Definition
Cost management is a financial process that involves controlling and managing a company's financial resources by specifically focusing on the company's costs. With effective cost management strategies, a business can have better cost control and achiever higher profitability.
Example
While looking at cost management for a project, a company's project managers are responsible for estimating the total project costs, budgeting of the project, monitoring overall spend, and preparing for any risks. A project manager's job is to stay vigilant during the cost management process such that the project costs remain within the defined budget and profitability is constantly improvised.
Why it matters
Cost management is important for every company and should be part of its DNA.Without cost management, there won't be a detailed budget and the company cannot effectively allocate its resources across projects. For instance, if a company plans to renovate its office building, there will be various costs involved, such as building materials, architect fees, construction workers' fees, etc. For the project to be within the budget, the company must accurately estimate all possible costs involved and ensure that the actual costs stay within the budget.