Cost centers

A cost center is a label for the part of the organisation that spends money — a department, a team, a project group — so you can see what each one costs instead of only what the company costs. You create cost centers once, in the finance setup, and people then pick one on their expense claims; when a claim posts, its expense lines land in the ledger tagged with that cost center, and the Profit and Loss can be broken out by cost centre.

Overview

A cost center is a reporting dimension, like business unit, branch and GSTIN. It has no workflow of its own: there is nothing to submit, approve or post on the cost center record. What matters is which postings end up carrying it.

In the standard product that is a narrow set. Only expense claims put a cost center on the ledger. Manual journals, invoices, bills, payments, payroll and expense vouchers post without one. Keep that in mind before you plan reporting around cost centers: they answer "what did each cost center claim in expenses", not "what is each cost center's full profit and loss".

When to use it

• You want expense spend reported by department or team, separately from the branch or business unit the employee belongs to.
• Finance asks for the expense heads of the Profit and Loss split by department.
• You are setting up expense management and want claims tagged for cost control from day one.

If you need a division that carries every posting — sales, purchases, payroll and journals — use a business unit instead: every journal line gets a business unit from the journal, the branch or the GL account.

How xMatix handles it

• Claims carry the cost center. An expense claim has a Cost Center on its header, and each claim line can have its own. When the claim posts, each expense line in the journal takes the line's cost center, or the claim's when the line has none.
• Only the expense lines are tagged. The input-GST line, the employee payable line and the bank line of the claim journal carry no cost center. So a cost centre view of the ledger is a clean view of expense heads; balance-sheet accounts are not split.
• Balances are kept per cost center. The period balances behind the statements are kept per GL account, branch, business unit, GSTIN and cost centre, so a statement by cost centre is read from the same ledger as the company statement.
• Statements break out by cost centre. On the Profit and Loss and Balance Sheet (including Schedule III), Financial Ratios and Risk Ratios screens, Compare → By cost centre gives one column per cost center plus a Total.
• The parent is for your own structure only. Parent Cost Center lets you record a tree, but nothing rolls a child's figures up into its parent. Each cost center is its own column.
• Is Active is a label. No process checks it: an inactive cost center can still be picked on a claim and still shows on statements.

Prerequisites

• You can open the Finance Setup app (or the Expense List app), and your security profile can create Cost Center records.
• The company (partner account) exists. If you use business units, create them first so you can link each cost center to one.

Procedure

Step 1 — Open the cost center list

Open the Finance Setup app and, under Company Structure, open Cost Centers. The same list is in the Expense List app under Dimensions. Two views are available: All Cost Centers (Name, Code, Partner Account, Business Unit, Description, Is Active, Parent Cost Center, Created By, Created Date, Modified Date) and All Cost Center.

Step 2 — Create a cost center

1. Select New. The create form opens.
2. Enter a Name — required; the save is refused with "Name is required" without one. Cost centers are not numbered automatically, so the name you type is the one people pick.
3. Enter a short Code (up to 40 characters). Statements use it as the column heading, so make it readable — for example MKT or FIELD-OPS.
4. Choose the Partner Account — the company the cost center belongs to. Only partner accounts (your own companies) are offered. On a tenant that runs a single company this field is hidden.
5. Optionally choose a Business Unit.
6. Under Additional Information, optionally choose a Parent Cost Center and tick Is Active.
7. Select Save.

The cost center's record page opens. It shows Code, Parent Cost Center and Is Active under Key Information, the audit stamps under System Information, and Edit and Delete buttons in the header.

Step 3 — Change or retire a cost center

Select Edit on the record page (or Edit in the list row menu). The edit dialog shows the same fields as the create form, so you can change the name, code, company, business unit and parent.

To stop using a cost center, clear Is Active and tell your team. Clearing it does not stop anyone from picking it: the cost center pickers on claims and advances are not filtered. Do not delete a cost center that has been used on posted claims — see Common problems.

Step 4 — Tag expense claims and advances

• On a claim. On the expense claim's Cost Allocation tab, choose the Cost Center. To charge one line to a different cost center, open the line and choose its own Cost Center; a line's own cost center takes precedence over the claim's. See Expense claims.
• On an advance. The advance form has a Cost Center under Additional Information. It is recorded on the advance for reference only — advance posting does not put it on the journal. See Expense advances.

When the claim is approved and posted, its expense journal lines carry the cost center.

Step 5 — Read the Profit and Loss by cost centre

1. Open a statement that supports a break-out — Profit and Loss or Balance Sheet (either grouping), Financial Ratios or Risk Ratios. See Financial statements.
2. Set Compare to By cost centre.
3. In Cost centres, leave the default All (with activity) to get a column for every cost center with posted activity, or choose the ones you want. When the statement is scoped to a company, the list offers only cost centers whose Partner Account is that company.

The statement shows one column per cost center — at most 12, in heading order — plus a Total that covers the whole company, including postings with no cost center. Each column is headed with the cost center's Description if it has one, otherwise its Code, otherwise its Name.

Select an amount in a cost center column to open that GL account's ledger, filtered to the cost center. The ledger shows a Cost centre filter tag; close the tag to see every posting on the account.

Fields

Business rules

• Where the cost center comes from on posting. Expense claim posting debits each line's expense GL account with the line's allowed amount, tagged with the line's cost center, or the claim's when the line has none. No other posting in the standard product sets a cost center.
• Which lines carry it. Only the expense lines of the claim journal. The input-GST (ITC) line, the employee payable and any bank line carry none.
• Balances. Each posting updates the period balance for its GL account, branch, business unit, GSTIN and cost centre, so statements by cost centre always agree with the company total.
• Reversal drops the cost center. When a posted claim journal is reversed, the reversal lines carry the branch, business unit and GSTIN of the original but not its cost center. The original amount stays in the cost center's column and the reversing amount lands in the untagged part of the Total.
• No roll-up and no active check. Parent Cost Center and Is Active are not read by posting, pickers or statements.
• Statement columns. Without a selection, the break-out shows every cost center with posted activity for the company, ordered by heading, capped at 12 columns.

Example

A services company wants its travel and meals expenses split between its Sales, Delivery and Support teams.

1. The finance administrator creates three cost centers in Finance Setup → Company Structure → Cost Centers: Name "Sales team", Code SLS; Name "Delivery team", Code DLV; Name "Support team", Code SUP — each with the company as Partner Account.
2. A sales engineer submits an expense claim for a client visit with Cost Center "Sales team" on the Cost Allocation tab. One line — a meal with a delivery colleague — has its own Cost Center "Delivery team".
3. The claim is approved and posted. The travel lines debit the travel expense account tagged SLS; the meal line debits the meals account tagged DLV.
4. At month end the controller opens Profit and Loss, sets Compare to By cost centre and sees columns DLV, SLS and SUP plus Total. Revenue, payroll and every other non-claim posting appear only in Total.

Training

Practice exercise

In a sandbox:

1. Create two cost centers, "Training A" (Code TRA) and "Training B" (Code TRB), for your company.
2. Create an expense claim with two lines. Set the claim's Cost Center to "Training A" and give the second line its own Cost Center "Training B".
3. Get the claim approved and posted.
4. Open Profit and Loss for the current period, set Compare to By cost centre.

Expected result: two columns, TRA and TRB, each showing only its line's expense amount; the Total includes both. Selecting the TRB amount opens the expense account's ledger with the Cost centre filter tag and only the second line.

Quick reference

• Finance Setup → Company Structure → Cost Centers (also Expense List → Dimensions).
• Name is required and typed; Code is the statement heading.
• Only expense claims put a cost center on the ledger.
• A claim line's own cost center beats the claim header's.
• Only expense lines are tagged — not GST, payable or bank lines.
• Compare → By cost centre on P&L, Balance Sheet, Financial Ratios, Risk Ratios.
• At most 12 cost centre columns; Total covers everything.
• Parent and Is Active are labels only.

Permissions

Access follows the user's security profile: its entity permission on Cost Center decides whether the user can see, create, edit or delete cost centers. The shipped System Admin, Standard User and Sales Executive profiles have full access. The Finance Setup app is granted to System Admin, Standard User and Sales Manager, and the Expense List app to System Admin and Standard User.

Employees who fill in claims need read access to Cost Center to pick one; only finance staff usually need create, edit and delete. Review the grants under Setup → Access Control → Profiles.

Configuration

• Cost center list — Finance Setup → Company Structure → Cost Centers, or Expense List → Dimensions → Cost Centers.
• Forms and list columns — the cost center create form, record page and list views are standard layouts. To show Description on the form, edit the Cost Center layouts; to narrow the claim pickers (for example to active cost centers only), add a lookup filter on the Cost Center field of Expense Claim, Expense Claim Line and Expense Advance. Both are done in Setup → Design Studio. See Design a form layout.
• Claim and advance fields — the Cost Center fields are on the claim's Cost Allocation tab, the claim line and the advance form. None is required by default.
• Bulk setup — cost centers can be loaded with Import data; an import is also the way to fill Description.

Common problems

A cost center has no column on the statement

The break-out lists only cost centers with posted activity. Check that claims tagged with it have actually posted in the period. If you picked cost centers by hand and the one you want is not offered, its Partner Account is empty or names a different company — set it on the cost center.

Revenue and payroll do not appear in any cost center column

Expected: only expense claims carry a cost center. Everything else is in Total only. For a split of every posting, use business units.

The cost center column still shows an expense after the claim journal was reversed

Reversals do not copy the cost center, so the reversing amount sits in the untagged part of the Total. Read the Total, or correct the figure with a new claim rather than relying on the cost centre column for reversed claims.

Columns are headed with codes I don't recognise, or with a long ID

The heading is Description, then Code, then Name. A cost center with none of the three shows its internal ID. Fill in Code (or Description) on the cost center.

Retired cost centers are still being chosen on claims

Is Active is not checked by the pickers. Ask an administrator to add a lookup filter on the claim and advance Cost Center fields, and tell your team which cost centers are retired.

Payroll employees have a Cost Center field that offers no values

The Employee form's Cost Center field is not linked to the Cost Centers list in the standard setup, and payroll posting does not read it. See Employees and salary structures.

Common questions

Should I use cost centers or business units?

Use business units when you need a full profit and loss and balance sheet per division: every journal line gets a business unit, from the journal header, the branch or the GL account. Use cost centers to tag expense claims by department or team on top of that. The two are independent — a cost center's Business Unit field is a label and does not change which unit the claim posts to. Many companies use both: business units for divisions, cost centers for teams within them.

Does a parent cost center include its children's figures?

No. Parent Cost Center records your structure but nothing reads it. On the statement, each cost center is its own column and the parent shows only what was tagged to it directly. To see a department's total, select its cost centers in the Cost centres picker and add up their columns, or tag claims at the level you want to report.

Can I put a cost center on a manual journal or a bill?

Not on the standard forms. Journal lines, bills, invoices and payments have no Cost Center field, and their posting does not set one. Expense claims are the only source of cost center figures in the ledger.

Can I budget by cost center?

The budget and budget-line forms have no Cost Center field, so a budget can't be scoped to one from the standard screens. Budget versus actual by cost centre is therefore not available out of the box. See Budgets.

Related topics

• Business units
• Financial statements
• Expense claims
• Expense accounting
• Expense advances
• Working with journals
• Cost Center reference