Budget control for purchase orders

Purpose:

The purpose of this blog post is to demonstrate how can we configure budget controls for purchase orders.

Product:

Dynamics 365 for Finance and Operations

Prerequisites:

• Basic understanding of main accounts and financial dimensions
• Basic understanding of purchase orders, procurement categories, posting profile

Disclaimer:

This blog post uses Microsoft’s demo company data to demonstrate the concepts and processes and hence therefore doesn’t violate any data privacy policies.

Overview:

Following are the brief steps involved in budget control configuration for purchase orders.

1. Dimensions for budget control
2. Budget cycles
3. Budget models
4. Budget control configuration
   1. Budget control dimensions
   2. Over budget permissions
   3. Budget funds available
   4. Document and journals
   5. Assign budget models
   6. Define budget control rules
   7. Activate budget control configuration
5. Budget register entry
6. Budget control statistics
7. Perform budget check on purchase orders

Steps:

 

Detailed steps can be found below.

Dimensions for budgeting

Budgeting > Setup > Basic budgeting > Dimensions for budgeting

First, we need to select which dimensions in the ledger will be available for budgeting. Select and move all the needed ones to the Budget Dimension pane.

Budget models

Budgeting > Setup > Basic budgeting > Budget models

Then configure budget models.

Budget cycles

 

Budgeting > Setup > Budget control > Budget cycles

Then, configure budget cycles.

Budget control configuration

Budgeting > Setup > Budget control > Budget control configuration

In budget control configuration, we need to define which ledger account structure and dimensions will be used for budgeting. Select and move all the required dimensions to the Budget Control Dimensions pane. These dimensions are coming from Dimensions for budgeting setup.

Configure any over budget permissions if needed. It gives you a provision to configure a group of users which will be allowed to do over-budget purchases with a warning message.

This screen allows you to configure the method to calculate budget funds available.

Choose the documents and journals you want to be under budget control.

Assign budget models.

Define budget control rules. This screen gives you more control over which main accounts or financial dimensions need to be under budget control.

The following screens were skipped as they were not required in my scenario.

• Select main accounts – Needed only if main account is not selected as budget control dimension
• Define budget groups – Optional
• Define message levels – Configure user groups to suppress budget control warning messages for

 

Finally, activate and turn on the budget control.

Budget register entry

Budgeting > Budget register entries

Once the setups are complete, we are ready to raise a budget register entry to allocate funds to a combination of financial dimensions. In the following example, we are allocating budget to a main account 618900 which is a Miscellaneous Expenses account along with the required budget control dimensions. Then click update budget balances which will change the status to Completed.

Tip:

Please note if you do not include all the budget control dimensions in this entry, system will NOT show the green icon under budget check results

Budget control statistics

 

 

Budgeting > Inquiries and reports > Budget control > Budget control statistics

To validate budget register entry has taken effect, you can see the funds available for your dimension values under budget control statistics. If couldn’t any entry for budget funds for your dimension combination it means something is wrong with the budget register entry.

Budget in action on purchase orders

Once the setups are in place, raise a purchase order and make sure to add a line item which has the same main account and financial dimensions for which budget funds have been allocated via budget register entry. In the posting profile, main account 618900 is configured for all items and procurement categories except item 1000 and Rent, Advertising, Utilities and Commissions and rebates.

Selecting Corp Procurement Categories as the line item.

Make sure financial dimensions are correct on the line item.

As you can see below the ledger account string shows the same main account and financial dimensions for which budget funds have been allocated:

Perform budget check on the purchase order by clicking:

 

Purchase > Manage > Budget > Budget > Perform budget checking

You should get a green signal under Budget check results which means the purchase is within budgeted funds.

Before confirming purchase order, you can see the purchase order total under budget reservations for encumbrances screen. Once the purchase order is confirmed and invoiced you can see the amount under actual expenditure.

I hope this will help you understand how budgeting uses main account and financial dimensions to validate available funds for purchases in purchase orders and will help you when configuring budgeting for purchase orders for the first time!