There are three core elements in the cost management process – estimating costs, budgeting and cost control.
Estimating costs: The first step in the cost management process is identifying and estimating costs. It is useful to categorise costs for this process. Generally, costs fall under three headings cost of producing goods or services, overheads and capital expenditure.
Budgeting: A budget is an itemised estimation of expenditure over a defined period of time. A budget can include income.
Cost control: Cost control is the efforts an organisation makes to maintain and/or reduce expenditure.
Successful cost management requires careful monitoring and evaluation, which should be built into each of the elements.