Cost center

Definition : A department within an organization that does not directly

add to profit, but which still costs an organization money to operate. Cost centers only contribute to a company's profitability indirectly, unlike a profit center which contributes to profitability directly through its actions. This type of department is likely to be one of the first targets for downsizing because, on the surface, it has a negative impact on profits.

Thereis a g betw ap een the requ irem ts and th cu en e rrent situ atio n inF ction C st R un al o eporting R q ir m n eue et
G o in h in h a c u t a d o d sig t to e d o n n c sts p r fu c n o e n tio / p c s is ro e s im o p rtan t To e su o a iza n n re rg n tio stru re is e ctu fficie t n To m nito & tra o g in o r ck n o g co re u n e rts st d ctio ffo

Sit aio ut n
W la k fu tra sp re c to a in th e c ll n a n y d y is a a re C rre t re o g lim d in sco e u n p rtin ite p (q a rly S F re o u rte R p rting o F a d n TE n sa rie fo F a , IT a d H M la s r in nce n R ) L w q a o in rm tio d e to o u lity f fo a n u m n a pro ss aul ce

B EST inFin n eh s d fin dan wr p r in fr m w r ac a e e e e ot g a e ok t er p r in int is a e h e ot g h r a

B S in F a ce F n n l C st R p rtin E T in n : u ctio a o eo g O E P ilip Ta o o y N h s xnm

t im r v o po e
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BEST in Finance has developed a Functional Cost Reporting framework Functional Cost Reporting Fram ework

1. Organ ion Costby izat al Funct ion (ONE Philip Taxon y) s om

2. Cat egoryCost

Cost of organization to provide functional services : - For the 1 2 defined functions (see next slide) - Lim ited to Salary costs & FTEs

Spend Analysis for specific category of costs f.e.: - ICT costs - Marketing costs - Distribution costs (63 range) (65 range) (64 range)

BEST in Finance: Functional Cost Reporting

ONE Philips Taxonomy

1 F n tio sh v b e d fin dto m a u O a iza n l C s 2 uc n ae en e e e s re rg n tio a o t b F n tio y u c n

T e 1 2 d fin d fu ctio s: h e e n n 1 . B sin ss M na m nt / G n ra u e a ge e ee l M n g m nt aae e 2 . F a ce in n 3 . H M R 4 . IC T 5 . M n fa rin a u ctu g 6 . M rk tin a e g 7 . P rch sin u a g 8 . R D & 9 . S le a s 1. 0 S rv (w rra e ice a nty -re te la d) 1. 1 S p ly ch in m n ge e t up a aa mn 1. 2 O e th rs

T e 1 fu h 2 nctio a ns re com re n p he siveand cove th e tire r e n o niz rga ation . H n shiftingof costs e ce a cross functionsw be ill m inim d ize . S m functions h ve o e a o n rs a G u le l w e t ro p ve w ileo e fu h th r nctio ns h ve ow rs a P a ne t D le l. ve

B S in F a ce F n n l C st R p rtin E T in n : u ctio a o eo g

O E P ilip Ta on m N h s x o y

S ste la d ap y m n sc e

&d flo ata w

O E P ilip N h s Tx n m aoo y

D inT x no y on ata a o m ly a ssib fo C ntro cce le r o ller/B et udg resp sib m age R for on le an r/H M h e organ is/h r izatio /de n partm t en

C trolle / B g t on r ud e resp n lem n g / H M o sib a a er R e nters d ta in T x n y a to a o om (in t to l) pu o A to a u m tic in terfa ce

D sto ata red N e(on in T o om too am ly ax n y l) F unloc / O U R B siness u F unctio n Jo p file b ro C o te g de orp ra ra

R po co in e rts nta ing: F E & S ry C sts p r fu T ala o e nctio / n p roce fro T x om ss m a on y

T e spen on p im t rocesses A e ge salary co p g v ra sts er rade

Bs es u in s W re o s a hue R p rts eo
C lear a tho tion p u riza rofilesfor use o B repo rs f W rts

D sto ata red C alcu lation : g de * av rage sa ra e lary co p g de / co sts er ra untry = estim dsala costs ate ry

B S in F a ce F n E T in n : u ction l C st R p rtin a o eo g

O E P ilip Ta o o y N h s xnm

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O EP N hilip Ta on m p c ss s x o y ro e
S rt o ta f p c s ro es T x n m b a : te mo C rp a d P s a o o y o rd a f o n D

L c l site oa (F n c/ O U u lo R ) In u d p t ata / rep rtin o g

T xo o y a n m c a p n h m io s

T chs p e u p (P A ) BS

C rp rate o o Sp o / u p rt c o in tio o rd a n In rfa te ce O E P ilip N h s Tx n m ao o y Bs es u in s W re o s a h ue

R p rtin (fin l d live b e o g a e ra le) P s D

In u d ta / c e p t a h ck

A u yc e k cc rac h c

SC S Ce ni hn a

A ra e ve g s lary c s a o ts

G & O S (co n s u trie )

B S in F a ce F n n l C st R p rtin ET in n : u ctio a o eo g

O E P ilip Ta o o y N h s xnm

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