In a recent interview for Radiožurnál, the CEO of Czech Post made a surprising statement: until now, Czech Post has not tracked costs by individual operations or departments.
As much as I find it hard to believe that the reality is as the CEO’s responses suggested, in the context of the planned sale of the parcel division “Balíkovna,” it’s more than alarming. How can a company make decisions about the future of its components if it doesn’t know their cost efficiency?
This isn’t just a problem of large state-owned enterprises—many smaller companies still underestimate the importance of internal cost breakdowns. Yet this is a fundamental cornerstone of good management.
Why is tracking costs by (not only) departments essential for any company?
- Profitability of individual parts of the business
- Effective management and planning
- Better control and accountability
- Support for strategic decision-making
But cost breakdown isn’t just about departments. There are other dimensions of cost management we can leverage:
1. Departments – the basic organizational view
Departments (cost centers) are a logical starting point. They usually correspond to organizational units: branches, departments, or teams.
Why is this useful?
- You discover which parts of the company create value and which are just cost centers.
- It enables efficiency management at the operational or regional level.
- It increases the accountability of department managers.
2. Activities – what the company actually does
The activity dimension (e.g., production, development, customer service, sales) allows tracking costs from a process management perspective.
Benefits:
- Reveals which activities are the most cost-intensive.
- Provides a foundation for process optimization and workflow improvements.
- Enables efficiency comparison across product lines or customer segments.
3. Analytical accounts – deeper breakdown in accounting
Analytical cost tracking (e.g., material type, service type, specific project) provides a detailed view of spending structure.
Why track this level of detail?
- Enables item-based budgeting.
- Helps with cost control—for instance, identifying rising expenses on external services or fuel.
- Crucial for grant-funded projects, contracts, or subsidies where exact expenditure documentation is required.
4. Jobs and projects – performance-based management
Job or project-based accounting is essential where work is delivered individually—e.g., IT, construction, marketing.
Value of this approach:
- See the profitability of each project.
- Compare plan versus actual performance.
- Enables accurate invoicing and performance evaluation of individual teams.
5. Customers or customer segments
Sophisticated companies also track costs by customers or customer groups.
Why do this?
- Helps understand the true profitability of each client.
- Serves as a basis for business decisions (e.g., whom to offer a discount, where to raise prices).
- Important for relationship management and personalized offerings.
Conclusion: Costs are more than just a number in accounting
Companies that want to manage efficiently need more than just an overview of total financial results. Tracking costs across various dimensions allows:
- Strategic, data-driven decision-making
- Accountability and motivation across teams
- Process optimization and profitability improvement
If a company knows only its total costs, but not where they come from or why they occur, it’s like driving a car with the windshield covered.