Some considerations of costs as a fundamental tool for decision making in companies.

Written by:Diomer Antonio Galán Rincón.
Bachelor's Degree.Public Accounting / MSc.Science of Higher Education.

Author: @dgalan,through Power Point 2010 tool, and using public domain image Pixabay

Nowadays, companies must adapt to the existing competition in the market, as it is increasing every day and as a consequence, they must make the right decisions to remain in competition, this implies studying the cost structure of the entity in order to detect failures or weaknesses for its improvement and thus achieve cost reduction.

According to Horngren et al. (2012) describe it as "a sacrifice of resources that is allocated to achieve a specific objective".

Because of this, costs are a fundamental basis for decision making within any entity so that proper management of these will lead us to be more efficient and achieve the goals set successfully, for all management it is important to know the costs in two stages of their work; when making decisions and when implementing the decisions taken.

Image taken from:Pixabay

In most cases, the study of costs is not given the proper importance within the organizations and therefore these organizations tend to be frustrated by the decrease of their profits and the making of wrong decisions.

Currently, the managers of the organizations do not take the time to train themselves in accounting in order to manage them in a correct way and as a consequence, the failure to achieve the objectives of the organization is the result.

Over the years, companies have changed significantly, and every day they tend to be larger and more complex, this forces the accounting to be more accurate and comprehensive to have proper control of them, because of this the design of cost structures is essential since each company performs its activities differently.

Cost accounting must be adapted according to the functions and needs of each company, this allows each entity to adapt to the local market competition, and offer the company an adequate use of its resources.

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

Bibliographic References:

1.- Charles T. Horngren, Srikant M. Datar & Madhav V. Rajan (2012) Cost Accounting. A managerial approach, fourteenth edition.

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