Cost management is the process of planning and controlling the budget of a project or business. It is important to monitor the project frequently in order to ensure the project delivery within the approved budget. The cost management process comprises of planning estimating, financing, funding and controlling the flow of money.
The process of estimating now become more easier and efficient with the cost estimating software. Today, there are many industrial estimating tools are available in the market.
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The effective cost management is a series of linked process. The main three areas or processes for effective cost management are :
- Estimate Costs
- Determine Budget
- Control Cost
Estimate Costs: A cost estimating process is the approximation of human resource and physical resources costs. Implementing the cost estimating techniques will help you in reducing the cost of production as well as creating an increased value for the customers.
The following techniques are useful in order to estimate the effective and accurate cost:
- Analogous Estimating: It is a technique to estimate the cost from analyzing the similar past completed project.
- Parametric Modeling: Mathematical formulas, regression analysis or learning curve model are used to figure out the cost estimations. In order to measure the correct figure of business resources, you may also use Industrial quote software (also know as logiciel de devis industriel in the French language) for accurate project cost estimation.
- Bottom-up Estimating: These estimates are calculated on the base of individual work item cost and work duration. It includes calculating the cost of each and every activity to have a cost estimation of the whole project.
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Determining the Budget
Once you have the idea of required cost, it is time to determine the cost baselines and financial support to have the sufficient fund to execute the project. Having enough working capital is vital to run a successful project without any hassle or breakage.
Controlling the Costs
This is the most important factor in cost management to monitor the flow of money in an effective manner and to avoid unnecessary expenses. One needs to prepare for the daily required cost. You will need to regularly monitor and measure the performance of the budget and revise forecasts as required.
You can also check this site to learn more about the project cost management techniques.