Published at: 11:03 am - Wednesday March 26 2014
Overview
Modules supporting budgetary control:
- General Ledger
- Payables
- Purchasing
- Inventory
- Projects
Limitations:
- Budgetary control is only available for the primary ledger functional entered currency
- Budgetary control requires the use of encumbrance or budgetary accounting
Funds checking levels:
- Detail budgetary control: budget per code combination assigned at budget organization range level
- Summary budgetary control: budget by summary accounts assigned at summary account template level
Budgetary controls possible:
- None: no funds checking and no funds reservation
- Advisory: funds checking and if no funds, warning is issued and funds are reserved
- Absolute: funds checking and if no funds, transaction is blocked and funds are not reserved
Budget Control Group
The budget control group is assigned at site or responsibility profile level and can set limits for:
- Funds check level
- Tolerance Percent: overspend allowed on budget in percent
- Tolerance Amount: overspend allowed on budget in amount
- Override amount: maximum override amount per account for failed absolute level
Note: tolerances only work in an encumbrance environment.
Amount Types and Boundaries:
- Amount Type: cumulative balance for funds checking interval
- Boundary: end point of the interval so budget cannot be spent beyond this point
- Some examples:
- PTD + Period: PTD budget is checked against current period (any previous periods underspend is ignored)
- YTD + Period: Accumulated YTD budget is checked for current period (YTD underspend can be used until current period)
- QTD + Quarter: Accumulated QTD budget is checked for current quarter (QTD underspend can be used within current quarter)
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Boundary |
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Period |
Quarter |
Year |
Project |
Amount Type |
PTD: Period-to-date |
OK |
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QTD: Quarter-to-date |
OK |
OK |
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YTD: Year-to-date |
OK |
OK |
OK |
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PJTD: Project-to-date |
OK |
OK |
OK |
OK |
Funds Available Calculation:
Encumbrance Accounting:
- Funds Available = Budget – Encumbrance – Expenditures
Budgetary Accounting:
- Funds Available = Budget – Expenditures
Detail Budget Control
To define detailed budget control you must create a budget organisation with a specific range and assign budgetary control that range.
Any ranges not assigned to budget control will not have budgetary control enabled so care must be taken when defining ranges to ensure all accounts are covered if full budgetary control is required.
Each of the budget organisation assignments having budgetary control enabled should have a budget amount allocated.
In practice, this may become a huge task. Just imagine you have an account for "stamps", then you must assign a budget amount for "stamps" per cost centre and per company per any code combination, your account structure may have.
Therefore, detail level budgetary control assumes you have a budget amount per code combination.
To limit the number of code combinations requiring budget amounts it is recommended to switch off "dynamic insert" so only pre-defined code combinations can be used.
A simple setup would be (based on the chart of accounts in the appendix):
Purpose
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Range from
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Range to
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Budgetary control
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Insurance
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10-100-6400
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10-100-6499
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Advisory
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Travel
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10-100-6500
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10-100-6599
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Absolute
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With this setup, you are required to enter a budget amounts for:
- 10.100.6510
- 10.100.6520
- 10.100.6530
And optionally amounts for:
Budgets > Define > Budget:
Note: "Require Budget Journals" must be enabled for budgetary control budgets.
Budgets > Define > Organization:
Note: Use the "Maintain" button to update code combination assignments when budget organisation ranges are changed or new accounts are added.
Click: Ranges
Click: Budgetary Control (line 10)
Click: Budgetary Control (line 20)
Process for adding a new account, which is inside an existing budget organisation range with budgetary control:
- Add new account
- Create code combinations manually
- Add budget amount for the code combination
- Run " Program – Maintain Budget Organization"
- Check if code combination exists in budget organisation assignment with correct budget control assignment
Only code combination assignments will have budget control enabled hence, it is important to run: "Program – Maintain Budget Organization". This program is run when clicking the button "Maintain" in the "Define Budget Organization" screen.
Summary Budget Control
Summary level control is managed at summary account level. Summary accounts are always assigned at parent account level.
This makes it easier to enter budget amounts as this can be entered at a higher level.
Also the budget organisations can now be arranged independently of the budgetary control.
To ensure we only budget at one account we specifically add a budget account for this purpose with "Posting = No" and "Budget = Yes" and set all other accounts to "Budget = No" and "Posting = Yes".
For example using our chart of accounts below, we define:
- Insurance Budget: 6401
- Travel Budget: 6501
Then we define summary accounts for 6400 and 6500 to summarise both actual and budget amounts in the parent account range.
First, we define a rollup group to control the summarisation.
Setup>Financials>Flexfields>Key>Groups:
Name the rollup groups the same as the segment values so you can refer to these in the same way as an account.
Setup>Financials>Flexfields>Key>Values:
Assign the rollup group to the parent account.
The rollup can be assigned to any level in a hierarchy so the account hierarchy is important for the level of budgeting as well as reporting.
Accounts>Summary:
These summary accounts will have a total for "Travel" or "Insurance" for total of company and cost centre. TBD as company should be "D".
Click: Budgetary Control (Insurance)
Click: Budgetary Control (Travel)
The budget control can be performed at these summary levels per segment:
- D: Detail – sum per segment value
- T: Total – sum per segment (normally applied to a 4th segment like "Analysis")
- {rollup group}: Sum of the accounts assigned to the rollup group
In the above example the calculation will be:
D.D.6400 =
10.100.6401 +
10.100.6410 +
10.100.6420
The amounts are added for each balance type of actual, budget and encumbrance.
Funds available = Budget – Encumbrance – Actuals = 100 – 0 – (10 + 20) = 70
All made simple thanks to the summary account.
The amounts can be checked using the funds inquiry screen.
Inquiry>Funds:
As the budgetary control is on D.D.6400 then there is no need for a budget on 6410 and 6420 making it simpler to maintain on just one account: 6401.
When a new account/combination is added it will inherit the budget assigned to the summary account hence dynamic insert can be enabled.
So for example, we add account 6430 to the above example then there would still be a budget covered by the amount on 6401.
However, you still need to ensure the summary account template is updated by running: Program – Maintain Summary Templates
Process for adding a new account, which is inside an existing budget organisation range with budgetary control:
- Add new account
Simple and clean.
Optional you can run: "Program – Maintain Summary Templates" but this is automatically run during the posting process anyway.
Not if you change the hierarchy, which is part of a summary group you need to run: Program – Incremental Add/Delete Summary Templates
Chart of Accounts
Note this is not the full chart of accounts but only listing accounts relevant for the above examples.
COA structure:
Segment
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Qualifier
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Length
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Company
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Balancing
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2
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Cost Centre
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Cost Center
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3
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Account
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Account
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4
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Company values:
Value
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Description
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10
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ACME Limited
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Cost Centre values:
Value
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Description
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000
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Balance Sheet
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100
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Finance
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Account values:
Value
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Description
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Type
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Parent
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Child Range
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6000
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Operating Expenses
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Expense
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Yes
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6000-6999
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6400
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Insurance Expense
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Expense
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Yes
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6400-6499
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6401
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Insurance Budget
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Expense
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No
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6410
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Liability Insurance
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Expense
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No
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6420
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Property Insurance
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Expense
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No
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6500
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Travel
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Expense
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Yes
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6500-6599
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6501
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Travel Budget
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Expense
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No
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6510
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Trains
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Expense
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No
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6520
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Planes
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Expense
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No
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6530
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Automobiles
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Expense
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No
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