Books about costs as part of business strategy

A cost report can tell you what was charged to a department while leaving you uncertain what to change. Some expenses support several kinds of work. A proposed saving may remove a capability the customer still needs. The reading question is how cost information should help a business make choices.

Our first recommendation is Infinite Upside for keeping costs connected to the operation. The Design of Cost Management Systems investigates the information system more directly. Strategic Cost Management relates cost analysis to the business's strategic direction. Choose this selection once your question goes beyond reading the statements themselves.

1. Infinite Upside: seeing the work behind the expense

   By Vijay Sheth.

   Chapter 3 of Infinite Upside: Building Wealth With Room to Live describes operating choices in which staffing, training, inventory and service affect one another. A lower payroll total can coexist with an inadequately staffed rush. Understanding that number requires understanding the shift it supports.

   Chapter 6 follows changes to a smaller remaining operation. Closing premises does not make collections, deliveries and paperwork disappear. The owner still needs an arrangement that can complete them.

   Imagine an invented workshop that produces both standard pieces and complicated custom orders. Its report spreads support costs evenly across orders, although the custom work needs repeated setup and coordination. Before acting on the reported result, the owner wants to understand what the information is describing and what it conceals.

   Choose the memoir first to keep the cost question attached to an actual operation. It does not teach activity-based costing or design a cost-reporting system. It gives the specialist reading a purpose: understanding what the business consumes and what would change under another arrangement.

2. The Design of Cost Management Systems: examining how the information is built

   By Robin Cooper and Robert S. Kaplan.

   The publisher-supplied description of the second edition presents The Design of Cost Management Systems: Text and Cases as a collection addressing cost-system design. Its scope includes activity-based costing and the use of cost information in customer, supplier and product decisions.

   Investigate it when you want to study the reporting approach itself. The fictional workshop's owner may need to understand why a convenient allocation can leave different demands on support work difficult to see.

   This is the more technical reading direction here, intended for people working closely with management accounting. Its case-and-reading format asks for a different commitment from a general business narrative. Examine the contents and an available sample before deciding whether you want that depth.

   The selected edition was published in 1999. Choose it for the cost-system questions it addresses, rather than expect current software instructions or treat its historical cases as descriptions of your own business.

3. Strategic Cost Management: connecting the analysis with the competitive choice

   By John K. Shank and Vijay Govindarajan.

   Strategic Cost Management: The New Tool for Competitive Advantage places cost information in the context of business strategy. The publisher describes an approach that asks cost analysis to engage with strategic objectives.

   Choose this direction when the information system is not your only concern. You also want to examine what kind of business the cost decisions are helping create. A workshop competing through customized work faces a different question from one trying to standardize a narrow offer.

   The book's strategic emphasis overlaps with cost-system design, rather than forming a separate unrelated subject. The useful distinction is whether you first want to investigate how the information is produced or how it enters a wider commercial choice.

   This is an established management-accounting work. Read its argument alongside the business you actually intend to run. Neither a general instruction to cut costs nor an attractive strategy label determines which resources your customer promise requires.

Choose the cost question

Start with operating work, the design of cost information or its strategic use. The same total can be useful for one purpose and inadequate for another. Name the choice you want the information to support.

For a concrete operating discussion, see the job an expense is doing. If the report itself is still unfamiliar, begin with the nonfinance-owner selection.

Read Infinite Upside for an owner's account that keeps a proposed saving connected to the continuing work. Try the opening passage before choosing an edition.