Cost Management

What is Cost Control?

Cost Controlling is a corporate management system focused on the planning, steering, and control of all business areas to efficiently achieve economic objectives. In the construction and real estate sector, cost controlling encompasses all project phases, from initial cost planning to the commissioning of a property. It ensures that projects remain within the defined budget and that all financial resources are optimally utilized. Within the PROBIS control module, all essential cost controlling tasks are integrated and optimized.

Significance of Cost Controlling in Project and Real Estate Management

Cost management is indispensable in project and real estate management, as it monitors and adjusts a project's financial parameters to identify and rectify deviations proactively. Key responsibilities of cost management include:

• Planning: Setting realistic budgets and financial targets at the outset of a project.
• Control: Monitoring cost development and adjusting planning as needed.
• Control: Regular review of actual costs and progress compared to planned values.
• Risk Management: Identification and minimization of financial risks during the project lifecycle.

Effective cost controlling ensures that a project remains economically viable and that profitability is maximized.

Areas of responsibility in cost controlling

Cost management encompasses a multitude of interconnected tasks that span the entire project lifecycle:

• Cost Planning: Creation of a detailed budget based on planned orders and expected costs.
• Budget Management: Control and adjustment of the budget during the project lifecycle to prevent overruns.
• Contract Management: Management of contracts, from award to execution, to ensure adherence to the financial framework.
• Change Order Management: Management of additional orders and changes that can lead to unforeseen costs.
• Risk Management: Identification and assessment of financial risks that could impact the project budget.
• Procurement Processes: Structured and efficient awarding of contracts and services to keep costs within budget.
• Billing Processes: Monitoring and reconciliation of billed costs and services rendered.
• Scheduling: Ensuring that project schedules are aligned with financial resources.
• Cash Flow Planning: Management of payment flows to ensure sufficient liquidity is available for the project.
• Reporting: Regular reporting to project stakeholders, banks, and investors for transparent communication of the financial situation.
• Forecasts: Proactive adjustment of financial planning based on current developments and changes during the project lifecycle.

Cost Management in the Real Estate and Construction Industry

In the real estate and construction industry, cost controlling plays a particularly important role, as it frequently involves high investments and complex project structures. Typical examples for the application of cost controlling include:

• New Construction Projects: Ensuring the construction project remains within the planned budget, despite potential price increases and unforeseen costs.
• Refurbishments and Renovations: Monitoring of renovation costs and reconciliation with original budget specifications.
• Real Estate Development: Precise management of the entire cost development for a portfolio or individual projects to ensure optimal profitability.
• Financing Control: Monitoring cash flows and expenditures in relation to financing provided by banks or investors.

Related Terms

• Project Controlling
• Budgeting
• Risk Management
• Financial Planning
• Change Order Management

Cost Management in PROBIS

With the PROBIS control module, cost controlling is implemented simply and efficiently. PROBIS supports project managers and companies through:

• Centralized Budget Management: All financial data and budgets are consolidated within a clear and structured framework.
• Automated Forecasts: Anticipated cost developments are continuously updated, allowing for timely reactions to changes.
• Risk Management Integration: Risks are integrated into financial planning and controlling to enable early detection of deviations.
• Detailed Reporting Functions: PROBIS offers customized reports for stakeholders, investors, and banks, enabling transparent and informed decision-making.
• Procurement Process Optimization: The module facilitates structured and transparent tendering and awarding of contracts.
• Efficient Change Order Management: All change orders and modifications are meticulously recorded and integrated into the project control system.

These functions enable PROBIS to provide effective and precise cost controlling that spans the entire lifecycle of a project.

Conclusion: What is Cost Control?

Cost management is an essential instrument in project and real estate management, encompassing the planning, governance, and control of project costs. It ensures projects remain economically viable and financial objectives are met. PROBIS provides a powerful module for cost management, facilitating precise budget administration, risk analysis, and transparent reporting.

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