Cost Center Allocation

Overview

Below is a business-focused explanation of the Cost Center Allocation document type as used in Dafater.

What is Cost Center Allocation used for?

Cost Center Allocation is used to distribute expenses or revenues from one cost center to multiple other cost centers based on predefined business logic.
It ensures that shared costs—such as rent, utilities, IT services, administration, or management overhead—are fairly and accurately assigned to the departments, branches, or projects that actually benefit from them.

This helps management understand the true cost of running each part of the business and supports more accurate profitability analysis.

Prerequisites and setup requirements

Before using Cost Center Allocation, the following should be in place in Dafater:

Cost centers representing departments, branches, or operational units
A clear understanding of how shared costs should be split (for example: equally, by headcount, by revenue, or by usage)
Expense or income transactions already recorded against a source cost center
Defined accounting periods where allocations will be applied

Without these basics, allocations may not reflect business reality.

Typical workflow and how it fits into business processes

Identify shared costs
Finance identifies costs that should not remain in a single cost center, such as head office expenses.
Define allocation logic
Using Cost Center Allocation, the finance team specifies how the cost should be distributed across receiving cost centers.
Apply the allocation
The allocation is applied for a specific period, automatically redistributing values in line with the defined rules.
Review financial results
Updated cost center reports now show more accurate expenses, supporting better decision-making.
Use in reporting and analysis
Allocated data is used for budgeting, performance reviews, and profitability analysis.

This process is usually performed monthly or quarterly as part of financial closing activities.

Key business scenarios where Cost Center Allocation is essential

Head office cost distribution
Allocating administration or management costs to branches or departments.
Shared service allocation
Distributing IT, HR, or finance department costs to operational units.
Project-based costing
Allocating indirect costs to projects to understand true project profitability.
Branch or department performance analysis
Ensuring each unit reflects its fair share of common expenses.
Accurate budgeting and forecasting
Using allocated historical costs to prepare realistic future budgets.

Important considerations for users

Allocation rules should be consistent and justifiable to maintain trust in financial reports.
Changes in business structure (new departments, branches, or projects) may require updates to allocation methods.
Allocations should be reviewed regularly to ensure they still reflect actual business usage.
Clear documentation of allocation logic helps during audits and internal reviews.
Overly complex allocation methods can confuse users and reduce transparency—simplicity is often better.

In summary, Cost Center Allocation in Dafater plays a critical role in ensuring financial fairness, transparency, and accuracy by assigning shared costs to the right parts of the business.

Basic Information

Module: Accounts
Document Type: Other

Fields

Field Name	Label	Type	Required	Options	Description
maincostcenter	Main Cost Center	Link	✓	Cost Center	Primary cost center whose costs are allocated to others in Dafater.
company	Company	Link	✓	Company	Company within Dafater where this cost center allocation applies.
valid_from	Valid From	Date	✓	-	Start date from which this allocation becomes effective in Dafater.
allocation_percentages	Cost Center Allocation Percentages	Table	✓	Cost Center Allocation Percentage	Defines percentage distribution of costs to target cost centers in Dafater.
amended_from	Amended From	Link		Cost Center Allocation	Reference to the previous Dafater cost center allocation being amended.

Child Tables