Department - What is a department?

A department is a part of a larger organisation and can be organised around a number of different parameters such as function.

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The term ‘department’ can refer to a number of different things. For example, an administrative division within a nation, a governmental ministry or even a part of an institution.

In this particular definition, we refer to the term ‘department’ as it’s used to refer to separate divisions of an organisation. Departments within a company can be organised around a number of different parameters - such as:

  • Their specific function

  • Products

  • Customers

  • Geographic location

  • Processes

For some organisations, it’s interesting or even critical to look at the income and expenses for each department from a financial point of view.

Why are departments used?

In addition to providing a higher level of organisation by dividing business activities by their functions, for example, creating departments within a company has shown to create more efficiency, productivity and also to lower costs.

Companies of a certain size could find department breakdowns especially useful because they provide a more in-depth overview of each unit's performance within a company. This way, companies have a breakdown of income and expenses throughout the organisation and are therefore equipped with the knowledge to make specific improvements.

In larger companies, departments might have the ability to act more autonomously, making decisions that benefit their department directly with the intent that they’ll have a positive impact on the entirety of the organisation.

Smaller companies might be more interactive and function together, making more collective decisions that are considered for their overall impact before action is taken.

For smaller companies, departments may not be as useful, but each company has their own individual needs and should decide as they see fit.

Department income & expenses

Depending on the size of the company and the types of departments into which it’s organised, departments might have their own income from sources such as sales, recruitment, purchasing or accounting, for example.

To calculate the income for a department, each department should be attached to its related product or service sales figures.

Likewise, companies may also want (or need to) consider the expenses incurred by each department in order to better understand their costs and efficiency.