IMPORTANCE OF COST CONTROL SYSTEMS FOR COMPANIES.

Written by:Diomer Antonio Galán Rincón.

Bachelor's Degree.Public Accounting / MSc.Science of Higher Education.

Nowadays, the efficient management of information within any economic entity is a factor for success in the competitive market. According to Kaplan and Norton (2000), "the competition of the industrial era is being transformed into the competition of the information era".

Production cost control systems, as well as any other type of information system, are designed to meet the information needs required by companies. A production cost system records, classifies, processes and summarizes all production-related activities.

Taking into account that cost structuring is a process oriented to organize cost management in a practical way, based on the strategic and operational priorities of the organization, its implementation is indispensable in order to cover all the operations of the organization, define mechanisms for the processing of products, to avoid high discretionality in the different classifications of direct and indirect costs.

If cost structuring is not applied, there is a risk of losing credibility by not being consistent in the management of costs. The existing relationship between direct and indirect costs will not have reliable and accurate information and will lack any validity. Making it difficult or impossible to know the total costs of the production process, also highlighting that the cost structure will hardly have a strategic orientation, ideally, the cost structuring process should be derived to a cost policy defined and designed to the new times by the company.

In view of these reasons Hansen and Mowen (1996) point out that: "Cost control consists of verifying whether everything occurs in accordance with the plan adopted and the instructions issued and with the established principles. Its purpose is to show weaknesses and errors in order to be able to apply adequate corrective measures, rectify them and prevent their recurrence". It is important to emphasize that a proper cost structuring is the essential foundation for the application of procedures and an accounting system.

These systems allow to optimize the alignment between programmed and financial. However, it is important that the cost structuring process be approached in a reactive manner, i.e., as a response of the financial area to day-to-day conditions and pressures in an environment characterized by the involvement or interest of the program area in the financial repercussions of management on production.

It should be noted that it is of utmost importance to define the company's operating parameters; it is necessary to know the production costs and to control the costs of materials, direct and indirect production costs, which directly affect companies from a strategic-administrative point of view, taking into account that without adequate control, costs could be higher than the cost of sale of the product itself.

I hope you like my article and I would appreciate all your comments.

1.- Hansen, M and Mowen, M. (1996). Cost Management (accounting and control). international thomson editores, S.A.

2- Kaplan, R. and Norton, D. (2000). "The Balanced Scorecard". Ediciones Gestión.