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A cost centre is nothing but a separate department within a business to which costs can be allocated. This also includes departments that do not produce directly but incur costs to the business. For example, the departments that are not accountable for the profitability and investment decisions of the business, but are responsible for incurring some of its costs.
There are two main types of cost centres:
Cost centre is created to keep a close watch on the various departments in terms of cashflow. Here are some of the key purposes of having a cost centre in a business process:
Cost centres in an organisation are nothing but different departments or verticals that handle processes, imperative to run an organisation, irrespective of revenue generation. These departments come with cost to company but only indirectly contribute to revenue generation. For example, a company’s legal department, accounting department, research and development, advertising, marketing, and customer service will be considered as separate cost centres.
Cost centre provides you with information that is extremely crucial for a company’s growth and sustainability. With budget allocated to different departments that enable a business to become more efficient, tracking of incomes and expenses becomes much more seamless. Cost centre helps businesses track the cost by function and allow the management to allocate limited funds more carefully.
If you have incomes and expenses, such as staff welfare, projects, employees, payment recovery, conveyance, and so on, and want to maintain them as per business unit, employee, project, department, and so on, you can use the cost centre capability that enables you to allocate incomes and expenses to cost centres or profit centres in your business.
You can maintain your incomes and expenses, as per different business units, employees, projects, departments, and so on, using the Cost Centre capability in TallyPrime. You can have one or more cost centres or profit centres in your company, as needed, and allocate the breakup of incomes and expenses to different cost centres or profit centres. TallyPrime provides reports that help you to view income and expense groups with the profit centre or cost centre allocations made under each group.
TallyPrime enables you to compare incomes and expenses incurred in a particular cost centre or profit centre to the others. You can compare the cost centre details by adding columns. For example, if you want to compare the ledger-wise details of Staff A and Staff B, open the Cost Centre Breakup report for Staff A, press Alt+C (New Column) and select Staff B.
When you create more than one cost category and have cost centres or profit centres under it, the cost categories along with their respective cost centres will appear for selection during parallel allocation of incomes and expenses.
As cited previously, cost centre management ensures optimum efficiency and effectiveness of all business operations in a company. Here are some of the most important benefits of cost centre management:
TallyPrime enables you to track incomes and expenses incurred in the cost centres or profit centres of your business. Furthermore, you can create multiple cost categories for parallel allocation of cost centres or profit centres. You can use cost centre report capability in the product in order to view all the incomes and expenses incurred in a particular cost centre or profit centre. Take a free-trial of TallyPrime today and make the most of its cost centre capability to boost your business efficiency even more.