Do cost centers even make sense for service-oriented companies and small businesses?

The general consensus is clear: cost accounting and cost centers are tools for industry or large corporations. Nevertheless, cost accounting and cost centers can also be of interest to service providers, especially in the project sector.

Many small businesses and service providers work on a project basis: agencies, IT services, consulting, trustees, craft businesses, or marketing companies. This is where the question is particularly crucial:

Is a project really worthwhile—or does it consume more time and money than anticipated?

Accounting with cost centers helps SMEs answer this question in an informed manner.

Typical situation in small businesses

In our experience, accounting in many SMEs works as follows:

• Income and expenses are recorded correctly.
• At the end of the year, the profit is correct.
• However, it remains unclear during the year:
  • Which project is profitable.
  • Which customers cause a lot of internal effort (note that internal labor costs must also be calculated for projects).
  • Where time and money seep away.

Service providers in particular often only realize after a project has been completed that the margin was too low.

Cost centers as a simple project cost overview:

For SMEs, cost centers don't have to be complicated. They can be used very pragmatically, for example:

• per customer
• per project
• per service area (consulting, support, implementation)

This allows all project-related costs to be bundled:

• internal working time
• external partners
• Software and license costs
• Travel expenses or materials

The result: a clear overview of costs per project—without additional Excel lists.

Why cost centers are particularly worthwhile for service-oriented companies:

1. Realistic project costing.

With cost centers, SMEs can see for the first time:

• How much a project really costs.
• Where the greatest effort is required.
• Whether flat rates or hourly rates are realistic.

This data is extremely helpful for future offers.

2. Better control over ongoing projects.

Even small projects can get out of hand. Cost centers show early on:

• Whether the cost is higher than planned.
• Whether additional services should be charged.
• Whether internal adjustments are necessary.

3. Greater transparency without significant additional effort.

The expenses and income are recorded in the accounting system. Now, the project can be easily added without much extra effort.

BUT not all accounting software is suitable for SME projects.

Many small businesses rely on simple, cloud-based accounting software—which makes perfect sense. However, as soon as projects and cost centers come into play, differences begin to emerge.

bexio – good for simple accounting, but cannot perform traditional cost accounting.

bexio is ideal for:

• Simple financial accounting
• Invoices and quotations
• Self-employed persons and SMEs

Restriction:
Genuine project cost accounting with cost centers is not possible; workarounds must be used. Accounting accounts must be used as cost centers. Unfortunately, this means that the overview is not optimal.

Abacus – a great solution, but unfortunately not as easy to use as bexio.

Abacus is aimed at SMEs that:

• Have cost centers per project or customer.
• Aim for detailed evaluations without additional tools.
• Want to ensure better post-calculation for future offers.
• Grow and focus on high scalability.

Great software, but not as easy to set up as bexio.

Conclusion: Cost centers are not a "corporate issue."

Many SMEs think that cost centers are only relevant for large companies. The opposite is true:

Small businesses and service providers in particular benefit greatly because:

• Margins are often tight.
• Projects are time-consuming.
• Incorrect calculations become immediately apparent.

With simple, well-structured cost center accounting, SMEs gain:

• More control over projects.
• Better basis for decision-making.
• Longer-term higher profitability.

We would be happy to advise you on whether cost centers make sense for your company. It doesn't necessarily mean switching to a larger accounting software program. Post-calculations can also be a big benefit.