{"id":187,"date":"2024-08-04T19:32:06","date_gmt":"2024-08-04T23:32:06","guid":{"rendered":"http:\/\/visuallease.wpengine.com\/?p=187"},"modified":"2024-08-07T17:49:35","modified_gmt":"2024-08-07T21:49:35","slug":"2016104charging-back-occupancy-costs-why-its-a-good-idea","status":"publish","type":"post","link":"https:\/\/visuallease.com\/2016104charging-back-occupancy-costs-why-its-a-good-idea\/","title":{"rendered":"Charging Back Occupancy Costs: Why It\u2019s a Good Idea"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/visuallease.com\/2016104charging-back-occupancy-costs-why-its-a-good-idea\/#The_Debate_Over_Chargebacks\" >The Debate Over Chargebacks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/visuallease.com\/2016104charging-back-occupancy-costs-why-its-a-good-idea\/#Understanding_Occupancy_Costs\" >Understanding Occupancy Costs<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/visuallease.com\/2016104charging-back-occupancy-costs-why-its-a-good-idea\/#What_Are_Occupancy_Costs\" >What Are Occupancy Costs?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/visuallease.com\/2016104charging-back-occupancy-costs-why-its-a-good-idea\/#Accessing_Cost_Data\" >Accessing Cost Data<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/visuallease.com\/2016104charging-back-occupancy-costs-why-its-a-good-idea\/#Implementing_Chargebacks_A_Practical_Approach\" >Implementing Chargebacks: A Practical Approach<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/visuallease.com\/2016104charging-back-occupancy-costs-why-its-a-good-idea\/#Calculating_Cost_Per_Person\" >Calculating Cost Per Person<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/visuallease.com\/2016104charging-back-occupancy-costs-why-its-a-good-idea\/#Standardizing_Space_Allocations\" >Standardizing Space Allocations<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/visuallease.com\/2016104charging-back-occupancy-costs-why-its-a-good-idea\/#Expanding_Chargebacks_The_Workpoint_Accounting_Metric\" >Expanding Chargebacks: The Workpoint Accounting Metric<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/visuallease.com\/2016104charging-back-occupancy-costs-why-its-a-good-idea\/#Developing_Broader_Metrics\" >Developing Broader Metrics<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/visuallease.com\/2016104charging-back-occupancy-costs-why-its-a-good-idea\/#Accounting_for_Mobile_Employees\" >Accounting for Mobile Employees<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/visuallease.com\/2016104charging-back-occupancy-costs-why-its-a-good-idea\/#Case_Study_The_Agile_Workplace_Project_at_Gartner\" >Case Study: The Agile Workplace Project at Gartner<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/visuallease.com\/2016104charging-back-occupancy-costs-why-its-a-good-idea\/#Benefits_of_Charging_Back_Occupancy_Costs\" >Benefits of Charging Back Occupancy Costs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/visuallease.com\/2016104charging-back-occupancy-costs-why-its-a-good-idea\/#Conclusion_The_Value_of_Occupancy_Cost_Chargeback\" >Conclusion: The Value of Occupancy Cost Chargeback<\/a><\/li><\/ul><\/nav><\/div>\n[vc_row type=&#8221;in_container&#8221; full_screen_row_position=&#8221;middle&#8221; scene_position=&#8221;center&#8221; text_color=&#8221;dark&#8221; text_align=&#8221;left&#8221; overlay_strength=&#8221;0.3&#8243; shape_divider_position=&#8221;bottom&#8221;][vc_column column_padding=&#8221;no-extra-padding&#8221; column_padding_position=&#8221;all&#8221; background_color_opacity=&#8221;1&#8243; background_hover_color_opacity=&#8221;1&#8243; column_shadow=&#8221;none&#8221; column_border_radius=&#8221;none&#8221; el_class=&#8221;individual-blog-spacing&#8221; width=&#8221;1\/1&#8243; tablet_text_alignment=&#8221;default&#8221; phone_text_alignment=&#8221;default&#8221; column_border_width=&#8221;none&#8221; column_border_style=&#8221;solid&#8221;][vc_column_text]\n<h2><span class=\"ez-toc-section\" id=\"The_Debate_Over_Chargebacks\"><\/span>The Debate Over Chargebacks<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>There\u2019s always a dispute within the organization aboutthe issue of chargebacks, particularly facility occupancy costs. Department heads typically question the need for charging back occupancy costs, since they don \u2018t feel they have any direct control over these overhead costs. But occupancy costs are directly linked to staffing, so it\u2019s logical to burden a department with its share of occupancy costs relative to staffing levels. The argument for chargebacks centers on the need for reinforcing cost containment, as well as maintaining a level of fairness in the organization.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Understanding_Occupancy_Costs\"><\/span>Understanding Occupancy Costs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"What_Are_Occupancy_Costs\"><\/span>What Are Occupancy Costs?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Occupancy costs include a variety of expenses directly related to maintaining and operating a facility. These typically consist of:<\/p>\n<ul>\n<li>Rental<\/li>\n<li>Utilities<\/li>\n<li>Maintenance<\/li>\n<li>Insurance<\/li>\n<li>Leasehold improvement amortization<\/li>\n<li>Capital depreciation related to furniture and equipment<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Accessing_Cost_Data\"><\/span>Accessing Cost Data<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>These costs should be accessible from the lease management system, and department P&amp;L statement. Usually, staffing numbers are available from the department operating statement.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Implementing_Chargebacks_A_Practical_Approach\"><\/span>Implementing Chargebacks: A Practical Approach<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"Calculating_Cost_Per_Person\"><\/span>Calculating Cost Per Person<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>In my experience, the finance department would develop a cost per person, and then charge a department P&amp;L with the product of number of employees times the chargeback rate.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Standardizing_Space_Allocations\"><\/span>Standardizing Space Allocations<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>In my opinion it\u2019s unnecessary to differentiate space allocations based on different office sizes. A standard cost per person is sufficient for the purposes of chargebacks and avoids arguments over space per person differences.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Expanding_Chargebacks_The_Workpoint_Accounting_Metric\"><\/span>Expanding Chargebacks: The Workpoint Accounting Metric<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"Developing_Broader_Metrics\"><\/span>Developing Broader Metrics<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Some years ago our group worked with the Institute of Management Accounting in an effort to develop a broader chargeback metric that was called \u201cworkpoint accounting.\u201d This metric included both occupancy costs and fully loaded IT costs such as network costs, prorata share of equipment costs, etc.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Accounting_for_Mobile_Employees\"><\/span>Accounting for Mobile Employees<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The idea behind this broader metric would be to account for cost per person regardless ofwhether employees were assigned a workstation or whether they worked on a mobile basis.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Case_Study_The_Agile_Workplace_Project_at_Gartner\"><\/span>Case Study: The Agile Workplace Project at Gartner<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The effects of this chargeback were quite compelling and made a strong financial case for telecommuting primarily as a result of reduced occupancy cost per person. At the time, the Agile Workplace project at Gartner did several case studies using the Workpoint accounting metric. I recall that in the case of Gartner\u2019s headquarters in Stamford, several scenarios assuming different levels of desk sharing and telecommuting reduced the cost per person dramatically from $19 K per employee down to $15 K per employee. (Total occupancy plus IT costs)<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Benefits_of_Charging_Back_Occupancy_Costs\"><\/span>Benefits of Charging Back Occupancy Costs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Charging back occupancy costs has several benefits:<\/p>\n<ul>\n<li>Provides incentives to conserve space.<\/li>\n<li>Provides metrics to analyze desk sharing and telecommuting strategies.<\/li>\n<li>Provides benchmarks to analyze occupancy costs across the portfolio.<\/li>\n<li>Provides a tool to plan new facilities based on headcount projections.<\/li>\n<li>Identifies disparities across different department occupancies; and exposes space inefficiencies.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Conclusion_The_Value_of_Occupancy_Cost_Chargeback\"><\/span>Conclusion: The Value of Occupancy Cost Chargeback<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Occupancy cost chargeback is an effective tool for allocating overhead costs to different staff groups. Some organizations strive to develop a P&amp;L statement by department, and having a cost component for occupancy insures a complete picture of profitability. But chargebacks assume that the organization has a robust lease management systemto identify space, and associated leasing costs. It also assumes the organization has an effective human resource system that tracks staffing levels by location.[\/vc_column_text][\/vc_column][\/vc_row]\n","protected":false},"excerpt":{"rendered":"<p><span style=\"font-size:18.6667px\">There\u2019s always a dispute within the organization aboutthe issue of chargebacks, particularly facility occupancy costs. Department heads typically question the need for charging back occupancy costs, since they don \u2018t feel they have any direct control over these overhead costs. But occupancy costs are directly linked to staffing, so it\u2019s logical to burden a department with its share of occupancy costs relative to staffing levels. The argument for chargebacks centers on the need for reinforcing cost containment, as well as maintaining a level of fairness in the organization.<\/span><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":"","_links_to":"","_links_to_target":""},"categories":[170],"tags":[194,195],"company_size":[],"company_portfolio_size":[],"company_industry":[],"case_study_topic":[],"class_list":["post-187","post","type-post","status-publish","format-standard","hentry","category-lease-accounting","tag-energy-utilities","tag-visual-lease-round-table"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/posts\/187","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/comments?post=187"}],"version-history":[{"count":0,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/posts\/187\/revisions"}],"wp:attachment":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/media?parent=187"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/categories?post=187"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/tags?post=187"},{"taxonomy":"company_size","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/company_size?post=187"},{"taxonomy":"company_portfolio_size","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/company_portfolio_size?post=187"},{"taxonomy":"company_industry","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/company_industry?post=187"},{"taxonomy":"case_study_topic","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/case_study_topic?post=187"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}