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How many profit centers are needed to run your business?

simon_broome
Explorer
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597

Hi

I am interested in knowing how many profit centers you have set up within your organisation and what drives the decision to create a profit center over a cost center or internal order for reporting?

Looking in table CEPC for one controlling area we have 5,529 profit centers. For an organisation with around 8,000 members of staff is this reasonable?

Thanks for sharing your experiences.

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Answers (2)

Answers (2)

simon_broome
Explorer
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I have just found OSS note 217338 which gives the following bands

Less than 1000 profit centers (normal)

1000 - 5000 profit centers (large installation)

5000 - 10000 profit centers (very large installation)

More than 10000 profit centers (extremely large installation)

This does seem to follow my suspicion, we have more profit centers than would be expected for our size.

Still interested to hear others experiences though.

Former Member
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Hello Simon

This is a not uncommon practice. SAP gives an opportunity for business to define and follow the best practices. You may discuss with the business and try to reduce the number of pc and have meaningful pc on a scientific basis.

Regards

saramaswamy

Former Member
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Hello Simon

Cost center, a unit inside a company that creates expenses with no responsibility for creating revenue. The only expectation a cost center has to meet is to lower expenses (budgeted). Profit centers are performance measure; profit centers allow business to better identify specific gains and losses with the specific object or without any specific objects. All companies, no matter what size, should have both cost and profit centers .There are many different deciding factors for the optimum numbers profit centers generally one business should have; following are few….

•        Responsibility Accounting

•        Whether it’s a Decentralized or centralized company

•        Revenue Assurance concept

•        When it’s very difficult to have an effective control on the expenditures

•        When business wants to have an optimum level control on indirect costs (overhead cost management)

•        Different Products line and different Product Mix

Co   Coming to 2nd part of your question, without considering other main factors,  the number of  pc what you mentioned (5529) is on higher side

           regards

          SaRamanswamy

ref

simon_broome
Explorer
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Thank you SaRamanswamy