If your organization has multiple subsidiaries, you can calculate overhead for each one instead of once for everyone.
Each subsidiary gets its own facility and internal costs, so profitability reports reflect what it actually costs to run. The main choice is how hours are counted: by the budget they're tracked on, or by the person who tracked them.
đ Learn how to turn it on in Setting Up Overhead Cost per Subsidiary.
Why Calculate Overhead per Subsidiary
Subsidiaries often have different operating costs. One might cost more to run because of its location or size.
A single organization-wide calculation blends these differences together. Calculating per subsidiary keeps them separate.
Calculation Types
The Calculation Type setting in Settings > Overhead Cost has three options:
Organization wide: Hours count toward the organization as a whole, regardless of which subsidiary tracked them
Per subsidiary (by budget): Hours count toward the subsidiary that owns the budget, regardless of who tracked them
Per subsidiary (by person): Hours count toward the subsidiary that employs the person, regardless of which budget they tracked on
This article covers the two per-subsidiary types.
Example
A Subsidiary A employee with an overhead rate of $10 per hour logs 5 hours on a client budget owned by Subsidiary B.
By budget: The 5 hours count toward Subsidiary B's client hours
By person: The 5 hours count toward Subsidiary A's client hours. They also show in the Intercompany hours column, which lists time tracked on another subsidiary's budget
In both types, the cost of that employee's time is their cost rate plus $10 from Subsidiary A.
Which Type Should You Choose?
Each subsidiary sells and delivers its own client work: Choose Per subsidiary (by budget)
Employees often work on other subsidiaries' budgets, or a subsidiary supports the others (shared services, cost center): Choose Per subsidiary (by person)
Not sure: Compare all three types in Overhead history before you switch
đ Learn how in Setting Up Overhead Cost per Subsidiary.
đ Both types need each subsidiary to have its own internal budgets, where its employees track their time.
By budget works best when each subsidiary has a meaningful share of client hours. The internal cost per hour divides internal costs by client hours, so a subsidiary with few or no client hours gets a number that doesn't reflect its costs.
By person avoids this for cost-center subsidiaries. Hours their employees track on other subsidiaries' budgets count as their own client hours.
How Overhead Is Calculated
Productive uses the same formulas for each subsidiary. The calculation type only decides which hours count toward which subsidiary.
đ See the formulas in How Overhead Cost Is Calculated.