2. Benefits of micro profit centers and their accounting

Companies that utilize the concept of micro profit centers observe the following benefits:

• Increased accountability and engagement of employees due to more expressed entrepreneurial attitude.
• Increased level of decentralization allowing centers more freedom to make business decisions in the best interest of the center and the company as a whole.
• This in turn creates an organization with many semi-autonomous groups that can react quickly to internal or external factors (i.e., being flexible and adapting quickly to changing environments). This is especially beneficial for large organizations where bureaucracy usually slows down such maneuverability and ability to quickly react to market forces.

How does micro profit center concept impact financial or management accounting?

• It usually doesn’t because micro profit centers don’t maintain true accrual accounting books and instead rely on simple records for tracking purposes (i.e., usually done by micro profit centers themselves). So accountants don’t get involved in record keeping for micro profit centers.
• In the case of Kyocera (the organization that has been using this method for a while), the accounting department was not involved in tracking cost data for micro profit centers. Instead, engineers and center managers had access to cost data for raw materials, equipment, payroll, etc. which allows them to calculate necessary product costs and, ultimately, help with product pricing decisions.

In summary, organizations nowadays have responsibility centers such as cost centers, revenue centers, profit centers, and investment centers.  Another variation of a responsibility center is a micro-profit center which offers several benefits to organizations.

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