Lapasar
Spend & Cost Management

Cost Centre

Also known as: Cost center

A cost centre is a department or unit within an organisation to which costs are allocated for budgeting and control, but which does not directly generate revenue.

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Cost centres — such as IT, facilities or HR — let an organisation track and budget spending by area of responsibility. Every purchase is coded to a cost centre so managers can see and control what their part of the business consumes, and finance can compare actual spend against budget.

In procurement, allocating spend to the correct cost centre is essential for accurate reporting, budget accountability and spend analysis. Digital purchasing systems capture the cost centre at the point of requisition, giving cleaner data than reconstructing it later from invoices and making departmental overspend easy to spot early.

Frequently asked questions

What is a cost centre?
A cost centre is a department or unit to which costs are allocated for budgeting and control, such as IT or facilities, that supports the business rather than directly earning revenue.
What is the difference between a cost centre and a profit centre?
A cost centre only incurs costs and is measured on staying within budget, while a profit centre both generates revenue and incurs costs and is measured on its net contribution.

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