Cost Control

Cost Control

Course Code: CM003

What is Cost Control

Cost control is the practice of identifying and reducing expenses in business activities to increase profits by identifying the processes and activities which overruns expected budgetary amounts and trying ways to reduce the extra expenditure involved in such processes. Cost Control commences from the process of budgeting through the completion of the projects.

Once cost control is activated, the management compares actual results to the budget expectations, and if actual costs are higher than planned, action is taken by searching for better and more economical ways of com­pleting each operation. More simply stated, Cost control is the prevention of waste within the existing environment. This environment is made up of agreed operating methods for which standards have been developed.

These standards may be expressed in a variety of ways, from broad budget levels to detailed standard costs. Cost control is the procedure whereby actual results are compared against the standard so that waste can be measured and appropriate action is taken to correct the activity. Deviations of actual performance from the standards are analyzed and reported and corrective actions are taken. Cost control is a preventive function and it seeks to attain lowest possible cost under existing conditions.

Cost control typically includes;

  • Investigative procedures to detect variance of actual costs from budgeted costs,
  • Diagnostic procedures to ascertain the cause(s) of variance, and
  • Corrective procedures to effect realignment between actual and budgeted costs.

In project management, cost control is the task of overseeing and managing project expenses as well as preparing for potential financial risks. This job is typically the project manager’s responsibility.

Cost control involves not only managing the budget, but also planning, and preparing for potential risks. Risks can set projects back and sometimes even require unexpected expenses. Preparation for these setbacks can save your team time and potentially, money.

Scope of Work of Cost Controllers

One key to business success is the accurate tracking of the costs of producing and selling products and services. In many organizations, the job of tracking and controlling costs falls under a cost controller’s job description. The term “cost controller” may be a position title or may represent one of the many hats worn by managers, accountants, cost estimators or project managers. The cost controller must pay attention to minute details and have a thorough knowledge of the company’s industry to ensure that the company remains competitive.

In project management, the Cost Controller reports directly to the Project Manager and is responsible for Cost Control Services including but not limited to those of cost estimating, budget control, cost forecasting, cost reporting and cost risk analysis.

Among many of the responsibilities of a Cost Controller, below are few of the core duties;

Estimate Costs

A company’s products or services must have its costs determined prior to establishing its selling price in order to get true profits. A cost controller generally is responsible for determining the costs the company will incur in manufacturing or providing its products or services.

Cost Reporting

After the product or service is offered to the consumer, the controller maintains periodic checks and generate reports to prove the budgets have been accurate and the gains of the company are met as planned. As the cost of materials and labor fluctuate, the reports also reflect the new costs and gives management the information needed to decide if the costs should be passed on to the consumer or if other measures are required to maintain the budgetary expectations.


A cost controller’s job description may also include negotiating the procurement processes for the company. During the negotiations, the cost controller would consider the prevailing market prices and bids of several vendors before choosing the best price.

Cost Management

Whether a cost controller works on a specific project or at corporate level in an organization, maintaining cost management is important while encompassing new technology and determine how it affects the value of existing inventory and labor.

While above mentioned are core responsibilities of a Cost Controller in any type of organization in general, the below listed are some of the specific duties of a Cost Controller in a construction company;

  • Responsible to control and monitor project total expenditure including verifying and checking of invoices and claims from suppliers, vendors and subcontractors to ensure that all project expenditures are captured and properly recorded,
  • Project cost estimation,
  • Provide planning and cost controlling support for all projects which include variation reporting, monitoring of milestone progress to the preparation of customer billing processes, etc.,
  • Perform and manage project activity scheduling and monitoring,
  • Perform technical and commercial review of Tenders (Contractors & subcontractor’s quotations) for the preparation of Service agreements,
  • Ensure effective project implementation and utilize productive reports from the creation of WBS with the use of project management system to monitor the status of all purchases, invoicing and delivery up to the closure of the project,
  • Prepare monthly project reports for the monitoring of the project activities on a daily basis and register all issues relating to the project promptly to the project manager and management,
  • Coordinate and work with the project management team to resolve project issues to ensure the delivery/completion of the project work,
  • Attend project meetings and discussions with the stake holders,
  • Perform project costing related reporting to the team and management’s review on a monthly basis to ensure that expenditures are kept within the project budget,
  • Provide cost control and planning advice to the project management team as and when required,
  • Undertake any other ad-hoc duties as required.

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