countries. The saturation of traditional sales markets has increased the pressure to cut costs. Due to the development from a seller's to a buyer's market, the importance of customer and process orientation increased. The result was the increasing automation of the processes, but also the associated increase in their complexity, which led to an increase in overhead and fixed costs. This change in economic conditions has led to the development of the three design dimensions of cost level, behavior and structure as areas of responsibility for cost management.

Cost management tools

The cost management can fall back on different instruments, which have to be selected depending on the reference object and the cost management category. Further aspects that have to be taken into account are the level at which the cost influence is to take place, the degree of change, the planned application and the product life cycle phase. Some methods and procedures can be used in several areas. Figure 2 provides an overview of possible cost management instruments.

Figure 2: Cost management tools

The overview in Figure 2 shows that cost management can choose from both operational and strategic instruments. In the area of ​​strategically oriented instruments, for example, product lifecycle costing and zero-based budgeting should be mentioned. The short-term cost analysis and the multi-period cost comparison, on the other hand, are examples of operational approaches.


Däumler, K.D./ Grabe, J., Cost accounting 3: Planned cost accounting and cost management, 7th substantially expanded edition, Berlin 2004.

Fischer, T. / Möller, K. / Schultze, W., Controlling - Basics, Instruments and Development Perspectives, Stuttgart 2012.

Franz, K.-P./ Kajüter, P., Proactive cost management, in: Franz, K.-P .; Kajüter, P. (Ed.), Cost Management: Increasing Value Through Systematic Cost Control, 2nd Edition, Stuttgart 2002.

Götze, U., cost accounting and cost management, 4th edition, Berlin 2007. Horváth, P. / Reichmann, T., Vahlens Großes Controlling Lexikon, 2nd edition, Munich 2003.

Joos-Sachse, T., Controlling, Cost Accounting and Cost Management: Basics, Instruments, New Approaches, Wiesbaden 2004.

First-time writers

Prof. Dr. Klaus Möller

Executive Director

University of St. Gallen (HSG)

Institute for Accounting, Controlling and Auditing (ACA-HSG)

Chair for Controlling / Performance Management

Tigerbergstrasse 9 | CH-9000 St.Gallen

Tel. +41 71 224 7406

Homepage: www.aca.unisg.ch | Mail: [email protected]

Honorary Professor of Management Accounting

Institute of Management Accountants (IMA), USA

Homepage: www.imanet.org

Dipl.-Kffr. Melanie Windolph