Wal-Mart is a multinational retail company founded by Sam Walton. A big organization like Wal-Mart Retail Company is well administered and easily control by forming small business groups. Generating profits and revenues for this organizations will require the organization to use some capital. These costs can be direct or indirect. Small groups that are formed by the organization to keep the organization operating in terms of expenses need funds to perform their duties. The cost used by these small groups in the organization is indirect and these departments are known as cost centers.
Wal-mart operates by the use of these cost centers to generate profit and revenue. Some of them include the accounting department, information technology department, maintenance department, research and development department, human resource development and supply department. Tracking of expenses is the main responsibility of the cost centers staff. Therefore, the segmentation of expenses into the cost centers easily controls the total costs of the company. Wal-mart records that the cash flow of the company is from continuous operations that go around the organization. The cash flow needs to be enough to meet the needs of the company such as seasonal buildups, dividends and other expenditure (Kenton, 2018). The cost centers in Wal-mart greatly helps to manage the total expenses as each cost center keeps track of the cost and expense in various sections they manage.
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Cost centers therefore helps to account for every dollar especially the companies expenses. The cost centre data is utilized by the internal management regularly to for operational efficiency improvement and maximizing profit as opposed to the external management such as investors, tax authorities and shareholders. As much as cost centers may cost the organization, they contributes to the company’s’ profit and revenue in an indirect way through operative productivity, customer service and enhancing the value of products (Kenton, 2018). Cost centers in the company aid the administration to utilize the company’s’ resources in an effective way as they are the one who have an understanding of how they are being used. In conclusion, there is no better way to group expenses in a large retail company like Wal-mart other that cost centers.
References
Kenton, W. (2018). Cost Center. Investopedia . Retrieved on 13 May 2019, from https://www.investopedia.com/terms/c/cost-center.asp
