Original article by Julio Hartstein
We want your field service organisation to make money. Isn’t that one of the most important objectives in running a successful business?
To make money, regardless of your specific customer service ecosystem, you need to become a profit centre – as opposed to a cost centre. Check out Microsoft’s Field Services eBook on the topic of transitioning from cost centre to profit centre. You can download it here.
Before you download it, though, you might want to understand the difference between a “cost” centre and a “profit” centre. Even though it seems logical on the surface, many business professionals don’t completely understand how the two concepts differ.
The Houston Chronicle’s small business page has a good breakdown of the ideas:
A cost centre is not operated with the intention of earning revenue or making a profit directly. It essentially exists to enable other areas of the company to make money. Standard examples include Human Resources and Customer Service, which is why field service organisations are often considered cost centres to some larger businesses.
A profit centre generates revenue while also taking on costs; this makes it possible to calculate the profit of just that department/division as a self-contained unit. In standard business terms, most people think of Sales departments as profit centres.
The transition from cost centre to profit centre typically comes from these activities:
- Successful monetisation of a product or service
- Accurate financial reporting around that product or service
Those are the two basic steps, but a lot more goes into the process. You can learn more in the Microsoft Field Services eBook, but here’s a sneak peek at one of the concepts: Any effort to pursue profits in the field services area has to come from providing value to your customers. So, the cost centre to profit centre transition all begins with the value proposition of your field service organisation.