“Are we over budget?” is really two questions: what did we plan to spend, and what have we actually spent. Usually those live in a spreadsheet and an accounting system that were last compared some time in March.
This puts the plan next to the ledger it’s measured against, and adds one extra dimension to your accounts so that “which department?” becomes a question the books can answer.
What you can do
- Build a tree of cost centers: departments, sites, product lines, regions, as deep as you need.
- Tag journal lines with a cost center, so spending has a shape beyond the account it hit.
- Set a budget for a fiscal year, line by line: an account, a period, an amount.
- Split those lines by cost center where a budget is owned by a department rather than the company.
- Approve a budget, and lock it so it stops moving.
- Read budget versus actual with the variance and the variance percentage, per line.
- Give a cost center a manager, so there’s a name against the number.
How it works in practice
Draw the tree first (Budgeting → Cost Centers). Each one has a code, a name and optionally a parent, so “North region → Leeds branch” is a real relationship rather than a naming convention. Deactivate the ones you stop using instead of deleting them, since historical postings still point at them.
Tag the postings that matter. A journal line can carry a cost center, and everything downstream reads that tag: the budget-versus-actual comparison, the analysis by department. Manual journals are where you’ll use it most deliberately.
Build the budget (Budgeting → Budgets). Create it for a fiscal year, then enter its lines on the detail page: which ledger account, which month, how much, and which cost center if the budget is split that way. It’s a plain grid on purpose, because a budget is a set of numbers somebody argued about, not something to be generated.
Approve it, then lock it. Approving records that it’s been agreed. Locking makes it read-only, which is rather the point: a budget you can quietly edit in November isn’t a budget, it’s a description of what already happened.
Compare (the budget → Budget vs actual). Each line shows what was budgeted, what the ledger actually holds for that account, period and cost center, the variance, and the variance as a percentage. The actual side reads straight from posted journals, so the comparison can’t drift from your accounts. There’s nothing to refresh or re-import.
Good to know
- You’ll need the Budgeting extension switched on (Settings → Extensions), and its permissions start at deny.
- The cost center is purely analytical. It never changes an amount, never affects which side of the ledger a line falls on, and never affects whether an entry balances. Switching it on can’t move any figure you already have, which is also why it can be added to a live company without a migration project.
- Documents don’t carry a cost center yet. Invoices, purchases and expenses post without one and show as unallocated. In practice, budget-versus-actual by cost center works today for the postings that supply one - manual journals, and the fixed-asset and manufacturing entries - while company-level budget-versus-actual works for everything. Check that against how you want to budget before you build the tree around documents.
- Postings made before you switched this on stay unallocated. There’s no retrospective tagging, so a mid-year start means a part-year comparison.
- A budget has no revisions. Locking is how you freeze one. If you re-plan, the honest record is a new budget rather than an edit, since nothing snapshots what the previous version said.
- The variance report lives on screen. Taking it away as a file isn’t something to build a monthly reporting pack around today.