Introduce Budget Availability Control into Cost Center Accounting

  • by Paulo Vitoriano, Freelance SAP Solution Architect
  • November 6, 2014
Learn how you can configure budget availability control for your Cost Centers with simple customizing steps.
Learning Objectives

Reading this article, you will learn how to:

  • Adapt Budget Availability Control into Cost Center Accounting
  • Customize the system to support Budget Availability Control functionality
  • Assess potential solution enhancements
Key Concept
Budget availability control in the managerial accounting (CO) and Project System (PS) modules is a standard SAP functionality that automates budget control through warnings and error messages. It also can send notification emails automatically to respective budget holders based on defined conditions. This functionality in the standard SAP system is available only for orders and projects.
The standard SAP functionality for budget availability control is available for internal orders and work breakdown structure (WBS) elements, but not for the cost centers. Cost centers are commonly used to represent the organizational structure of the company. Naturally, most businesses are interested in having system-enabled budget control for departments or business units represented by cost centers.

Quite often, budget overspending is discovered too late with a traditional system setup. Organizations traditionally rely on a regular reporting procedure, but sooner or later, it can fail for a number of possible reasons. On the other hand, with active budget availability control, the system can not only provide early and real-time warnings, but also send automatic emails to the person responsible. This is exactly the difference between reactive and proactive approaches toward cost controlling.

When you use budget availability control, my recommendation is to route most of your external costs through commitments. From a business perspective, commitment is a future cost that is internally agreed upon in advance, so the company is anticipating it with very high degree of certainty. Ideally all vendor invoices should have corresponding purchase requisitions (PRs) and purchase orders (POs) because the system automatically creates commitments for them. Any exceptions to this rule should be minimized. Commitments allow a budget control to be one step ahead of an actual cost because they block or reserve funds from the budget.

Note
You can always consider the implementation of Funds Management functionality (PSM-FM component), but I would classify it as a heavy alternative that requires a lot of effort and its complexity is often underestimated by project implementation teams.

In this article, I test the solution proposed in the SAP Note 101030. However, I go beyond the SAP Note content and provide practical steps for configuring a working prototype, as well as sharing some ideas around further possible solution improvements.

In SAP Note 101030, SAP suggests that you mirror cost centers with statistical internal orders that should be used as an additional account assignment in financial postings via substitution. Once budget availability control is activated for statistical internal orders, it serves as budget availability control for cost centers that are paired with them.

One of the important advantages of this solution is that it can be implemented after the system go-live date and with minimum impact to the end-user interface. On the other hand, it naturally increases complexity around master data management in the managerial accounting (CO) module.

Paulo Vitoriano

Paulo Vitoriano started his consulting career with Arthur Andersen Business Consulting in 1997. Since then, he has helped many global clients on SAP implementation projects, including DHL, Carlsberg, Nestle, Shell, AXA, Electrolux, and Maersk. During the last 18 years he has covered more than 10 end-to-end SAP implementations working on-site in 16 different countries. He has project experience with seven different oil and gas companies, and his current focus is on SAP IS-Oil and system integration. 

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Comments

12/10/2014 10:37:06 AM
John

Thanks for this - it is an interesting approach. I have had this request several time to control cost center spending with availability control - now I have an option for it.

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