Budgeting and Targets – Rajawali Adikarya

What Is It?

A budget can be defined as ‘a quantified plan of action relating to a given period of time’. The purpose of budgeting can have two main roles:

• Act as authorities to spend i.e. they give authority to budget managers to incur expenditure in their department of the organization.

• Act as comparators for current performance, by providing a yardstick against which current activities can be monitored.

(Walker Janet 2005/2006 The CIMA study system – Management Accounting Fundamentals)

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SYSPRO Solution

Within SYSPRO, you would want to create different budgets to fulfill certain business requirements.

Companies require a budgeting process that all budget holders are given the opportunity to participate in. The advantage of allowing each department to set their own budgets is to improve quality of forecasts and improve motivation. Different types of budgets include:
• Master
• Sales
• Production
• Cash flow
• Marketing
• Revenue and
• Expenditure

Process Flow

General Ledger

The General Ledger system allows for up to 10 budgets per ledger code – current year budgets, next year budgets and 8 alternate budgets.

In the General Ledger queries and reports, extensive comparisons can be performed between current year values, previous year valuess and budgets.

These budgets can be defined in a number of different ways, including an import option to facilitate integration to an external budget system. At the time of setting up the budgets amounts can be posted to each individual period, or a fixed amount spread evenly across all periods, or a fixed amount spread across all periods based on the defined budget spread. Budgets can also be copied from one budget to another and a % increase applied.

At year end a number of options exist:

Retain current year budgets to leave budget information intact after the Year end function of the Period End program
Zeroize current year budgets to set the current years’ budgets to zero at year end
Copy next years’ budgets to current year for next years’ budgets to become the budgets for the current year during the Year end function of the Period End program.

Accounts Receivable/Sales Analysis

You can assign budgets to product classes to measure product class performance against actual sales (i.e. using the Sales by Product Class report). Budgets either represent sales values or sales quantities as per the Sales Analysis Setup option Budgets represent.

You can assign budgets to salespersons, to measure salesperson performance against actual sales (i.e. using the Sales by Salesperson report). Budgets either represent sales value or sales quantities as per the Sales Analysis Setup option Budgets represent.

Requisitions

While overall purchase budgets are normally set by the company’s financial management, each departmental manager is usually responsible for controlling and tracking the budget consumption within allotted departmental limits.

Requisition Group Budgets
Over and above the group approval limits you can add group budgets. Budgets can be set up at stock code or product class level and either in terms of value or quantity. The users within a group can approve requisitions below a maximum approval limit, however once the amounts surpass the group budget, requisitions will be denied. The requisition budget takes precedence over requisition group limits, and group limits takes precedence over maximum values set against requisition users.

Requisition Capex
Capex refers to Capital expenditure. Capital expenditure is a widely accepted Accounting term referring to the expenditure a company makes on fixed assets. The requisition system allows capital expenditure limits to be defined, and all requests earmarked as Capex must be routed through the Capex user.

The Capital Expenditure budgetary and control system allows you to budget for (and manage) capital expenditure items for the current and future financial years.

A Capex item could include one or more Capex requisition lines. Each capex item will have a budget recorded against it, and as soon as capex requisition lines are captured for the item, the system will record uncommitted, committed and spent balances against it. You can manage and control both Capex items and Capex requisition lines by status (i.e. unapproved, approved, on hold, closed).

Commitment Accounting

Commitment Accounting allows committed and uncommitted costs to be checked against budget. Committed costs are incurred when you make a commitment to purchase a service or non-stocked item, where the service or item has not yet been provided.

Within SYSPRO, commitment accounting enables you to record committed and uncommited costs and to track these costs against the budget entered for a ledger code. This ensures that you do not overextend the company by committing costs over budget.

When commitment accounting is disabled, you would typically assign a budget per ledger code and then record the actual value of transactions posted against the ledger code. The check against the budget would therefore exclude any expected costs.

When commitment accounting is enabled, you can monitor both committed and uncommitted costs. Depending on how you have configured the system, costs exceeding budget can be rejected, or a warning can be displayed.

Committed and uncommitted values are recorded as they are incurred against the relevant ledger code. When a cost goes from being uncommitted to committed, the uncommitted value is removed and the committed value updated. The value remains as a committed cost until you update General Ledger with the actual cost, at which time the value is removed. This feature is only applicable to non-stocked items when creating or maintaining purchase orders (committed cost) and approving requisitions (uncommitted cost). You configure commitment accounting within the General Ledger Setup program.

Integration

Setup Options Affecting Budgets

Purchase Order – Approval level checking
This indicates the level at which the maximum value checks must be performed.

To enable the definition of requisition budgets, the Approval level checking must be set to either Group or Product class within group.

If these options are changed after they have been set and saved, then the following message is displayed:

“Changing the Approval Level could mean that the Group Approval Limits are no longer applicable. Do you want to initialize the Group Approval Limits?”

If Yes is selected, then the approval limits defined against the groups are cleared.

• User
If this is selected, the checks are performed based on the Requisition maximum values defined against the requisition user in the User Maintenance program.

Automatic approval of requisitions/lines can only be done when approval level checking is at user level.

• Group
If this is selected, the checks are performed based on the Max approval value defined against the requisition user group in the Group Approval Limits program.

Automatic approval of requisitions/lines cannot be done when approval level checking is at group level.

To set approval checking at this level, the following is required:
• The Check maximum value at option must be set to Time of approval.
• Requisition groups must be defined in the Requisition Group Maintenance program.
• All requisition users must be assigned to a valid group, using the User Maintenance program.
• The Group Approval Limits program must be used to define group approval limits for each group.

• Product class within group
This indicates that the checks must be performed based on product classes within user groups. To enable approval checking at this level, the Check maximum value at option must be set to Time of approval.

Automatic approval of requisitions/lines cannot be done when approval level checking is at Product class within group level.

In addition, requisition groups must be defined in the Requisition Group Maintenance program and all requisition users must be assigned to a valid group in the User Maintenance program.

The Group Approval Limits program is used to define the group approval limits for each group.

Purchase Order – Requisition budgets required

If, after the budget options have been defined, changes are made to these options, the system prompts for the budgets to be adjusted.
• At stock code level
This indicates that requisition budgets are defined at stock code level.
At this level, a budget for a product class can be entered instead of a stock code, enabling you to budget for non-stocked items at product class level.
• At product class level
This indicates that requisition budgets are defined at product class level. A stock code can also be defined within the product class.
• Expressed in terms of value
This indicates that requisition budget values are monetary amounts.
• Expressed in terms of quantity
This indicates that the requisition budget values are quantities.

General Ledger – Warn if budget exceeded

If this option is selected, a warning is displayed when the value of a transaction causes the budget to be exceeded. If the operator is disallowed in the Operators security settings (SYSPRO Ribbon bar > Setup > Operators) from exceeding a budget, an error is displayed, regardless of the selection here and the operator will not be able to proceed with the transaction.

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