Cost centers are an essential part of controlling and cost accounting in companies. They are used to make costs more transparent and to make decisions on a sound basis. In this article, you will learn what cost centers are, what advantages they offer and how they are used in the company.
A cost center is a department, functional unit or area in a company to which costs can be assigned. Cost centers thus form a kind of organizational subdivision of the company. For example, they can be structured according to departments such as sales, marketing, production or IT. By assigning costs to individual cost centers, costs can be made more transparent.
The introduction of cost centers brings many advantages to a company. These include
Cost centers can be used in all departments and areas of a company.
Here are some examples of cost centers:
Cost centers can be used in many HR and financial processes. Here are some application examples:
Cost centers can be used in companies of any size. Even small companies can benefit from cost centers, especially if they want to grow in the future. Cost centers allow companies to better control and monitor their costs, which is especially beneficial for growing companies.
Depending on the type of business and the industry in which it operates, cost centers can be used in a variety of ways. Usually, they are used in the areas of finance and human resources. An example of the use of cost centers in finance is invoice approval. Here, cost centers can be used to ensure that invoices are only released by the responsible persons.
Cost centers can also be used in a meaningful way in the personnel area. For example, they can be used to allocate wage costs. If a company employs people in different departments, assigning salary costs to the appropriate cost centers can help the company better control costs.
Cost centers also play an important role in controlling. Cost centers can be used to monitor and analyze costs. For example, companies can use cost centers to analyze the costs of specific projects, products or services and thus evaluate the profitability and efficiency of these activities.
In summary, cost centers are an important part of companies' financial and human resources processes. They allow companies to better control and monitor their costs, which is especially beneficial for growing companies. Depending on the type of company and industry, cost centers can be used in different ways, e.g. for invoice approval, allocation of personnel costs or controlling.
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