Profit Center Management

Departments

Departments are an extension to the general ledger account numbers. They are three digit codes used to designate different departments, divisions, locations, or product lines of a company. Departments are a powerful way to analyze the profitability of a specific segment of the company.

A department is a separate activity or product line within a company. A department is coded within the general ledger chart of accounts by the 3-digit extension to the main 5-digit account code.

Financial Statements

The system facilitates separate Profit & Loss statements for individual departments or Profit Centers as well as other financial statements.

Use Cases

Following are some examples of how departments and Profit Centers may be used:

Hardware Store
A hardware store may divide the store in the following departments:

• Tools
• Sporting equipment
• Lawn & Garden
• Automotive
• Hardware
• Building supplies, etc

The manager may identify each department as a separate profit center or he may combine a few of the departments together into a common profit center that is managed by the same person. A possible advantage of creating departments for this storeowner would be to determine which departments are the most profitable within his operation.

Farm Equipment Dealer
A farm equipment dealer may want to create the following departments:

• Farm tractor sales
• Farm tractor service
• Harvesting & cultivating equipment sales
• Harvesting & cultivating equipment service
• Lawn and garden equipment sales
• Lawn and garden equipment service

With the following Profit Centers:

• Sales Profit Center which includes all the sales departments
• Service Profit Center which includes all the service departments

Multiple Locations & Multiple Departments
Another possible use for Profit Centers would be to identify locations for companies with multiple locations as well as multiple departments within each location. A hardware storeowner may own more than one store with the departments listed in our first example.

Profit Centers can also identify entire divisions within companies, such as:

• Manufacturing division
• Service division
• Sales division

Ministry & Non-Profit
Departments could be identified as fund groups within a ministry or non-profit organization. The system allows multiple funds within the capital folder (Fund folder) and a means of separating costs or revenue by funds.