Cost centres can be used for tracking of business expenses by user departments, functions or projects.
Similar to Labels, cost centres provide a means for businesses to classify expenses for reporting or analysis purposes. However, unlike Labels, cost centres usually relate to more permanent arrangements such as an employee's department or role. Labels on the other hand are more often used to describe ad-hoc or transient projects.
Here are some examples of the types of cost centres that you could consider setting up for better tracking and reporting of data.
Cost Centre Name: [Staff Department]
e.g. Accounting, Legal, Customer Service, Sales, Research & Development
- To track expenses by department / employee functions
- To track departmental expenses period-on-period
Cost Centre Name: [Market Segments] / [Divisions]
e.g. Frozen Food Segment, Deli Segment, Ladies Fashion Segment, Computer Division, Printers Division
- To track expenses by business segments or product lines
- To track expenditure and profitability of business segments or product ranges
Sometimes a user's expense could also relate to expenditure for multiple cost centres. Although each user is pre-set under a specific cost centre, the actual cost-centre allocation can also be differently specified at report level for each expense report.
For instance, an engineer might have gone on a single business trip for dual purposes of meeting prospective clients where technical expertise is required, as well as to oversee an unrelated R&D project being carried out in the same destination. The Sales department and the R&D department may agree to allocate costs of the business trip proportionately to better reflect the purpose of expenditure. Within the expense report, the relevant cost centres could be added and the allocation rates adjusted for instance as follows:
- Sales Department 40%
- R&D Department 60%
These adjustments to allocation rates are specific only to the report and do not affect the cost centre settings for the user.
If you are a company admin and would like to learn how to create cost centres, find out how to set them up here.
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