Hi Krista:

Using Departments adds an additional 4 digits to your general ledger so every transaction would be coded as 8 digits. Departmental reports are decent. You can identify in Sage 50 all of the income and expense accounts to be allocated to departments. Using Projects is usually for job costing but it can reflect your information. Project reporting is less fancy than the departmental reports. Using projects allows distribution to multiple projects on each line of entered transactions compared to departmental entered transactions being entered on individual lines E.G. an a/p invoice for repairs for each store can be allocated on one line for 7 stores using projects rather than departments using 7 lines to distribute the costs.

When you mention payroll by location are relating to your 7 retail stores?, if using Sage 50 it will allow you to post to each retail store set up as either by departmental or project costing.