Microsoft Dynamics Partners providing comparisons and opinions to professionals in the ERP/Accounting software selection process since 2009

 
 

HITACHI Asia Pacific

Better Budgeting with Microsoft Dynamics AX 2012: Part II of Excellence in Financial Management


Email | Print

I presented a session on budgeting capabilities with Microsoft Dynamics AX 2012 at the AXUG (AX Users Group) Summit in Las Vegas and I was surprised at how many users were not aware of the powerful budgeting functionality within Dynamics AX. While earlier versions of Microsoft Dynamics AX had base budgeting functionality with ability to import and load budgets and run budgets Versus Actuals – the latest version Microsoft Dynamics AX 2012 has significantly enhanced the native budgeting functionality allowing it to become both a budgeting as well as financial control solution to keep expenditure within budgetary limits. This blog post talks about budgeting functionality in Microsoft Dynamics AX 2012 in a comprehensive fashion and is not limited to just the enhancements. However, I will point out areas of significant enhancement but this post will provide someone new to budgeting with Dynamics AX the knowledge to use it.

The functionality with Microsoft Dynamics AX 2012 includes

  • Budget Development with Zero base budgeting and Historical Budgeting
  • Rules to define budget control
  • Budget Control at a Transaction level to prevent overspend

Microsoft Dynamics AX 2012 provides comprehensive budgeting functionality to develop budgets with flexible configuration and adaptable rules with budgetary controls at a transaction level to ensure expenditures are aligned with budgetary limits

Microsoft Dynamics AX 2012 provides comprehensive budgeting functionality to develop budgets with flexible configuration and adaptable rules with budgetary controls at a transaction level to ensure expenditures are aligned with budgetary limits

Budget Development:

The budget development process includes creating a budget, optionally approving a budget, and tracking any revisions to a budget. Let’s start with budget creation:

Zero Base Budgeting effectively is the ability to build a budget from the ground up. There are 3 ways to do this:

  • Budget Register Entry: Enter line by line into a budget register entry. Budgets can be set at a GL Account and period combination or GL Account, Financial Dimension and Period combination.
  • Enter with Recurrence: Instead of manually entering a number for each period, you can set a recurrence so that for a GL or GL Account and Financial dimension combination you can create multiple entries for different financial periods. The recurrence can be uniform i.e. same number across the periods or follow some sort of curve and be allocated using a period key and have different budgeted numbers across different financial periods. The automation with recurrence significantly reduces the manual data entry required to create a budget.
  • Import from Excel: Often the favorite of Dynamics AX users the new Excel Add in for Dynamics AX allows you to import a budget within Dynamics AX efficiently.

Historical budgeting is typically when you are basing a budget on prior period numbers e.g. a prior month or prior year. Microsoft Dynamics AX provides functionality to build budgets based on historical numbers. This is achieved by

  • Export/ Import from Excel: The new Excel Add in for Dynamics AX allows you to export numbers, make changes and then import them back into Dynamics AX.
  • Transfer Balances: This allows you to transfer balances based on actual transactions within a date range or for an entire fiscal year into a budget with the ability to use a factor to adjust the numbers brought in.

Transfer Balances is used in this example to bring balances based on actuals from the fiscal year July 2009 to June 2010 into the July 2011 to June 2012 budget. The numbers are multiple by a factor or 1.20 to forecast a 20% higher budget over the actuals

Transfer Balances is used in this example to bring balances based on actuals from the fiscal year July 2009 to June 2010 into the July 2011 to June 2012 budget. The numbers are multiple by a factor or 1.20 to forecast a 20% higher budget over the actuals

The historical based budgeting functionality allows you to quickly develop a budget and then modify the numbers to get to a final form

Budget created through Transfer Balances shows budget numbers created based on Historical balances. Budget is created for different combinations of GL Account and GL account and financial dimensions.

Budget created through Transfer Balances shows budget numbers created based on Historical balances. Budget is created for different combinations of GL Account and GL account and financial dimensions

Budget Approvals: Budget approvals are managed through the workflow framework in Microsoft Dynamics AX. The framework allows for multiple approval steps with approvers being defined by any combination of department, cost center or other organizational dimensions and hierarchy. The workflow tool has a graphical editor with drag and drop functionality so that users can easily create the rules through configuration of the system.

Budget approvals are managed through the workflow framework in Dynamics AX. Multiple approvers can be setup based on configuration rules

Budget approvals are managed through the workflow framework in Dynamics AX. Multiple approvers can be setup based on configuration rules

Budget Revisions:

Microsoft Dynamics AX 2012 has multiple budget types to differentiate between the original budget and revisions. For example the screen shots below show original budgets and revisions and then the corresponding budget report showing the summary of the original and the revisions.

Original budget entry in Dynamics AX for the 601300 GL Account – Advertising expenses with a uniform $5,000 budget every month

Original budget entry in Dynamics AX for the 601300 GL Account – Advertising expenses with a uniform $5,000 budget every month

The various types of budget types are listed below

  • Original budget – Use when you are creating an initial budget amount for an account.
  • Transfer – Use when you are moving a budget amount from one account to another.
  • Revision – Use when you are changing the budget amount for an account. Use this budget type after you have posted an original budget register entry for the account.
  • Encumbrance – Use when you are manually creating an encumbrance, which is an obligation to pay a vendor. Use this budget type to reserve budget funds so that actual expenses do not exceed the budgeted amount for an account.
  • Pre-encumbrance – Use when you are manually creating a pre-encumbrance, which is an obligation to pay for a purchase that is likely to occur in the future. Use this budget type to reserve budget funds so that actual expenses do not exceed the budgeted amount for an account.
  • Carry-forward budget – Use when you are moving budget amounts from one fiscal year to the next.
  • Fixed assets – Use when you are transferring fixed asset budget forecasts to the general ledger.
  • Demand forecast – Use when you are transferring demand and sales budget forecasts to the general ledger.
  • Supply forecast – Use when you are transferring purchase budget forecasts to the general ledger.
  • Preliminary budget – Use when you are creating a preliminary budget for an account when the actual budget is being reviewed and approved.
  • Apportionments – Use to show the difference between budgeted amounts and amounts that are approved for spending. For example, a public sector organization might have an original budget of 10,000.00 for an account and use this budget type to approve 5000.00 for spending. Only the amount that is apportioned can be spent.

Budget Adjustment of $55,000 made through a Revision Budget Register in Dynamics AX on GL Account 601300 – Advertising Expenses for the month of December 2011

Budget Adjustment of $55,000 made through a Revision Budget Register in Dynamics AX on GL Account 601300 – Advertising Expenses for the month of December 2011

Budget Report showing the Original Budget and revised budget for the GL Account 601300

Budget Report showing the Original Budget and revised budget for the GL Account 601300

Budget Control:

Now the fun actually begins. We’ve created the budget and can put into place controls that ensure expenditure stays within the set budget limits. The budget controls functionality is entirely new in the Microsoft Dynamics AX 2012 version.

Budget control can be setup on the transactions that you desire to put in budget controls on. The Budget control configuration allows you to select through check boxes which transactions types you want to enable budget control on. Budgetary control can be setup at the consolidated transaction level or at a line level on the transaction. I prefer having this on the line level as on entry of the line you will immediately get a warning that the particular line is over budget. The transaction types are listed below

  • General Ledger Journal
  • Allocation Journals
  • Purchase Requisitions
  • Purchase Orders
  • Vendor/ AP Invoices
  • Travel Requests
  • Fixed Asset
  • Expense Reports

Budget Control can be setup on selected documents on a transaction level or line level

Budget Control can be setup on selected documents on a transaction level or line level

In a step above most ERP systems, Microsoft Dynamics AX allows you to define with a few clicks the calculation that determines the budget fund available. For example, you can choose to compare only against the original budget or against original and revisions. You can also select whether you want to include only posted expenditures or also include unposted expenditures, budget reservations for encumbrances and pre-encumbrances etc. The formula is dynamic and can be updated at any time.

Calculation for Budget fund available is easily defined by users by selecting what elements are included in the budget and what elements are included in the expenditures and budget reservations

Calculation for Budget fund available is easily defined by users by selecting what elements are included in the budget and what elements are included in the expenditures and budget reservations

Now let’s execute a transaction and put our budget control to test. I’ve entered a Vendor invoice of $5,000 for the period and it the budget check allows it through as the Budget funds available are over the amount as shown below.

Figure. Dynamics AX Budget Control on an AP Vendor Invoice showing that the invoice is within the budget funds available

Figure. Dynamics AX Budget Control on an AP Vendor Invoice showing that the invoice is within the budget funds available

Now let’s raise the amount to $70,000 and we get a warning that this transaction will take us over the budget funds available and the budget check has failed

Figure. Budget Check has failed since the invoice is over the Budget Funds Available

Figure. Budget Check has failed since the invoice is over the Budget Funds Available

Finally – we end with an Actual Versus Budget report. The report can be run on a net change basis where it compares period by period or by an accumulated basis where it calculates the rolling total of expenditures over the period and the rolling total of the budget over the same period. As a business owner, I prefer the accumulated as I could have period to period fluctuations and really care most about the big picture and how we are doing on an YTD basis.

Actual Versus Budget report

I trust this blog arms you with enough information to use the budgeting functionality in Dynamics AX 2012. If you need more information don’t hesitate to write to dynamics@ignify.com.

Sandeep Walia is CEO of Ignify. Ignify is a leading provider of Microsoft Dynamics ERP solutions to mid-market and Enterprise businesses. Ignify has been ranked as Microsoft Partner of the Year Winner in 2011 and 2010 and in the Microsoft Dynamics Inner Circle, Microsoft Dynamics Presidents Club in 2009. Ignify has offices and team members in Southern California, Northern California, Arizona, Tennessee, Illinois, Washington, Canada, Singapore, Malaysia, India, Philippines.

by Ignify

5 Responses to “Better Budgeting with Microsoft Dynamics AX 2012: Part II of Excellence in Financial Management”

  1. Great questions everyone! However, we aren’t able to give the answers properly on a blog. Feel free to contact our team for support and we would be happy to work with you.

  2. Ammar says:

    Dear Team!

    PFB my scenario on budgeting and guide me :

    I have entered budget register entry on 1st October 17 with Main Account Only (No FD attach in BRE)
    Date Main Account Amount Budget Type
    1/10/2017 Selling Expense (6011250) 5000 Expense

    Budget Control Configuration is :

    Main Account is 6011250

    Now when I’m posting the expense voucher with following description then system will restrict to post the JV(Transaction exceeds the budget with amount 1000)
    Date Main Account-Department Debit
    1/10/2017 Selling Expense (6011250)-C001 1000

    Query:

    I want to apply budget on main account only but wants to record the JV(Expense Voucher) with Main accounts & Financial Dimensions and it is required that system will allow me to post the JV up to budgeted amount(E.g. 5000) and then restrict me if the JV amount exceeds the budgeted amount.

    Is it possible ? if yes then please guide me

  3. Ahmed Omran says:

    Hi Sandeep
    i hope you are fine
    why total actual expenditures filed in budget fund available report not included the expenses come from inventory?
    is this normal?
    please be noted that i am working on AX 2012 feature pack

    thanks

  4. Muhammad kashi says:

    Hi there,

    i hope you are doing fine i want to know how to enable pre-encumbrance in ax 2012 r2 CU 8.

    I will be obliged if you let me know the prerequisites also

  5. Gerry says:

    Hi Sandeep,

    A good day to you. I read your blogs in dynamics site about this budgeting process. Actually i am done with E-Learning thru customersupport in AX 2012.

    Im basecin Saudi as an analyst and preparing budget is one of my task.

    this is my first time in dynamics and below are my question

    Im done in creation models, say 8 budget models, then i used one of the model in attached the other budget models as my sub-model. then i manually inputted the figures in each sub-model (department or plant). but before that i set up the exchange rate, period and coa – which was already in place in test module.

    When i finished i test to run the the Budget Details report and it is successfull.

    My question is, what is now my next step – either in Test module or the Production Module?

    Hope you could helpo me finished what i have started.

    Many thanks,

    Gerry

Ask This Expert a Question / Leave a Comment