Cost control, also known as cost management or cost containment, is a broad set of cost accounting methods and management techniques with the common goal of improving business cost-efficiency by reducing costs, or at least restricting their rate of growth. Businesses use cost control methods to monitor, evaluate, and ultimately enhance the efficiency of specific areas, such as departments, divisions, or product lines, within their operations.
Behavioral management deals with the attitudes and actions of employees. While employee behavior ultimately impacts on success, behavioral management involves certain issues and assumptions not applicable to accounting's control function. On the other hand, performance evaluation measures outcomes of employee's actions by comparing the actual results of business outcomes to predetermined standards of success. In this way management identifies the strengths it needs to maximize, and the weaknesses it seeks to rectify. This process of evaluation and remedy is called cost control.
Cost control is a continuous process that begins with the proposed annual budget.
The budget helps: (1) to organize and coordinate production, and the selling, distribution, service, and administrative functions; and (2) to take maximum advantage of available opportunities.
As the fiscal year progresses, management compares actual results with those projected in the budget and incorporates into the new plan the lessons learned from its evaluation of current operations.