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cost management

This definition is part of our Essential Guide: Key IT metrics: A CIO guide

Cost management is the process of planning and controlling the budget of a business. Cost management is a form of management accounting that allows a business to predict impending expenditures to help reduce the chance of going over budget. 

Many businesses employ cost management plans for specific projects, as well as for the over-all business model. When applying it to a project, expected costs are calculated while the project is still in the planning period and are approved beforehand. During the project, all expenses are recorded and monitored to make sure they stay in line with the cost management plan. After the project is finished, the predicted costs and actual costs can be compared and analyzed, helping future cost management predictions and budgets.

Implementing a cost management structure for projects can help a business keep their over-all budget under control. Several business intelligence (BI) programs, such as Oracle Hyperion, offer cost management software to help businesses monitor costs and increase profitability. While the software may help, it is not imperative that software is used when executing a cost management plan.

Vendors may refer to cost management software applications as cost accounting, spend management or cost transparency products.  

See also: IT MOOSE management, IT chargeback system, capacity planning, Project Management Office (PMO), advanced planning and scheduling (APS) 

Learn more about cost management:

Cost Management Analysis Guide
Bernie Klinder describes how standardizing hardware to create a common desktop environment can keep costs down in a well managed Windows environment.

How a cost management analysis affects Windows Server 2008 migration
In order to calculate ROI for a Windows migration, you need some "hard savings numbers." In other words, you need to find areas where you can cut existing costs in your cost management analysis.

Spend management software, cost transparency tools help CIOs cut costs
For enterprise organizations with sprawling global operations, spend management software and cost transparency tools can help CIOs gain insight into spending and cost-cutting opportunities.

IT project management: The cost estimating processThe cost estimating process begins by breaking the project down into work phases such as design, engineering, development, and fabrication.

This was last updated in November 2010

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I definitely agree that monitoring costs and profit on projects should be a standard for all companies. We had the same problem in our agency. But to find the tool is not as easy as it seems to be. Especially when the complex solutions like Oracle are not affordable for small business owners. That's why we came up with idea to build the tool for ourselves which fits to our business requirements and processes. We've been using it for us and found out that the same problem have other agencies as we are. That's why we launched it as a commercial tool. Check out Costlocker.com if this is the tool for you as well.
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