Construction Project Budget: General Information

The project budget is used to provide both a financial plan and cost constraints for a project. That is, you define the amount of money and resources to be spent on the project. Then you can control the actual project costs against the costs in the original and revised budgets. As a project progresses, you can continuously track budget execution and either adjust expenditures or revise the budget.

Learning Objectives

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

• Configure the revenue budget and the cost budget for a project
• Update actual values of the project budget
• Review project balances
• Lock original budgeted values and make changes to the locked budget
• Control whether AP bills, purchase orders, and change orders created for a project exceed the project budget
• Restructure the budget before and after billing

Applicable Scenarios

You configure the project budget in one of the following cases:

• If you want to plan the revenue of a project and track its completion
• If you want to plan and control the amount of money and resources spent on a project
• If you want to configure a fixed-price project that is billed for progress

Budget Planning

You plan a project budget during the estimation stage of the project, before any project transaction occurs. To estimate the project income, you populate the revenue budget of the project. To estimate the resources to be spent on the project, you populate the cost budget. During the execution stage of the project, when you process project transaction and bill the project, actual values of the project budget are updated so you can control the project execution and compare the actual values against the budget ones.

On the Revenue Budget and Cost Budget tabs of the Projects (PM301000) form, you can add, revise, and delete budget lines. Each budget line is defined by the combination of the following settings, including the project, that are unique within the project:

• A project task, which identifies a step or activity within the project.
• An account group, which determines the category of the revenue or expenses that you expect to incur during the project execution.
• A particular inventory item (that is, a resource) needed to complete the task. If you do not need to associate the budget line with a particular item but the budget level is configured to include the item, you can select the empty item code (N/A) as the inventory item.

The level of details of revenue budget lines and cost budget lines—that is, whether you need to specify the inventory item or not, depends on the option selected in the Revenue Budget Level and Cost Budget Level boxes on the Summary tab (Project Properties section) of the Projects form, respectively.

Other information that you can specify in a budget line includes the original budgeted quantity of the selected inventory item, the unit rate, and the original budgeted amount, which is calculated automatically as the original budgeted quantity multiplied by unit rate if you have not specified a value manually.

The revised budgeted quantity and amount are initially equal to the original budgeted values. If during the estimation, acceptance, or execution stages of the project you need to revise the budget and want to keep the original budgeted amounts and quantities unchanged so that you can later analyze the accuracy of your original estimates, you can adjust the revised budgeted quantities and amounts.

Budget Tracking

As a project is being processed, you create project-related documents such as AP bills, purchase orders, or AR invoices. This causes the creation of project transactions. When these transactions are posted, the system updates the Actual Quantity and Actual Amount on the Revenue Budget and Cost Budget tabs of the Projects (PM301000) form.

The system uses the combination of the project, project task, account group, and inventory item to match the transaction with a project budget line. If the budget line with the same combination exists, the system updates actual values of the existed line. For a new combination that does not exist in the project budget, the system creates a new budget line.

For the revenue budget, the system creates a revenue budget line with the same inventory item as the inventory item of the transaction if the Detailed option is selected in the Revenue Budget Update box on the General tab (General Settings section) of the Projects Preferences (PM101000) form. With the Summary option selected, the system creates a revenue budget line with the empty item code (N/A) instead of the inventory item of the transaction. Similarly, the system creates cost budget lines based on the option selected in the Cost Budget Update box on the General tab (General Settings section) of the Projects Preferences form.

You track the Actual Amount of project budget lines and compare this amount with the Revised Budgeted Amount when reviewing the budget. In the Performance (%) column, the system estimates the percentage of the actual amount to the revised budgeted amount. For a revenue budget line, this percent shows the progress of completion of your financial plan. The fully performed budget line has the performance of 100%. For a cost budget line, the percent shows how much expenses you have incurred against the planned amount. You use this column to track the performance by the following budget attributes:

• A project budget line on the Revenue Budget and Cost Budget tabs
• A project task on the Revenue Budget and Cost Budget tabs if the Group by Task check box is selected on the table toolbar
• An account group on the Balances tab

Similarly, you can compare the actual quantity of project budget lines with the revised budgeted quantity to control how the project execution fits the planned quantity. The actual quantity is updated only if the UOM is specified in the budget line and if the system can convert the UOM of the corresponding project transaction to the UOM of the budget line by using the list of unit conversions defined on the Units of Measure (CS203100) form.