Purpose of Allocations:
Allocating costs for your organization is a necessary task in managing your data accuracy. The process requires you to assign costs to projects, events, or general operations so that all components of that cost are divided appropriately.
Fundamentals has been designed to allow you control of your allocations so that you know at all times what portion of costs like electric bills or rent go into the cost of running your programs, projects, or events. You will setup your allocations by either percentages and/or fixed amounts.
In this section of the Tangicloud Knowledge Base we will cover:
- Line Allocations
- Markup Allocations
Key Uses of Allocations:
Once setup and implemented, Allocations will help with:
- Providing Accurate Cost Information – By allocating cost to departments, projects, funds, etc., you’re able to show that the item associated with the cost had input to the cost generation. Accurate cost information also enhances the quality of financial reporting and improves managerial decision-making within your organization.
- Enhanced Resource Usage – There will be some constant costs in every dimension of your organization, such as rents or utility bills. While these are predictable and a part of your budget, other costs may rise.By allocating costs, you’re able to determine the extent to which you can use your organization’s resources without negatively impacting costs.
- Controlling Limited Resources – By knowing how to use your organization’s resources and making it known that there are costs associated with those resources, you generally limit the demand for them. While this concept has more to do with limiting demand for your resources than actual cost of using them, you may find your general organizational management operates better by employing this information to your advantage.
- Indirect Cost – The opposite of direct costs, where each cost is traced directly to its project, program, fund, etc., an indirect cost is allocated using estimates across multiple entities to give an educated overall cost to the one project, program, fund etc. that you are currently focused on.
- Line Allocation – Costs attached to invoice lines and posted in real time.
- Batch Allocation – Typically this is allocated costs processed at predictable cycles, most often on a monthly basis.