Project BudgetsLesson 20

Tracking Budget Overruns

Back to V300: Project Accounting for Construction

Lesson 20: Tracking Budget Overruns

Part 5: Project Budgets

In Acumatica ERP Construction Edition, you can set up budget control for construction projects to make the system display warnings if the project budget is close to being exceeded. The overbudget warnings are displayed for subcontracts, purchase orders, change orders to commitments, and AP bills. In this lesson, you will learn how to configure budget control for a project to track documents that exceed the budget and how to process a document with a cost code that was not initially included in the 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.
                   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.

    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. Construction Project Budget: To Track Project Budget Overrun
    The following activity will walk you through the process of tracking the budget overrun for a project.

Story

Suppose that ToadGreen Building Group is a general contractor building an Italian restaurant for its customer, Italian Company. The ToadGreen project manager has created a project for the work to be performed, and the budget has been agreed on with the customer. On February 15, 2025, the purchasing agent has negotiated a subcontract for mechanical piping with the Harmon Installation subcontractor at a better price than was initially planned, thus reserving some budget. The subcontractor has started working, and on February 25, 2025, it notified the project manager that an extra 20 hours is necessary to complete the work. Acting as a project manager, you need to enter all the related documents and review the budget overruns.

Configuration Overview

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

  • On the Projects (PM301000) form, the ITALIAN project has been defined. On the Cost Budget tab, the cost budget lines have been added. Cost budget lines related to 15 – Mechanical Piping project task have no budget changes or open commitments, and the actual amount for the lines is 0. Also, the Change Order Workflow check box is selected on the Summary tab.
  • On the Vendors (AP303000) form, the HARMINT (Harmon Installation) vendor has been defined.
  • On the Change Order Classes (PM203000) form, the DEFAULT change order class has been created and specified as the default change order class on the Projects Preferences (PM101000) form.

Process Overview

You will enter a subcontract related to a project on the Subcontracts (SC301000) form. Then you will create the change order for this subcontract on the Change Orders (PM308000) form. Aer that, you will create an accounts payable bill on the Bills and Adjustments (AP301000) form. Finally, on the Potential Project Budget Overruns (PM404000) form, you will review the documents that have exceeded the project budget.

System Preparation

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

  1. On the Projects Preferences (PM101000) form, in the General Settings section of the General tab, specify Show a Warning in the Budget Control box.
  2. Save your changes.
  3. In the info area, in the upper-right corner of the top pane of the Acumatica ERP screen, make sure that the business date in your system is set to 2/15/2025. If a different date is displayed, click the Business Date menu button, and select 2/15/2025 on the calendar. For simplicity, in this activity, you will create and process all documents in the system on this business date.

Step 1: Recording a Vendor Commitment To record the commitment to the project, do the following:

  1. On the Subcontracts (SC301000) form, add a new record.
  2. In the Summary area, specify the following settings:
  • Vendor: HARMINT
  • Description: Mechanical piping
  • Date: 2/15/2025
  1. On the Details tab, add two lines to the table as follows: a. Add the first line, and specify the following settings:
  • Inventory ID: LABOR
  • Project: ITALIAN
  • Project Task: 15
  • Cost Code: 15-100
  • Line Description: Mechanical piping work
  • UOM: HOUR
  • Order Qty.: 100
  • Unit Cost: 145 b. Add the second line, and specify the following settings:
  • Inventory ID: PROJMATERIAL
  • Project: ITALIAN
  • Project Task: 15
  • Cost Code: 15-100
  • Line Description: Mechanical piping materials
  • UOM: EA
  • Order Qty: 1
  • Unit Cost: 17000
  1. On the form toolbar, click Remove Hold. The system saves the subcontract and assigns it the Open status. Make sure that the subcontract total is $31,500.
  2. On the Projects (PM301000) form, open the ITALIAN project, and on the Cost Budget tab, make sure of the following:
  • In the line with the 15 project task, the 15–100 cost code, and LABOR account group, the Original Committed Amount is now 14,500.
  • In the line with the 15 project task, the 15–100 cost code, and the MATERIAL account group, the Original Committed Amount is now 17,000.

Step 2: Recording the Extra Work To process the extra work needed for the project, create and process a change order by doing the following:

  1. While you are still viewing the ITALIAN project on the Projects (PM301000) form, on the More menu (under Change Management), click Create Change Order. The system creates a change order for the project and opens it on the Change Orders (PM308000) form.
  2. In the Summary area, specify the following settings:
  • Class: DEFAULT (inserted automatically)
  • Project: ITALIAN (inserted automatically)
  • Change Date: 2/25/2025
  • Approval Date: 2/25/2025
  • Description: Extra work on piping
  1. On the table toolbar of the Commitments tab, click Add Commitments, and in the Add Commitments dialog box, select the unlabeled check box for the line with the following settings:
  • Project Task: 15
  • Cost Code: 15-100
  • Inventory ID: LABOR
  1. Click Add Lines & Close to add the selected line to the change order and close the dialog box.
  2. In the line that has appeared on the Commitments tab, set Quantity to 20. Because you have only $500 of the budget available and the change amount exceeds the available budget by $2,400, the overbudget warning is displayed, as shown in the following screenshot. The Consumed amount in the warning indicates the total of open commitments and already-processed actual amounts for the project.
        Figure: A warning indicating a budget overrun
  3. Save the change order, which has the On Hold status.

Step 3: Creating a Vendor Bill Enter an AP bill for the subcontract as follows:

  1. On the Bills and Adjustments (AP301000) form, create a new document, and specify the following settings in the Summary area:
  • Type: Bill
  • Vendor: HARMINT
  • Date: 2/15/2025
  • Description: Mechanical piping work
  1. On the Details tab, add a new row with the following settings:
  • Inventory ID: LABOR
  • Quantity: 10
  • UOM: HOUR
  • Unit Cost: 100
  • Project: ITALIAN
  • Project Task: 15
  • Cost Code: 15-100
  1. Save the bill, which has the On Hold status, and review the overbudget warning displayed in the Ext. Cost column. The amount to be paid by the bill exceeds the budget by $500.

Step 4: Viewing Documents Exceeding the Project Budget To view all documents that exceed the budgeted amounts, do the following:

  1. Open the Potential Project Budget Overruns (PM404000) form.
  2. In the Selection area, specify the following values:
  • Project: ITALIAN
  • Date Range: 2/1/2025, 2/28/2025
  1. On the form toolbar, click Calculate. The system shows the list of documents, along with the document amounts and the amounts that exceed the budgeted amounts. Notice that the subcontract that you have processed does not exceed the budgeted amounts, and thus is not shown in the table.
        Figure: List of documents that exceed the budgeted amounts
  2. On the Projects Preferences (PM101000) form, in the General Settings section of the General tab, select Do Not Control in the Budget Control box, and save your changes.
    You have entered the documents for the project and reviewed the budget overruns.

Construction Project Budget: To Add a New Cost Code to the Project Budget

The following activity will walk you through the processing of a subcontract with a cost code that had not been initially specified in the project.

Story

Suppose that ToadGreen is a general contractor building an Italian restaurant for its customer, The Italian Company. On February 15, 2025, the purchasing manager negotiated a subcontract for construction labor with the Harmon Installation subcontractor. This subcontract had not been budgeted initially in the project. Acting as a ToadGreen project manager, you need to enter a subcontract, record these expenses to a new cost code in the project budget, and make sure that the project cost budget is updated.

Configuration Overview

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

  • On the Projects (PM301000) form, the ITALIAN project has been defined. On the Cost Budget tab, the cost budget lines have been added along with the appropriate cost codes. On the Summary tab, the Allow Adding New Items on the Fly check box is selected.
  • On the Account Groups (PM201000) form, the SUBCON account group has been created.
  • On the Non-Stock Items (IN202000) form, the SUBCONTR item has been created. The expense account of the item is mapped to the SUBCON account group.

Process Overview

You will enter a subcontract related to a project on the Subcontracts (SC301000) form, and add a to the subcontract with the new cost code. Then you will release the subcontract and make sure that the project budget is updated.

Step: Entering a Subcontract To enter a subcontract, do the following:

  1. On the Subcontracts (SC301000) form, create a new subcontract.
  2. In the Summary area of the form, in the Vendor box, select HARMINT, and in the Description box, type Construction labor.
  3. On the Details tab, add a new line with the following settings:
  • Inventory ID: LABOR
  • Project: ITALIAN
  • Project Task: 15
  1. In the Cost Code column, click the magnifier icon to open the lookup box. On the Project Codes tab of the lookup box, the system displays the list of cost codes that are used in the project budget lines that have the specified account group and project task.
  2. Open the All Records tab, and click the 01–300 cost code.
  3. On the table toolbar, click Select. The system closes the lookup box and inserts the cost code in the line. The warning next to the Cost Code column of this line indicates that the entered cost code does not exist in the project budget.
  4. In the Ext. Cost column of the line, type 1200.
  5. On the form toolbar, click Remove Hold. The system saves the subcontract with the Open status.
  6. On the Projects (PM301000) form, open the ITALIAN project, and review the Cost Budget tab. Notice that the new cost budget line for the 15 project task with the 01-300 cost code has been added, and 1200 is shown in the Original Committed Amount column, as shown in the following screenshot. In the added line, the LABOR account group is specified because this group includes the expense account of the inventory item specified in the subcontract line.
       Figure: A new cost budget line added to the project

    You have processed a subcontract and added a line with a new cost code to the cost budget.