Cost Centre Definition:
A cost centre is a department or function within an organization that does not directly generate revenue but incurs costs for the company. The primary purpose of a cost centre is to track and manage expenses, helping organizations control costs and improve financial efficiency.
Best Practices for Managing Cost Centres
- Budgeting: Develop and adhere to strict budgets for cost centres.
- Expense Monitoring: Regularly monitor and review expenses to identify areas for cost savings.
- Performance Metrics: Establish performance metrics to evaluate the efficiency of cost centres.
How Cost Centres Work
- Identification: Identify departments or functions to be classified as cost centres.
- Budgeting: Allocate budgets and track expenses for each cost centre.
- Analysis: Analyze cost centre performance to identify cost-saving opportunities.
Key Features of Cost Centres
- Expense Tracking: Focuses on tracking and managing expenses.
- Non-Revenue Generating: Does not directly contribute to revenue generation.
- Budget Management: Helps in budgeting and financial planning.
