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. As the project progresses, you can continuously track actual project costs 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 the actual values of the project budget
• Review project balances
• Lock the original budgeted values
• Control whether AP bills, purchase orders, and change orders created for a project may exceed the project budget
• Restructure the budget before and after billing

Applicable Scenarios

You configure a project budget in any 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 add lines to the revenue budget of the project. To estimate the resources to be spent on the project, you all lines to the cost budget. During the execution stage of the project, when you process project transactions and bill the project, the actual values of the project budget are updated so that you can control the project execution and compare the actual values against the budgeted 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 project budget key, which is a unique combination of the following settings:

• A project
• A project task, which is a small identifiable piece of work that is a part of the project
• An account group, which determines the category of the revenue or expenses that are expected during the project execution.
• A particular inventory item 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.
• A cost code if the Cost Codes features is enabled on the Enable/Disable Features (CS100000) form.

The level of details of revenue budget lines and cost budget lines—that is, whether you need to specify the inventory item and cost code 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. In each box, you can select one of the following options: Task, Task and Item, Task and Cost Code, and Task, Item, and Cost Code.

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. During the estimation, acceptance, or execution stages of the project, you may want to revise the budget but keep the original budgeted amounts and quantities unchanged. This gives you the ability to analyze the accuracy of your original estimates while also adjusting the revised budgeted quantities and amounts. For more information, see Project Budget: Locking of the Budget.

Budget Tracking

As a project is being processed, you create project-related documents, such as AP bills, purchase orders, or AR invoices. The release of these project-related documents causes the creation of project transactions. When these transactions are released, 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 project budget key to match the project transaction with a project budget line. If a budget line with the same combination exists, the system updates the actual values of the existing 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 of the Projects Preferences (PM101000) form. If the Summary option is 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 of the Projects Preferences form.

You track the Actual Amount of project budget lines on the Projects form 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. In a project, you can track the performance at different levels as follows:

• For a project budget line on the Revenue Budget or Cost Budget tabs

  A fully performed budget line has the performance of 100%. For a revenue budget line, this percent shows the progress of completion of your financial plan. For a cost budget line, the percentage shows how much expenses you have incurred against the planned amount.

• For a project task on the Revenue Budget or Cost Budget tabs if the Group by Task check box is selected on the table toolbar
• For 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.