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The bullshit is hidden in the word "directly". You can define this word to mean whatever you'd like to mean. You can say a salesperson directly adds revenue to

The bullshit is hidden in the word "directly". You can define this word to mean whatever you'd like to mean. You can say a salesperson directly adds revenue to the company, but it's not really directly, the billing department is much closer to the actual money. You allow yourself to take the billing department for granted, but that's just because you don't work for the billing department. In the same way you could view the developers as the profit center, and take the sales department for granted. I'll say it again, I'll be happy to see an objective definition of profit centers and cost centers.

bloomer 7y ago
Profit center: spending more money on it can make you more money. Cost center: spending more money will not be able to increase your revenue, hence the only way to improve your bottom line is by reducing costs. A lot of the confusion on this thread was conflating necessary functions with profit centers. Billing and compliance are both necessary. Done poorly they can cost a lot of money. Done perfectly they can never increase the actual income of t he company. That is why sale and product development are traditionally the only parts of the business identified as profit centers. It doesn’t mean the others aren’t important just that they have different goals. Profit centers look to expand the business while cost centers look to increase efficiency through optimization. They have different value during the life of a company. During growth, profit centers are the most valuable source of effort while for a mature company that has saturated its market cost centers are most valuable to focus on. The advice to stick to profit centers is somewhat equivalent to sticking to growth which nearly always has a higher return than optimization.
- rightbyte 7y ago
  If compliance are doing a good job they protecting engineering from late changes in projects which might give a better product and more revenue. It's symbiotic.
bdowling 7y ago
The billing department is a profit center because it converts accounts receivable into cash and there are metrics like days sales outstanding that can be used to directly measure their impact on the bottom line. Cost centers on the other hand are indispensable, but evaluating their impact on the bottom line is hard to quantify and therefore subjective. Again, it’s not fair to the invaluable work done by the cost centers, but that’s what it is.

bloomer 7y ago

Profit center: spending more money on it can make you more money. Cost center: spending more money will not be able to increase your revenue, hence the only way to improve your bottom line is by reducing costs. A lot of the confusion on this thread was conflating necessary functions with profit centers. Billing and compliance are both necessary. Done poorly they can cost a lot of money. Done perfectly they can never increase the actual income of t he company. That is why sale and product development are traditionally the only parts of the business identified as profit centers. It doesn’t mean the others aren’t important just that they have different goals. Profit centers look to expand the business while cost centers look to increase efficiency through optimization. They have different value during the life of a company. During growth, profit centers are the most valuable source of effort while for a mature company that has saturated its market cost centers are most valuable to focus on. The advice to stick to profit centers is somewhat equivalent to sticking to growth which nearly always has a higher return than optimization.

rightbyte 7y ago
If compliance are doing a good job they protecting engineering from late changes in projects which might give a better product and more revenue. It's symbiotic.

bdowling 7y ago

The billing department is a profit center because it converts accounts receivable into cash and there are metrics like days sales outstanding that can be used to directly measure their impact on the bottom line. Cost centers on the other hand are indispensable, but evaluating their impact on the bottom line is hard to quantify and therefore subjective. Again, it’s not fair to the invaluable work done by the cost centers, but that’s what it is.