Back to P200: Project Accounting Extended Scenarios

Lesson 4: Controlling the Budget on Document Entry

Part 2: Budgets

This lesson explains how to control that the created documents do not exceed the project budget.

Project Budget Control: General Information

The project budget is used to provide both a financial plan and cost constraints for a project. If you define the amount of money and resources to be spent on the project, you can control whether the actual project costs exceed the budgeted values as users enter documents for the projects. This helps users control the created documents and can be useful for the person who approves these documents.

Learning Objectives

In this lesson, you will learn how to do the following:

Control whether AP bills, purchase orders, subcontracts, and change orders created for a project exceed the project budget
Control the cost code usage in documents
Lock the budgeted values

Applicable Scenarios

You configure project budget control if your company needs to ensure project budget consistency and adherence— specifically, if you need to be able to do the following:

Verify that the budgeted values would not be exceeded if a document is processed
Control the consistent usage of cost codes in project-related documents
Lock the project budget to prevent the agreed-on values from being changed

Control of Document Consistency for the Project

If the Cost Codes feature is enabled on the Enable/Disable Features (CS100000) form, to ensure that document lines are entered for the appropriate budget lines, the system controls the cost code entry in the lines of documents created for projects. When a user interacts with the Cost Code column of the document entry form, the system helps the user enter the appropriate cost code as follows:

When the user clicks the magnifier button in this column, in the lookup table that opens, the system displays only the cost codes that exist in the project budget for the specified combination of the project task and the account group.
If the user manually enters an existing cost code that is not included in the project budget for the specified combination of the project task and the account group, the system displays a warning.

Control of the Budgeted Costs

To avoid the project budget being exceeded as users enter documents for a project, you can configure the system to check whether the entered purchase order, change order, accounts payable bill, or subcontract is within the cost budget of the specified project, taking into consideration the portion of the budget that has already been consumed. To set up this validation, you select Show a Warning in the Budget Control box on the General tab (General Settings section) of the Projects Preferences (PM101000) form. For more information, see Project Budget Control: Overrun Notifications During Document Entry.

Locking of the Budgeted Values

Once a project budget has been agreed on, you can lock the original figures to prevent further editing of them. Aer the original budgeted values are locked, you can still update the revised budgeted values. By maintaining the original values, you can assess how accurately the budget was estimated. Because you can also make adjustments to the revised budget as additional information becomes known, budget revisions provide the most accurate and up-to-date estimation of the budget. For more information, see Project Budget Control: Budget Locking.

Project Budget Control: Overrun Notifications During Document Entry

You can configure the system to notify a user if the amount in a line of the document they are entering would exceed the budget of the corresponding project budget line. To do this, you select Show a Warning in the Budget Control box on the General tab of the Projects Preferences (PM101000) form. When a user enters a project-related document, the system will generate a warning if a line amount exceeds the cost budget of the corresponding project budget line. These warnings can be generated when a user is entering any of the following documents:

A purchase order of the Normal or Project Drop-Ship type and the On Hold or Pending Approval status on the Purchase Orders (PO301000) form.
An AP bill with the On Hold, Pending Approval, or Balanced status on the Bills and Adjustments (AP301000) form.
A change order with the On Hold or Pending Approval status on the Change Orders (PM308000) form.
A subcontract with the On Hold or Pending Approval status on the Subcontracts (PO301000) form.
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               Subcontracts are available in the system if the Construction feature is enabled on the Enable/
               Disable Features form. For more information about the processing of subcontracts, see
               Subcontracts: General Information.
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The warning message in a document line shows you how much the line amount exceeds the budget. The system compares the document line with the corresponding cost budget line of the project and shows you the following amounts in the warning:

Budgeted: The revised budgeted amount of the budget line.

               If the project budget has no corresponding budget line with the same project budget key, the
               revised budgeted value of the line used in overrun calculation is 0.

Consumed: The amount that has been spent already—that is, the sum of the actual amount and the committed open amount of the budget line.
Document: The total amount (the Ext. Cost minus the Discount Amount) of all the document lines that impact the same budget line, including the current document.
Available: The amount of the budget that is available for the document. The available amount is calculated as the diﬀerence between the Budgeted amount and the Consumed amount.
Remaining: The amount that exceeds the budget. The remaining amount is calculated as the diﬀerence between the Available and Document amounts. For example, suppose that you have budgeted a cost of $400 for the project (the budgeted amount). You have already spent $150 (the consumed amount). When you create an AP bill for the project in the amount of $300 (the document amount) and specify the project budget key in the document line, the system will display the following warning: Budgeted: 400.00, Consumed: 150.00, Available: 250.00, Document: 300.00, Remaining: –50.00 The warning does not prevent you from processing the document; it just informs you that by processing the document, you will exceed the budgeted values. You can see the list of all document lines that potentially could exceed the budget of a selected project on the Potential Project Budget Overruns (PM404000) form.

Project Budget Control: To Review the Budget Overruns

This activity will walk you through the process of receiving notifications that indicate whether a newly entered document fits the existing project budget.

Story

Suppose that the West BBQ Restaurant customer has ordered a juicer from the SweetLife Fruits & Jams company, along with the following services: juicer installation, and employee training on operating the juicer. The SweetLife company has contracted the Squeezo Inc. vendor to perform all the services. SweetLife's project accountant has created the project. The vendor has delivered and installed the juicer, and Squeezo's consultant has provided the training. Then suppose that the project accountant noticed that the juicer has cost an extra $200 beyond the budgeted amount, and that the installation and the training have taken two hours more than the budgeted number of hours. Acting as SweetLife's project accountant, you will enter a change order to adjust the cost of the juicer, an accounts payable bill for the provided training, and a purchase order for the installation service. As you enter these project- related documents, you will check whether the costs are within the project budget.

Configuration Overview

In the U100 dataset, the following tasks have been performed to support this activity:

On the Enable/Disable Features (CS100000) form, the following features have been enabled:
Project Accounting, which provides the project accounting functionality
Inventory and Order Management, which provides the ability to maintain stock items and to create and process purchasing documents that include stock items
On the Change Order Classes (PM203000) form, the DEFAULT change order class has been created.
On the Projects Preferences (PM101000) form, the DEFAULT change order class has been selected in the Default Change Order Class box on the General tab (General Settings section).
On the Projects (PM301000) form, the WESTBBQ2 project has been created, the PHASE1 and PHASE2 project tasks have been created for the project, and three cost budget lines have been added. The change order workflow has been enabled for the project.
On the Non-Stock Items (IN202000) form, the INSTALL and TRAINING non-stock item have been defined.
On the Stock Items (IN202500) form, the JUICER15 stock item has been defined.
On the Vendors (AP303000) form, the SQUEEZO vendor has been created.

Process Overview

In this activity, you will capture project costs by processing a change order on the Change Orders (PM308000) form, an accounts payable bill on the Bills and Adjustments (AP301000) form, and a purchase order on the Purchase Orders (PO301000) form. While you process these documents, you will review potential budget overruns on the entry forms. You will then review all the project budget overruns at once on the Potential Project Budget Overruns (PM404000) form.

System Preparation

To prepare to perform the instructions of the activity, do the following:

On the Projects Preferences (PM101000) form, go to the General tab (General Settings section) and set Budget Control to Show a Warning. With this setting, the system shows warnings if documents of the following types exceed the project budget: commitments within change orders, purchase orders, accounts payable bills, and subcontracts.
Select the Internal Cost Commitment Tracking check box.
Save your changes to the project accounting preferences.

Step 1: Creating a Change Order for the Project To review the project and create a change order for the project, do the following:

On the Projects (PM301000) form, open the WESTBBQ2 project. On the Cost Budget tab, review the cost budget of the project, which has the following lines:

The JUICER15 line, with a budgeted amount of 2,000
The TRAINING line, with a budgeted amount of 320
The INSTALL line, with a budgeted amount of 320 The actual values of the budget lines are 0, and the budget lines have no changes or related commitments.

On the More menu, under Change Management, click Create Change Order. The system creates a change order and opens it on the Change Orders (PM308000) form. Make sure that EXTERNAL is specified in the Class box of the Summary area.
In the Summary area, enter Adjustment to the WESTBBQ2 project as the Description.
On the Commitments tab, click Add Row and add a commitment line with the following settings:

Project Task: PHASE1
Cost Code: 00-000
Inventory ID: JUICER15
Quantity: 1.00
Unit Cost: 2,200.00
Vendor: SQUEEZO
Commitment Type: Normal Purchase Order

Save your changes to the change order. Notice that a notification has appeared in the Amount column (see the following screenshot) indicating the following:

The budget for the juicer (Budgeted) is 2,000.
The amount of the commitment line (Document) with the New Document status is 2,200. This line will result in a purchase order line.
The amount by which the change exceeds the available budget (Remaining) is 200. A warning is also shown in the Summary area of the form. Figure: Warnings indicating a budget overrun for a change order

Step 2: Creating a Bill for the Project To create a bill for the project, do the following:

On the Bills and Adjustments (AP301000) form, add a new record.
In the Summary area, specify the following settings:

Type: Bill
Date: 1/30/2025 (inserted by default)
Vendor: SQUEEZO

On the Details tab, click Add Row on the table toolbar and specify the following settings in the added row:

Inventory ID: TRAINING
Quantity: 10
Project: WESTBBQ2
Project Task: PHASE2
Cost Code: 00-000

Save your changes to the bill. Notice that a notification has appeared in the Ext. Cost column indicating the following:

The budget for the training (Budgeted) is 320.
The amount of the bill line (Document) is 400.
The amount by which the bill line exceeds the available budget (Remaining) is 80. А warning has also appeared in the Summary area of the form.

Step 3: Creating a Purchase Order for the Project To create a purchase order for the project, do the following:

On the Purchase Orders (PO301000) form, add a new record.
In the Summary area, specify the following settings:

Type: Normal
Date: 1/30/2025 (inserted by default)
Vendor: SQUEEZO

On the Details tab, click Add Row on the table toolbar and specify the following settings in the added row:

Inventory ID: INSTALL
Order Qty.: 6.00
Project: WESTBBQ2
Project Task: PHASE1
Cost Code: 00-000

Save your changes to the purchase order. Notice that a warning has appeared in the Ext. Cost column indicating the following:

The budget for the installation (Budgeted) is 320.
The amount of the purchase order line (Document) is 480.
The amount by which the purchase order line exceeds the available budget (Remaining) is 160. А warning has also appeared in the Summary area of the form.

Step 4: Reviewing Potential Budget Overruns To review all the budget overruns for the project in a single place, do the following:

Open the Potential Project Budget Overruns (PM404000) form.
In the Project box, select WESTBBQ2.
On the form toolbar, click Calculate to review all project-related documents that exceed the budget, as the following screenshot shows.
Figure: Budget overruns of the project
You have configured the tracking of budget overruns and found the documents that exceed the project budget. In the next step of the process in a production environment, which is beyond the scope of this activity, a project manager would approve or reject these changes to the budgeted amounts. Part 3: Corrections and Adjustments | 40