Sebastian de GoeijShort answer
Indirect costs do not belong directly to one product, project or department, such as rent, energy, insurance and software. To see what a department or project really costs, you allocate them with a key such as floor area, revenue or headcount. In the books you use cost centres or projects and a fixed percentage split per booking.
Key takeaways
- Indirect costs do not belong to one cost object and must be allocated.
- An allocation key sets the ratio, such as area, revenue, hours or headcount.
- Choose a key that matches what drives the cost and apply it consistently.
- Record the split as fixed percentages per booking or as a rule per supplier.
- Autoboeker supports cost centres, cost units and projects, with percentage splits per booking.
What are indirect costs?
Costs made for the business that cannot be linked one-to-one to a product, project, client or department: rent, energy, cleaning, insurance, team-wide software and general admin. Direct costs, like materials for a specific project, can be linked.
Without allocation, indirect costs sit in one general place and every project looks more profitable than it is.
Which allocation keys do you use?
The best key matches what drives the cost:
- Floor area, for rent, energy and cleaning.
- Headcount or FTE, for software, supplies and staff costs.
- Hours spent, for shared services used per project.
- Revenue, as a general key when nothing better fits.
How do you book the allocation?
Usually with cost centres or projects: book the invoice to the right GL account and split the amount by percentage. Alternatively book to a general cost centre and recharge periodically with a journal entry.
Consistency matters. Record the key, change it deliberately when the situation changes and document why.
- 1Decide which costs are indirect and which belong to a cost object.
- 2Choose a fitting key per type of cost.
- 3Set up cost centres or projects for the units.
- 4Record the split as fixed percentages per booking or supplier.
- 5Check periodically that the key still reflects reality.
How does Autoboeker help allocate costs?
Autoboeker supports cost centres, cost units and projects, and recognises cost centre and optionally project on invoices. Percentage splits per booking and splits over several GL accounts divide an invoice at once, and supplier-specific and administration rules keep, for example, the energy bill on the same split every month.
FAQ
Questions about this topic.
Direct costs link one-to-one to a product, project or department; indirect costs are allocated with a key.
The one that best reflects what drives the cost, such as floor area for rent or headcount for software.
Either: per invoice with a percentage split, or periodically with a journal entry from a general cost centre.
For tax usually not. It is mainly for management information.
Yes, with percentage splits per booking and splits over several GL accounts, captured in rules.
