Understanding Budget Checking

You use budget checking to identify the detail line amounts that exceed the budget for a specific job, project, department, and so forth.

Each time you enter or change a subcontract, the system checks the account number for each detail line and compares it to the available budget for the account. If the detail line amount exceeds the available budget amount, the system places the entire subcontract on hold. You can set a budgeting processing option in the Purchase Orders program (P4310) to provide a warning message that a detail line amount exceeds the available budget amount, but the system still places the order on hold. The system stops further processing of the order until you remove the budget hold. You must set up budget hold codes for each business unit.

The system calculates available budget amounts by subtracting actual amounts (AA ledger) and committed amounts (PA ledger) from the budget amount that you specify for an account number. The system uses this budget calculation:

(Available Budget) = (Original Budget Changes) – (Actual Amounts Spent) – (Commitments) – (Encumbrances)

The system uses this budget calculation for ledgers:

(Available Budget) = (BA or JA Ledger Amounts) – (AA Ledger Amounts) – (PA Ledger Amounts)

Important: To work with budgets, you must enter purchase order detail lines by account numbers.

You use the processing options on the Budgeting tab in the Purchase Orders program to activate budget checking and to specify information such as:

• The budget ledger from which the system retrieves budget amounts.

• The hold code that the system assigns to detail lines that exceed budget.

• The percentage by which a detail line can exceed budget before being put on hold.

• The method by which the system determines budget amounts.

  Note: Use the BA ledger type for monthly budgets (typically used for departmental budgets) and the JA ledger type for Job/Project budgeting.

You might want to compare the amounts that you have budgeted for subcontracts to the amounts that you have actually spent and to the amounts that you are committed to spend in the future. For each account, you can review:

• The budget amount.

• The actual amount that you have spent.

• The total amount of commitments through a certain date.

• The variance between the budget amount and the amount that you have spent or are committed to spend in the future.

• The transactions that have affected a certain account and the journal entries that relate to a particular transaction.