Cost Center

Finance & Payments

Also known as: Cost Centre

Definition

An organisational unit to which costs are assigned for tracking and accountability.

Explanation

Coding each purchase to a cost centre lets finance report spend by team, function or location and hold budget holders accountable. Accurate cost-centre coding is essential for meaningful spend analysis and budget control.

Example

The new monitors are coded to the IT cost centre so the spend lands on the right budget.

Related terms

Budget — A financial plan allocating expected spend across categories, departments or projects for a period.
Chart of Accounts (CoA) — The structured list of account codes a business uses to record and classify financial transactions.
General Ledger (GL) — The central accounting record holding all of a company's financial transactions.
Cost Allocation — The assignment of shared or indirect costs to the departments, projects or products that drive them.

Related concepts

Procure-to-Pay (P2P) — The end-to-end operational buying cycle — from requisition and approval to purchase order, receipt, invoice matching and payment.

Frequently Asked Questions

What is Cost Center?

An organisational unit to which costs are assigned for tracking and accountability. Coding each purchase to a cost centre lets finance report spend by team, function or location and hold budget holders accountable. Accurate cost-centre coding is essential for meaningful spend analysis and budget control.

Can you give an example of Cost Center?

The new monitors are coded to the IT cost centre so the spend lands on the right budget.

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