Cost centers - this is how you can increase the profitability of your business!

In collaboration with Bokio

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Running a successful business requires having a good track of how the business is performing. Which products or services generate the most money, or which area is most profitable? Get a better track of your company's finances with the help of cost centers!

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What are cost centers?

A cost center is a place within a company where costs are incurred. For example, it can be different departments, functions or units of a company. Depending on the size of your business and industry, you may benefit from a variety of cost centers.

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By assigning costs and revenues to specific cost points, the company can see where and how money is being spent. It makes it possible to identify areas that are doing economically well and badly, respectively, which can facilitate the management of your business.

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If your business consists of two areas, renting apartments and renovating apartments, perhaps the rental generates a high profit while the renovation part goes plus minus zero. If the company does not use cost centers, you cannot see these figures in black and white — but if you were to post with cost centers, you can get exact figures on how the different parts perform individually!

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Examples of how cost centres are used

Cost centers and other economic concepts can sometimes be difficult to understand, so let us concretize cost center with an example.

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Benny runs a clothing store. He has various departments in his company, including purchasing, sales and marketing. When Benny books, he equates each department as a cost center, attributing costs and revenues to the correct area. In this way, Benny can get a good idea of what costs and revenues each department has.

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Benny can choose for himself how he chooses to divide his cost centers. He can choose to divide the cost point “sales” into even smaller parts, for example through “children's clothing”, “women's clothing” and “men's clothing”.

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If he wants to gain insights on a detailed level, he can divide the cost points by brand or by category of garment. Instead of getting a picture of the performance of the whole business, he can get a more detailed picture of his performance, which can be the basis if he needs to tighten the budget or is going to make an investment.

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Who benefits from using cost centres?

As a self-employed person, you can use cost centers to better understand where your strengths and weaknesses lie in your company. It allows you to make more informed decisions to further develop your business.

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Companies with different areas

You who run a company that has different areas benefit from being able to divide the income and costs of the different areas. But even you who are, for example, a consultant can choose to differentiate between different types of services to know what is most profitable for you.

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Project

For someone who works a lot in project form, it can be useful to use cost centers to get figures on how different projects are doing financially. It can be especially useful for someone who runs multiple parallel projects.

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A company with few employees

In a company with few employees, each employee can be a cost center, this way you can see how much each employee generates.

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In summary, most companies have something to gain from using cost centers in their accounting.

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Get full control of your business with Bokio!

With Bokio, you can create as many different cost centers as your business needs. With accounting, invoicing, payroll management, business account and automated reports, it's easier than ever to get full control of your finances!

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