Annual accounts show overall profit, but not which areas generated or consumed it. Cost centre accounting allocates revenue and expenses to business areas, showing where money is earned. This guide explains sensible centres, interpreting results and limitations, and turning project hours into invoices.
What a cost centre is
A cost centre is an area of your business to which you assign revenue and expenses. It might represent a department, a location, a service line or administration. In the bookkeeping records, each posting line receives a cost centre in addition to its account. The account tells you what kind of expense arose, such as materials or rent. The cost centre tells you which area it arose for. These two ways of organising the figures run alongside each other.
This is our explanation, not a statutory definition. The Code of Obligations (OR; CO) requires appropriate bookkeeping for business type/size (Art. 957a, para. 2, point 4), not cost centres. Annual statements comprise balance sheet, income statement and notes (Art. 958, para. 2); cost-centre breakdowns are voluntary management tools. They help when multiple areas require pricing, staffing or investment decisions.
Choose sensible centres
Creating too many cost centres is a common mistake. If every customer and every order becomes a separate centre, the extra posting work can become so burdensome that nobody reads the resulting analysis. Choose a structure that people can maintain and use. The following suggestions come from practical experience; they are not legal requirements:
- Responsibility: assign an accountable person: maintenance head, branch manager, managing director for administration.
- Start with three to eight: refining later is easier than consolidating.
- Overhead centre: collect rent, insurance, bookkeeping and management under “Administration” instead of arbitrary allocation.
- Stable numbers: e.g. 100, 200, 300, with durable names.
- Consistent coding: unassigned entries collect in a summary row, blurring results.
Accounts and centres run in parallel: type versus origin. See SME chart of accounts.
Read results by centre
The simplest analysis places three figures next to each other for every cost centre: revenue, expenses and the result, calculated as revenue minus expenses. This shows which business areas report a surplus on their own and which report a deficit. Two points help prevent mistaken conclusions when reading these figures.
- “Without cost centre” is normal, but growth is a warning: too many unassigned postings make analysis uninformative.
- Administration shows losses: expenses without own revenue. Ignoring it overstates operating areas’ profit.
Overheads and allocation
Overheads serve all areas. Conventional costing allocates them so no area appears artificially profitable. Keys depend on the business: revenue share, employee count or hours. There is no legally correct key; select, disclose and retain one consistently.
The allocation described here is a calculation outside the bookkeeping records. Distribute the expenses collected under “Administration” to the operating areas using your chosen key, then compare the results before and after that allocation. The worked example below shows how this changes the view of each area’s result.
Results versus contribution margin
Contribution margin helps pricing. This business metric, explained in our words, is order/area revenue less costs incurred only when performing it: variable materials/subcontracting, for example. The remainder covers unavoidable fixed costs before profit.
A new-installation order earns CHF 24’000, materials/subcontractors cost CHF 9’500: contribution CHF 14’500. Low post-allocation profit can coexist with substantial contribution. Dropping it could remove contribution while fixed costs remain.
“Result by cost centre” deducts all expense, not variable versus fixed. For contribution analysis, structure accounts accordingly or calculate from exports.
Projects: time-based, fixed-price, internal
Time-selling services also need projects grouping customer hours, tasks and invoices. Three billing types:
| Type | Meaning | Invoice based on |
|---|---|---|
| Time-based | Actual hours at agreed rates | Recorded unbilled hours |
| Fixed-price | Agreed amount regardless of effort | Milestones with amounts |
| Internal | Own use, no billing | None; hours unbilled |
Quality depends on:
- Rates: standard rates often suffice; foreperson/labourer differ. Person/activity rates improve accuracy.
- Prompt time entry: record daily and mark billable work; fresh Friday memories fade by month-end.
- Budget: hours/CHF budgets reveal overruns early.
Practical example: Weber Gartenbau GmbH
Fictional small Weber Gartenbau GmbH has two areas and centres 100 Maintenance, 200 New installations, 300 Administration. Revenue and expenses are coded. Year-end:
| Centre | Revenue CHF | Expense CHF | Result CHF |
|---|---|---|---|
| 100 Maintenance | 186’400 | 151’900 | 34’500 |
| 200 New installations | 241’600 | 229’300 | 12’300 |
| 300 Administration | 0 | 38’700 | −38’700 |
| Without cost centre | 0 | 2’100 | −2’100 |
| Total | 428’000 | 422’000 | 6’000 |
Profit CHF 6’000. Both operating areas initially appear positive: maintenance 18.5%, installations 5.1% (34’500 / 186’400; 12’300 / 241’600).
Allocate CHF 38’700 administration by revenue: maintenance 186’400 / 428’000 = 43.55%, CHF 16’854; installations 56.45%, CHF 21’846. Together CHF 38’700.
| Area | Before allocation | Administration allocated | After allocation | % of revenue |
|---|---|---|---|---|
| Maintenance | 34’500 | −16’854 | 17’646 | 9.5% |
| New installations | 12’300 | −21’846 | −9’546 | −4.0% |
| Operating total | 46’800 | −38’700 | 8’100 |
CHF 8’100 less unassigned CHF 2’100 returns CHF 6’000 profit. Installations fail to cover overhead share. Before dropping them, review contribution: CHF 24’000 revenue less CHF 9’500 variable costs gives CHF 14’500 that would disappear. Instead, raise prices and eliminate unassigned postings next year.
For a time-based garden-design project, foreperson records 22 h 50 min at CHF 110; gardener 14 h 40 min at CHF 85. Round each person’s minutes up to quarter-hours:
| Person | Recorded time | Rounded | Rate CHF | Amount CHF |
|---|---|---|---|---|
| Foreperson | 22 h 50 min (1’370 min) | 23.00 h | 110.00 | 2’530.00 |
| Gardener | 14 h 40 min (880 min) | 14.75 h | 85.00 | 1’253.75 |
| Total excluding VAT | 37.75 h | 3’783.75 |
Checklist
- Three to eight centres, each with responsible person
- Administration overhead centre
- Durable numbers/names
- Clear responsibility for coding invoices/entries
- Unassigned row monitored and minimised
- Overhead key defined/documented
- Project billing type, customer and rates defined
- Daily time entry; billable work marked
- Project budget set/monitored
How KMU | base helps
KMU | base is also available in French, Italian and English.
Finance | base creates company-specific centres and assigns postings; reports show results.
1. Create. Finance › Settings › Finance settings, panel Cost centres, shows number/name/active status; create below. Requires Finance “Manage”. Plan first: the interface only creates; renaming/deactivation are unavailable and numbers permanent.
2. Assign. Assign centres to journal lines, subsidiary-ledger invoices (Customers and suppliers), Incoming invoices and assets; sales documents have no centre field. Select per Journal line. Incoming invoices split accounts, VAT codes and centres; rules retain lines and proposals suggest centres for review. See Digital incoming invoices. HR | base payroll imports summaries by account/centre per run, without names/individual salaries. Centres must exist in Finance or import reports errors.
3. Results. Finance › Accounting › Reports, Result by cost centre, shows revenue, expense and result including unassigned entries, from year-start to selected date.
Limits: no overhead allocation or variable/fixed contribution analysis. Export journal centres via Export for the fiduciary (dedicated column) and allocate externally. Automatically posted sales invoices carry no centre; revenue appears “Without cost centre”. Centre revenue requires explicit journal-line coding, e.g. manual entries. The example assumes this.
4. Projects. Finance › Goods and projects › Projects holds number, customer, centre, status and time-based/fixed/internal billing. Lists show billed hours/amounts as percentages of hours/CHF budgets. The project’s “Cost centre” is free text, unlinked to accounting centres and absent from Result by cost centre. Customerless projects cannot be invoiced.
5. Time/billing. Record task, activity and billable flag. Effective-dated person/activity/both rates use the most specific rule. With HR | base, clocked project hours appear evaluated through yesterday. Invoice hours creates drafts by person, day or total; round each invoice line up to quarter-hours, grouped by person/day/total and rate. Cancellation releases time; no double billing. Fixed-price milestones become drafts in one click; see Partial, deposit and final invoices.
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Sources
- Code of Obligations (OR, SR 220), Art. 957a, para. 2, point 4 and Art. 958, para. 2, as at 1 October 2026: Fedlex (German original), accessed 26.10.2026.
- Cost-centre, allocation and contribution-margin explanations reflect business practice and the author’s explanations, not statutory rules; calculations are shown in the text.
This guide does not replace legal or tax advice. Information as at 26 October 2026.