How are Transactions Checked Against Available Budget?

When is Budget Checking Carried Out?

Budget checking is carried out for ledger transactions if you define any budget checks for account/analysis combinations in Budget Check Setup (BCS). For the same account/analysis combinations, budget checking is also performed for purchase invoices if the Over Expenditure Check option is selected in Purchase Business Setup (PBS); or for purchase orders if the Over Commitment Check option is selected in Purchase Business Setup (PBS). Then, when actual transactions are entered, the budget checking process validates each transaction to ensure it meets the budgetary controls set.

Budget checking begins by finding the budget check definition for the account referenced on the transaction. This is the account code on the ledger, purchase order or purchase invoice line. The system uses this account code to see if it falls within any budget check setup account code ranges.

If the account is not covered by a budget check, the transaction is accepted without budget checking.

If a budget check applies to the account, the budget check definition identifies the budget account, and any optional analysis codes, that contain the budget for the account.

Available Budget

Budget amounts are held as unique combinations as follows:

• Account Code
• Period
• Analysis Code 1 (optional - dependant on Budget Check Setup)
• Analysis Code 2 (optional - dependant on Budget Check Setup)
• Analysis Code 3 (optional - dependant on Budget Check Setup)
• Analysis Code 4 (optional - dependant on Budget Check Setup)
• Analysis Code 5 (optional - dependant on Budget Check Setup).

Budget checking calculates the remaining budget available for the account, analysis code, and period combination to see whether there are sufficient funds available to meet the transaction. For each combination, the available budget is calculated as follows:

Available budget = budget - committed expenditure - actual expenditure

All budget amounts are held in the base currency.

What is a Transaction?

The budgeting process checks each individual transaction as you enter it, to ensure it doesn't exceed the available budget for the account and analysis codes. A transaction is either a purchase order, a purchase invoice, or a certain ledger transaction such as ledger entry, ledger import, and so on.

For purchase orders or invoices, budget checking can be carried out either line by line, or on the entire document, depending on the settings on the Purchase Types (PTS) or Purchase Business Setup (PBS).

Navigation Methods

When a transaction is entered, it consumes budget starting with the current period. That is, for purchase orders and invoices, it is the current purchasing period; for ledger transactions, it is the current financial period.

The available budget is checked and consumed for this period first. If there is not sufficient available budget in this period, budget is consumed from other periods depending on the navigation method that has been defined. This is defined either using an analysis code or Budget Check Setup (BCS).

The following tables show examples of how different navigation methods consume budgets in different ways, and the order in which budgets are consumed:

Assume that the current period is 03/2012, and that a transaction of 100 USD is entered.

Assume that the current period is 03/2012, and that a transaction of 150 USD is entered.

On the Budget Check Setup (BCS) you can define whether single year or multiple years are used. Single year means that budget checking only uses periods in the current year, whereas multiple years means that budget checking uses periods from all years.

Tolerances

If the transaction amount exceeds the available budget, the budget tolerance percentage or amount defined on the Ledger Setup (LES) or Purchase Business Setup (PBS) is taken into account. If the budget deficit is within the tolerance allowed, the transaction is allowed, and a warning message is displayed.

Using Miscellaneous Permissions, available in the Security, you can allow operators to override the overspend warning and post transactions despite an insufficient budget being available.

Failing Budget Checking

If a transaction fails budget checking, the transaction is held and a message is displayed. A transaction can pass budget checking by one of the following methods:

• Reducing the transaction value so that it is less than the available budget.
• Allowing the user with higher tolerance overrides to process the transaction.
• Increasing the amount of budget for the account/analysis/period combination. This could be by reallocating budgets.
• Using a different account/analysis/period combination depending on the navigation method.

If none of the above methods can be used to release the transaction, it cannot be processed and should be cancelled.

Purchase Orders and Purchase Invoices

A purchase order updates the committed expenditure amount. When an invoice is matched to a purchase order and passes the budget checking stage, the following occurs:

• Committed expenditure amount is reduced for the periods whose budget is consumed.
• Actual expenditure amount is increased for the periods whose budget is consumed.

A purchase order reserves budget from a specific period (or periods). When the corresponding invoice is processed, the amount changes from a reserved budget amount to an expenditure amount for that period, regardless of the period in which the invoice is processed.

For example, a purchase order reserves budget from periods 03/2006 and 04/2006. The reserved budget amount is recorded in periods 03/2006 and 04/2006. An invoice is received in period 06/2006 and is matched to the purchase order. The reserved budget amount is reduced for periods 03/2006 and 04/2006, and the expenditure is increased for these periods, not for period 06/2006.

Finding the Budget Check for an Account

A Budget check definition identifies the budget account that must be checked for the account referenced on the transaction. The budget checking process looks for the most appropriate budget check definition for the account.

Initially, a search is carried out to locate a budget check that relates solely to the account referenced on the transaction. If one is not found, a search is carried out for a budget check that has been defined for a range of accounts that includes the account on the transaction.

This allows you to exclude selected accounts from the total budget defined for an account range. For example, you may have a total budget allocated to advertising which includes a large amount for TV advertising. You could set up a specific budget check for the TV advertising expense account and enter the budget allocated to this account alone. You could then set up another budget check for the remaining advertising accounts. The account range assigned to this budget check may reference the TV advertising account but this is immaterial. When a transaction is entered for the TV advertising account, the checking process will use the budget check for the TV Advertising account. When a transaction is entered for any other advertising expense account, the checking process will not find a specific budget check for the account and so will use the budget check that references the range of advertising accounts.

If you create a budget check for a combination of account codes and analysis codes that has no budget, a zero budget is created. This means that every transaction posted to that combination of account codes and analysis codes is treated as exceeding budget.

If you have set the Combined Budget Check option in Analysis Codes (ANC), transactions are posted against the most specific budget available. If this has been exceeded, a less specific budget is used if one is available.