Funds Reservation for a Purchase Order

As a buyer, you can reserve funds for a purchase order that's subject to budgetary control.

Based on the control budget setup, this can occur either when you submit the document, or when the document is approved. This ensures the available funds aren't consumed by other transactions before the purchase order is fulfilled.

Key aspects of funds reservation for a purchase order are:

How funds are reserved for a purchase order.
Setup needed for funds reservation.
How encumbrance accounting interacts with reserve on submit.
What happens to reserved funds if the order isn't approved.
What you can do if funds aren't available in the budget.

How Funds are Reserved

Funds reservation is done automatically, either when the purchase order is submitted or approved. Funds are reserved based on the setup for the requisitioning business unit and business function.

Set Up Needed for Funds Reservation

Your organization can choose the point at which funds are reserved for purchase orders, either on document submission or document approval. Do this using the Manage Budgetary Control and Encumbrance Accounting page. Find the page in the Setup and Maintenance work area, Financials offering, Manage Budgetary Control task.

How Encumbrance Accounting Interacts with Reserve on Submit

Encumbrance accounting is only created upon implementation of the purchase order or change order. No encumbrance accounting is created at submit time.

What Happens When the Order Isn't Approved

If a transaction for which funds have been reserved on submission is rejected during the approval process, any funds previously reserved are either:

Released back to the available funds
Reinstated to the backing transaction

For example, a purchase order with a backing requisition for which funds were reserved at submit is rejected during the approval process. The funds are reinstated to the backing requisition.

What Happens When Funds Aren't Available

When a purchase order is needed and budget isn't available, you can request a funds override if:

Funds override is enabled for the control budget, and,
The overall override limit for the control budget hasn't been exceeded, and,
A funds override approver can be identified for the transaction based on the control budget's override rules.

The funds override process supports a funds override request, funds override approval and reserving funds with an override at approval.