Cost centers and Project costing

ERPNext Accounting
1

I’m still confused by how these two things work together. I’ve read the manual many times, and experimented a little but it’s still not clear to me:

  • To get reports on Project costs do I HAVE to make a cost center for each project? Many reports seem to let you choose to view costs related to projects OR cost centers. If I tag transactions with the project number can I get reports like the profitability analysis on the project WITHOUT making a cost center?
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2

Cost center is mandatory for all costs related transactions. If you don’t use cost center then just define one default cost center in company master.

Regarding the project, you can track costs by project and one project can link with one or many cost centers. Then You can analyze costing reports by project or cost center or both combination depends on your requirement.

3

Ok, based on your reply I’m getting that cost centers and projects are not specifically linked.
It sounds like project costing takes care of itself as long as all the transactions are pointed to the right project. So I don’t HAVE to make a new cost center every time I make a new project right?

Also, if I make a new project, and the cost centers are 2 different manufacturing shops, if I tag each transaction to the project AND to whatever shop it belongs to then can I get a report on:

  • All transactions related to the project (regardless of the shop)
  • All transactions related to 1 shop (regardless of the project that transaction belongs to)
  • All transactions related to the project and the shop

Is this right?

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4

I think it is right.
And you can get a report for the whole company (including all shops and projects).

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5

To make it hierarchical, which one is better?

  1. Company → Cost center → Projects, or
  2. Company → Projects → Cost Center.

I use the first for 2 reasons:

  • In most transactions, a Project can have Cost Center. But many Cost Center related transactions can’t select Project.
  • It is easier to relate it to real life process. Cost Center can be project related or not related. In 1 cost center can have many projects. And a project can take resources from many Cost centers.
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6

@rahy, would you mind summarizing what you have learned?

I’m also a bit confused on the best way to implement Cost Centers, Accounting Dimensions, and Projects.

7

As I mentioned above, I use Company → Project → Cost Center because a project can have multi cost center. So I can track money on cost item (accross projects).

But again, it is flexible as you can have different arrangements. You can also have Cost Center → Project to reflect projects in each department (cost center).

8

Thank you. I’m planning an implementation for a construction company that also performs service calls.

I’m considering using:
Projects that will contain multiple Cost Centers (at the Item level since this works out of the box). They will also have Sales Invoices not tied to Projects. I’m considering implementing Accounting Dimensions as well. At the invoice level assigning an Accounting Dimension may help reporting on specific types of work (pools, generators, solar, etc).

The hierarchy has me wondering if my plan is sound.

Basically I’d like to track at the item level, project level, and invoice level.

Any thoughts on my plan?