What is expense management?
Cost management is the process of effectively planning and controlling a company's costs. It is considered to be one of the most demanding tasks in corporate management. In general, the cost or expenditure in a company is recorded by a team of experts using expense forms.
The process includes various activities such as collecting, analyzing, evaluating and reporting cost statistics for budgeting. By implementing an effective cost management system, the overall planning of a company can be brought under control.
Many companies use cost management as an integral part of corporate governance. Expense management is also viewed as a form of management accounting that helps identify future expenses in a company in order to reduce budget overruns.
When cost management is applied to a specific project, the expected costs in the company are analyzed in the initial phase of the planning period. The project manager then approves the estimated cost of purchasing the materials required for the project.
The costs and expenditures are recorded and monitored during the project implementation to ensure that the costs are in line with the actual cost management plan. Once the project is complete, the actual costs are compared to the predicted costs, which helps in predicting future expenses.
Some of the benefits of cost management include:
- The ability to predict future expenses and costs of a project
- Maintaining a central record of all projected expenses
- The ability to ensure that the cost is approved prior to purchase
- The ability to control the expenses of a project