COST CENTER AND BUDGETING

A cost center is a department or unit to which cost may be charged for accounting purposes. It is a role or department that costs the business money but does not generate revenue on its own. These are centers that contribute to a company’s profitability indirectly. Thus, to control these cost centers, it is important to set a budget for each one. 

A budget is a spending plan for your business. It can help you plan your business activities and can be considered a yardstick for setting up your business and financial goals. Budgeting is vitally important to your business as it allows you to oversee and get a better understanding whether your business is earning enough or spending a lot.