Considerations for Cash Budgeting

When you enable cash budgeting, payment processing happens only when there is sufficient balance in the funds account.

This is different from the expense budgeting where the funds reservation enforces the budget limits. It ensures that the expenditure or liability incurred on the invoice is within the approved limits. In contrast, the cash budgeting ensures that the cash account has sufficient funds before clearing the supplier payment.

When you subject a payment to cash budgeting, the following attributes impact it:

• Budget date

• Budget amount

• Budget account against which the reservation is done

Budget Date

This is the budget date for the payment. It’s the same as the payment date.

Budget Amount

This is the amount reserved for the payment. Prorating the amount paid for the invoice in the ratio of distribution amount and total invoice amount gives the amount for each distribution.

Budget Account

This is the account used for reserving the budget amount. The distributions of the invoice that’s getting paid determines the account combination for reserving the funds. To derive the budget account, overlay the distribution natural account with the natural account segment value from the cash account. This cash account is configured specifically for the bank used for the payment.