Counting Costs: Understanding and Using Costing Information to Make Better Decisions

Over the next few years leaders of organisations face hard choices about what services will be provided and how to fund them. Right now the focus is on reducing costs. Without robust and relevant cost information decisions the mix cannot be objectively considered and justified. The organisation’s leaders need to understand the cost base for ‘business as usual’, to have the factors driving cost clearly laid out, and be aware of the tolerances and risks associated with cost projections into the future.

Managers must increase the drive for greater efficiency and productivity. They need to understand how their costs behave so that they know the impact of their operational decisions, and can plan and control their spending.

Finance professionals must be able to advise on what is the relevant cost information for different decisions, know the appropriate technique to apply, and ensure that data sources and the costing process are robust and reliable.

Costing is an important discipline in all organisations. Done well costing provides powerful insights to support decision taking, but it is not a set of rules to be followed slavishly. It is a set of approaches that need to be carefully chosen for each situation. The accountant must exercise judgement in matching costing techniques to decision situations.

This guide covers all the issues that need to be considered and factored into deriving costs for decision support:

• what costing is and how costs behave
• how managers can use relevant costing information to support better decision taking, and
• the role of the accountant in educating managers and the organisation’s leadership on the benefits to be gained from a good understanding of costs, and in providing cost information and analysis.

It gives summaries of costing techniques and pricing approaches, including the insights they offer.

This publication is available as a book and a bookmarked PDF.