Cost Management

Table of Contents

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What is Cost Management? 

Cost management is a process through which businesses plan and control all the expenses associated with running the company. An e-commerce company collects and analyzes cost information for better finance management and generates long-term profit.  

Significance of Cost Management in E-commerce

Cost management technique helps e-commerce businesses lower their expenses and gain operational efficiency. Here is why cost management is important for e-commerce businesses: 

  • Cost management techniques allow businesses to generate long-term profit and achieve financial goals. 
  • Implementing a functioning cost management structure is the first step toward proper resource planning. A reasonable cost management structure can help businesses plan their projects more efficiently. 

Prerequisites of Cost Management and How It Works 

Here are some things to remember while implementing cost management: 

  • Resource planning – It helps to plan, allocate and schedule the resources looking specifically at cost as a factor.  
  • Cost estimation – It indicates cost associated with each resource required at scheduled activities. It predicts the cost of the entire activity within a defined scope. 
  • Cost budgeting – Cost estimation leans to cost budgeting. It represents the activity’s budget to make informed decisions about resource allocation.
  • Cost control – It refers to a financial plan that indicates the expected cost of an e-commerce activity. To implement cost control, companies should be aware of the following factors:
    • Original budget
    • Predicted costs
    • Actual costs
    • Approved costs
    • Committed costs

Use Case with Cost Management 

Suppose a company running a pottery business is losing revenue. To increase sales and increase profit, they can implement cost management. It will allow them to plan and use their resources in a better way that saves costs and helps increase profit.

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