Budgeting
· Use budgeting to enter estimated account balances for a specified range of periods.
· You can use these estimated amounts to compare actual balances with projected results, or to control actual and anticipated expenditures.
· If you use Multiple Reporting Currencies, budget amounts and budget journals are not converted to your reporting currencies. So if we need to have your budget amounts in a reporting sets of books, you must log in to General Ledger using the reporting set of books’ responsibility, define your budget in the reporting set of books, then you can import budget amounts in your functional currency, then translate the amounts to your reporting currency.
Encumbrance
· With General Ledger you can record pre–expenditures commonly known as encumbrances.
· The primary purpose of tracking encumbrances is to avoid overspending a budget. Encumbrances can also be used to predict cash outflow and as a general planning tool.
l. When you enable the budgetary control flag, the system automatically creates encumbrances from requisitions, purchase orders and other transactions originating in feeder systems such as Purchasing and Payables.
>When you do not enable the budgetary control flag, you can still enter manual encumbrances via journal entry, but you cannot generate encumbrances from requisitions and purchase orders.
>You have two options for using encumbrance data to monitor over–expenditure of a budget: After actuals and encumbrances have been posted, you can generate reports to show over–expenditures.
From Payables Option>>>
Use Requisition Encumbrance – Enable this option to encumber funds for requisitions. If you enable this option, Purchasing creates journal entries and transfers them to General Ledger to encumber funds for purchase requisitions.
Encumbrance Type - If you enable Use Requisition Encumbrance, you must select an encumbrance type by which you can identify your requisition encumbrance journal entries.
Reserve at Completion – If you enable Use Requisition Encumbrance, indicate whether you want requisition preparers to have the option to reserve funds,otherwise only requisition approvers will have the option to reserve funds.
Use
Invoice Encumbrance Type - If you use purchase order encumbrance, select an invoice encumbrance type by which you can identify your invoice encumbrance journal entries
To use General Ledger budgeting:
5 Define a budget to represent specific estimated cost and revenue amounts for a range of accounting periods. You can create as many budget versions as you need for a set of books.
>You can create budget hierarchies by assigning a master budget to lower-level budgets. This enables you to track budgeted amounts against a control budget.
5 Define budget organizations to represent the departments, cost centers, divisions, or other groups for which you enter and
maintain budget data. You can also define one general budget organization that includes all accounts. If you are using budgetary control, you set the budgetary control requirements for an account within its budget organization. Assign a password to each budget organization to restrict access to budget account balances.
5 Enter the budget amounts. There are several methods you can use to enter your budget amounts:
Copy budget amounts from an existing budget.
Enter amounts directly into the budget, replacing any existing budget amounts. You can also use budget rules to calculate and distribute amounts automatically across several periods
Create and post budget journal entries to maintain an audit trail of your budget entries. You can use budget rules to calculate budget journal amounts automatically. After generating budget journal entries, you can review, change, and delete them using the Enter Journals window
Define budget formulas to calculate budgets based on other budget amounts or on actual account balances. You can use statistical amounts in your formulas.
Define MassBudget formulas to allocate revenues and expenses across a group of cost centers, departments, or divisions.
Transfer budget amounts from one account to another.
Create a Microsoft Excel budget spreadsheet using the Applications Desktop Integrator’s Budget Wizard, and upload the budget information into General Ledger.
Upload budget amounts from the budget interface table.
4. Calculate budget amounts to update budget balances from your budget and MassBudget formulas. You should calculate budgets after you revise existing formulas, or whenever the balance of any account you use in a budget formula changes.
5. Perform online inquiries to review budget information. Use the Account Inquiry window to display complete budget balances, as well as actual or encumbrance balances. Use the Budget Inquiry window to compare summary balances between your master and detail budgets, and check for budget violations.
6. Use the Financial Statement Generator to design a wide variety of reports that include budget information. These reports can include budget, actual, variance and variance percentage amounts.
7. Define and run a consolidation to consolidate budget balances between sets of books. Your subsidiaries and parent sets of books must share the same calendar.
8. Freeze your budgets to prevent accidental or unauthorized changes. You can freeze an all or part of a budget.
9. Translate budget balances to create budget versus actual reports in your reporting currency using the Financial Statement Generator. You can also generate reports comparing different versions of your budgets in your reporting currency.
Budgeting Methods
General Ledger supports a variety of budgeting methods that facilitate budget entry and reporting.
Creating Budget Formulas to Allocate Budget Amounts
You can allocate budget amounts automatically using budget formulas and statistical amounts. This is useful if you use recurring journal formulas to allocate actual amounts from your operating results.
Creating a Flexible Budget
>You can create a flexible budget that you can easily update to reflect current operating results or statistics.
>This is useful if you want to see revised budget amounts based on actual amounts, rather than on other projected amounts.
5 You would define the following formula:
BUDGET = COST * (ACTUAL UNITS / PLANNED UNITS)
Using Top–Down, Bottom–Up, and Middle–Out Budgeting
Top–Down Budgeting With top–down budgeting, you enter budget amounts to key accounts at the top level, then distribute those amounts among lower–level accounts.
Bottom–Up Budgeting For bottom–up budgeting, you enter detailed budget information at the lowest level, then use the Financial Statement Generator to review summarized budget information at higher levels.
Middle–Out Budgeting Middle–out budgeting is a combination of the top–down and bottom–up methods. You then use budget formulas and MassBudgets to calculate budgets for cost centers within each division. You can also summarize your budgets for all divisions using the Financial Statement Generator.
MassBudgeting
>MassBudgeting gives you the flexibility to allocate budget amounts to ranges of accounts throughout your organization using simple formulas.
5 You define a MassBudget formula using parent segment values to allocate budget amounts to accounts with child segment values.
6 All MassBudget formulas use the following equation:
ALLOCATION AMOUNT = COST POOL * (USAGE FACTOR / TOTAL USAGE)
5 When you generate MassBudget formulas, General Ledger creates budget journal entries. Post the batches to update your budget balances.
Master/Detail Budgets
5 Use master and detail budgets to create budgeting hierarchies for your business.
>Budgeting hierarchies enable you to control budgeting authority, and easily identify budgets that exceed control limits.
5 Master budgets are informational only when used with budgetary control. Master budgets do not affect funds checking, budgetary control options, or the relationships between detail and summary accounts used for budgetary control.
Budgets
5 Create a budget to represent a collection of estimated amounts for a range of accounting periods.
6 You can create budget hierarchies by assigning lower–level budgets to a master budget. This enables you to track budgeted amounts against your control budget.
7 You can use AutoCopy to create a new budget from an existing budget.
To create a budget:
5 Navigate to the Define Budget window.
6 Enter a Name and Description for your budget.
7 Enter the Status of your budget.
Open: The budget is available for update and budget entry.
Current: The budget is open, and it is the default budget when you use most budgeting and inquiry forms. You can have only one Current budget at a time for each set of books.
Frozen: The budget is unavailable for update or budget entry. General Ledger displays the Created Date and Frozen Date, if applicable, for the budget.
4. Choose whether to Require Budget Journals for your budget. If you enabled the Require Budget Journals flag for your set of books, this option will already be selected and cannot be changed. When you require budget journals, you can only use budget entry methods that create journals, namely budget journals, budget transfers, MassBudgets, consolidation of budget balances, and the Applications Desktop Integrator’s Journal Wizard.
Attention: Use budget journals to maintain an audit trail for your budget balances. Other budget entry methods update budget balances directly.
Note: If you use budgetary control, you must use budget journals to enter amounts in your funding budget (i.e., the budget you use to enforce budgetary control).
5. Enter the First and Last period for your budget.
6. Assign a Master Budget if you want to track your budget amounts against a control budget. You can choose any budget in your set of books that has the same period range.
7. To open the first fiscal year of your budget, choose Open Next Year. General Ledger launches a concurrent request to open the next year.
Opening a Budget Year
You can enter and update budget amounts only for open budget years. Once you open a new fiscal year for your budget, it remains open. For best performance, do not open a budget year until you are ready to use it.
Copying Budget Amounts from an Existing Budget
Budget Organizations
5 Use Defining Budget Organizations window to define budget organizations or update existing budget organizations.
6 You can review, assign, delete or copy ranges of Accounting Flexfields to your budget organizations.
7 You must define at least one budget organization before you can enter budget amounts.
Copying Account Ranges
If you have not assigned account ranges to a budget organization, you can copy the range assignments from another budget organization using AutoCopy.
Changing a Budget Organization
You can modify a budget organization after you have defined it. Your
changes can include:
Changing the password protection:
Adding an account range:
Deleting an account range:
Adding or changing individual account assignments:
Budget Formulas
>You define budget formulas to calculate budget amounts.
>You can use any combination of fixed amounts and account balances, including actual or budget amounts, statistics, and period-to-date or year-to-date balances from the current period, prior period or same period last year. >When you define budget formulas, you create a budget formula batch. The batch contains one or more budget entries, and each entry contains
one or more formulas.
>Use budget batches and entries to group your budget formulas.
Entering Budget Amounts
>Enter budget amounts for your accounts to replace any existing budget balances. You can enter budget amounts for each account in the budget organization one–by–one, or you can use worksheet mode to enter budgets for several accounts at once.
Using Budget Rules to Distribute Budget Amounts
Budget rules are predefined methods for calculating and distributing budget amounts to all periods for an account. You can use budget rules to help you enter budgets quickly and easily.
Entering Budget Journals
>Enter budget journals to maintain an audit trail for your budget balances. You can use budget rules to calculate budget journal amounts automatically.
>When you post budget journals, the journal amounts update existing budget balances. You can review and change your budget journals before posting them.
Entering Statistical Budget Journals
You can enter statistical budget journals for accounts that have a currency of STAT in their budget organization assignment.
Creating Unposted Budget Journal Batches
>After entering budget journals, you must run Journal Import to create unposted journal batches. If you are using budgetary control, you must check and reserve funds for the budget journal batches.
Transferring Budget Amounts
>You can transfer budget amounts from one account to another within any budget. The accounts may belong to the same or different budget organizations.
>You can transfer fixed amounts or a percentage of an account’s budget balance.
Uploading Budgets
>‘Budget Upload’ lets you prepare and analyze your budget outside of General Ledger, such as on a personal computer using a spreadsheet program, and then transfer your budget information into General Ledger.
5 This enables you to perform your budgeting in the environment you choose, and still maintain the integrity of your database.
>The first step in transferring your budget data from an outside source to your General Ledger application is to load your data into your General Ledger application Budget Interface table, then can run Budget Upload to post your budget data into your General Ledger application.
Freezing Budgets
>Freeze a budget, budget organization, budget formula batch or range of budget accounts to prevent accidental or unauthorized changes.
>You can also unfreeze a budget, budget organization, budget formula batch or range of budget accounts that is currently frozen.
Freezing Budget Formula Batches
>When you freeze a budget formula, you cannot use the formulas to calculate budget amounts for the specified budget.
>However, you can still use the formulas for budgets for which the formula batch is not frozen.
Freezing Budget Organizations
>When you freeze a budget organization, you cannot budget to the accounts belonging to that budget organization for the budget specified.
>However, you can still enter budget amounts for budgets for which the budget organization is not frozen.
Freezing Budgets for a
>When you freeze a range of budget accounts, you cannot budget to those accounts for the budget specified.
>However, you can still enter budget amounts for budgets for which the range of accounts is not frozen.
Using Budgetary Control & Online Funds Checking
BUDGETARY CONTROL
>Budgetary control refers to the process of<recording budget data> and <tracking encumbrance and actual data against a budget. >
>You can track budget or encumbrance data using one of two methods(1)encumbrance accounting or (2)budgetary accounts.
FUNDS CHECKING
>Funds checking is the feature of budgetary control that helps prevent overspending budgets by verifying available funds online before processing a transaction.
>If you use funds checking, you must use either encumbrance
Budgetary Control Options
>You can define options such as
>You can define options such as
sources and categories.
>If you use summary budgetary control, you define budgetary control options for summary templates.
5 Funds Check Level
>Enter a Funds Check Level to control the severity of budgetary control checks. You use a Funds Check level when setting budgetary control options for account ranges, for source and category combinations in budgetary control groups, and for summary account templates in budget organizations.
>Choose:
None: for no funds checking or funds reservation.
Advisory: for online notification when transactions fail funds checking. The system still reserves funds for transactions even when no funds are available.
Absolute: to prohibit you from reserving funds for a transaction unless funds are available.
Attention: Advisory budgetary control makes it easy for you to overspend a budget by an unlimited amount. You might want to use Absolute budgetary control with tolerances or overrides to allow you to approve selected transactions for which no funds are available.
5 Tolerance Percent and Tolerance Amount
>You can enter a Tolerance Percent and a Tolerance Amount
5 Override Amount
>You can allow the system to override budgetary control transactions that fail absolute budgetary control.
>You can exercise override only on funds reservation, not on funds checking.
Budgetary Control Options for Accounts
>Before you can budget in General Ledger, you must assign accounts to a budget organization. If you are using budgetary control, you also assign budgetary control options to a range of accounts using the Define Budget Organizations window. >You must set a Funds Check Level, Amount Type, Boundary, Funding Budget and an Automatic Encumbrance flag.
>Budgetary control options for accounts determine the level of detail for funds checking.
>Budgetary Control Options for Journal Sources and Categories
>In addition to enforcing budgetary control options by account, you can enforce options by type of transaction. You can set budgetary control options for journal entry source and category as a way of organizing resulting encumbrances. For example, you might want to import payroll transactions through Journal Import and always perform advisory budgetary control on these transactions. You might also want to avoid checking funds on journal entry batches called Month–End Adjustments.
Detail and Summary Level Budgetary Control
We can have detailed or summary (non detailed) budgetary control. When you use detail budgetary control, you must budget to every account for which you enable budgetary control. Use summary budgetary control for less detailed control over
expenses.
Setting Up Budgetary Control
Before you can use budgetary control, you must complete all set up steps. You perform most of the steps in General Ledger.
>To set up budgetary control:
5 Define an account structure
6 Define rollup groups and assign them to segment values.
7 Enable budgetary control for the set of books
Suggestion: Define a set of books before enabling budgetary control for the set of books. Leave the enable budgetary
control option set to No for the set of books until you are ready to complete all setup steps for budgetary control.
4. Define the Reserve for Encumbrance account.
5. Create a funding budget to use for budgetary control.
6. Define latest open encumbrance year:
7. Define a budget organization
8. Assign account ranges to the budget organization:
9. Set budgetary control options for each account range:
10. Define encumbrance types:
11. Define summary accounts:
12. Set budgetary control options for each summary template: page
13. Define journal sources
14. Define journal categories
15. Define AutoPost options:
16. Define system level budgetary control groups.
17. Assign system level budgetary control options to a profile level.
18. Do the following steps in Purchasing:
Define a document approval hierarchy:
Implement internal requisitioning:
Define financial encumbrance options
19. Enter budget journals for the funding budget:
20. Start the Create Journals Program:
Budgetary Control in Oracle Payables
Entering an Invoice
>You can check funds available online when you enter an invoice. You can also check funds at the invoice level, or you can check funds for each expense distribution line for an invoice.
>When you check funds for an invoice or invoice distribution, Oracle Payables does not attempt to reserve funds for the invoice.
5 When you check funds for an invoice, Oracle Payables sums up invoice distribution amounts by account and checks if any of these amounts exceeds available funds. If any account fails funds checking, the entire invoice fails funds checking.
Final Match
>When you enter an invoice and match it to a purchase order, you can indicate that it is a final match. A final match is one in which you do not expect any more invoices from a supplier against a particular purchase order shipment.
>The advantage of using a final match is that you can automatically liquidate excess encumbrances and therefore increase available funds.
Prepayments
>When you enter a prepayment, you can associate it with a purchase order. If you associate a prepayment with a purchase order, you can only apply the prepayment to an invoice that you match to the purchase order. For such prepayments, usually you do not need to encumber the prepayment, as you have already encumbered the purchase order.
Cancelling Invoices
>When you cancel an invoice, Oracle Payables creates negative debit entries reversing any encumbrances associated with the invoice.
Matched Invoices
If an invoice passes matching conditions and has no other holds that prevent its posting, Oracle Payables automatically checks funds. If the invoice has a quantity or price variance with the purchase order, Oracle Payables automatically checks that you have enough funds for the variance. If you use absolute budgetary control, Oracle Payables places a funds hold on invoices that have distributions not passing funds checking. If you use advisory budgetary control, Oracle Payables reserves funds for the invoice variance, whether it is a quantity or a price variance. For either absolute or advisory budgetary control, Oracle Payables creates a negative encumbrance entry for negative variances. Oracle Payables creates any additional encumbrance using the invoice encumbrance type.
Unmatched Invoices
If an invoice passes tax, currency, and distribution checks, and has no other holds that prevent its posting, Oracle Payables automatically performs funds checking during approval. If you use advisory budgetary control, Oracle Payables reserves funds for the invoice, whether funds are available for each distribution of the invoice. If you use absolute budgetary control, Oracle Payables places a funds hold on invoices that have distributions not passing funds checking. Oracle Payables also does not reserve funds for the invoice, since funds are not available for it. Oracle Payables creates encumbrances using the
invoice encumbrance type.
Creating a Budgetary Control Group
You define one or more budgetary control groups to attach to sites or users. You can create a budgetary control group by specifying funds check level (absolute, advisory, or none) by journal entry source and category, together with tolerance percent and tolerance amount, and an override amount allowed for insufficient funds transactions.
To use General Ledger encumbrance accounting:
5 Define Reserve for Encumbrance account for each set of books.When you post encumbrance transactions, General Ledger
automatically posts offset amounts to this account.
5 Enable Budgetary Control for your set of books to automatically create encumbrance entries from Oracle Purchasing and Oracle Payables. However, you need not define budgetary control options for your detail or summary accounts nor must you define budgetary control groups.
6 Open encumbrance years to enter and post encumbrance entries to future periods. Your initial encumbrance year is opened
automatically when you open your first period for your set of books. General Ledger uses the last period of your latest open
encumbrance year to determine how far to calculate your project–to–date encumbrance balances.
4. Define encumbrance types: page 12 – 6.
5. Define financial encumbrance options in Purchasing and Payables in the Financials Options window: page 2 – 97.
6. Enter encumbrances manually: page 12 – 7.
7. Import encumbrances using Journal Import.
8. Enter encumbrances via Purchasing and Payables. Purchasing automatically creates unposted encumbrance entries for
General Ledger when you approve a requisition or purchase order. Payables automatically creates unposted encumbrance entries for General Ledger to encumber funds for purchase order variances and unmatched invoices.
See: Encumbrance Entries in Payables (Oracle Payables User’s Guide) General Ledger immediately updates your funds available when you reserve funds for your transactions in Purchasing and Payables. However, you must post your encumbrance entries to review funds available in Financial Statement Generator reports.
9. Reserve funds for encumbrance entries to allow posting of encumbrances. To do so, do one of the following:
Reserve funds online in the Enter Encumbrances window
Reserve funds in batch by running the Mass Funds Check/Reservation program.
Have the Posting program automatically reserve funds when you post your encumbrance batch.
Suggestion: We recommend that you let the Posting program automatically reserve funds. Since reserving funds for
encumbrance entries independent of budgetary control is always successful, this method requires no user intervention.
10. Review unposted encumbrance journal entries online.
11. Post encumbrances:.
12. Relieve encumbrances:
13. Review funds available:
14. Define and submit encumbrance reports using the Financial Statement Generator. For example, you might define a Funds
Available report to measure budgets against expenditures and encumbrances.
You can also use standard reports to review your encumbrance balances and activity. Standard reports include the following:
Encumbrance Trial Balance Report
General Ledger Report
Account Analysis Report.
15. Perform Year–End Encumbrance Processing
16. Carry Forward Year–End Encumbrances
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