Budgeting with Microsoft Dynamics AX
Improve your organization’s flexibility to develop, modify, and control budgets with Microsoft Dynamics AX 2012. Various budget types are supported within Microsoft Dynamics AX 2012 from budgeting based on historical transactions, budget transfers, budget encumbrances, project budgets to fixed asset budgets.
Microsoft Dynamics AX gives organizations the capacity to define budget amounts and track budget to actuals as well as forecasts to actuals. Budgets can be defined using a top-down approach, a bottom up approach or using a mix of the two approaches. Organizations can define budget approval workflows to ensure that budgets go through multiple level of approvals based on the parameters such as the relevant organization unit including cost center, departments or divisions. Native budget control ensures that spend is compliant with the budget limits that are approved.
Microsoft Dynamics AX allows you to:
- Determine the financial components used to establish and control budgets.
- Update or revise budgets based on economic events.
- Define workflows and policies that match organizational requirements.
- Use a budgeting tool that is right for the organization.
Some organizations may want basic budgeting functionality while others may want a full cycle budgeting process with a several organizational rules baked in and a multi-level approval process. An example of a full cycle budgeting flow in Microsoft Dynamics AX is shown below:
Budgeting within Microsoft Dynamics AX can be configured to be simple or complex and can support a multi-step budgeting process including top down or bottom up budgeting.
All of the above steps can be modified based on the organizational need. A budget manager/analyst, a controller, and a department manager can all use Microsoft Dynamics AX 2012ís budgeting functionality and play different roles in the budget building process as well as in the execution process.
Budget Planning in Microsoft Dynamics AX 2012
Microsoft Dynamics AX provides a flexible model for budget planning
- Top Down approach: Creating an organizational budget and then allocating it down to the various organizational units such as cost centers
- Bottom Up approach: Creating a budget by organizational unit such as department and cost centers and then rolling it up into an organization level budget
- Hybrid approach: Having both approaches maintained in different simulation models and then developing a budget that seems appropriate for the organization
The budget planning process has the following components
- Responsibility centers: Organizational units that will administer the budget components e.g. Sales Department manages the Sales Budget; Operations will manage the Operations Budget
- Scenarios: Multiple scenarios can be developed such as historical, top-down, bottom-up which can be used for comparison
- Stages: The various steps in the budget planning process
- Workflows: The linking of the various stages in the budget and the relevant responsibility center owners
- Templates: Excel based templates that can be distributed in case users prefer to develop budgets in Microsoft Excel which has native integration with Microsoft Dynamics AX
Budget planning configuration in Microsoft Dynamics AX allows users to define scenarios, stages, workflow processes, constraints, schedules, priorities, templates used in budget management as shown below.
The Budget Planning Process in Microsoft Dynamics AX 2012 defines the processes, steps, sequence, rules, templates and priorities used in budgeting.
Types of Budgets
Microsoft Dynamics AX supports multiple budgets at the GL level and the sub-ledger level including
- General Ledger Budgets
- Project Budgets
- Fixed Asset Budgets
- Inventory Forecasts and Budgets
- Supply Forecasts and Budgets
- Sales Forecast by Item, Item Group, Customer, Customer Groups
Budgets can be tracked for revisions and transfers through the use of budget types which include
- Original Budget
This provides granularity and the ability to track results at multiple levels. For example, actuals and forecasts can be compared with original budgets, original budgets with revisions, original budget and transfers plus revisions.
Developing Budgets in Microsoft Dynamics AX 2012
Microsoft Dynamics AX 2012 provides multiple ways to develop budgets in Microsoft Dynamics AX
- Historical base budgeting: Creating budgets based on prior actuals with some changes e.g. add 10% growth in sales and increase indirect expenses by 5%. Since there is native integration with Microsoft Excel, you can export out a suggested budget and then make changes in excel and publish it back.
- Budget derived from another Budget: Creating budgets based on another budget
- Zero Base budgeting: Create budgets directly in Microsoft Dynamics AX or import them from Excel
Microsoft Dynamics AX 2012 gives budget analysts and controllers the ability to define policies and workflow that meet the needs of an organization and to modify or adjust budgets as market conditions change. User defined budget codes can enable greater budget analysis and an audit trail related to the origination of budget amounts, and budget types can be set up to enable business logic to enforce rules. These rules are defined by the organization to enforce budget control.
The budget entries can be set up for recurrence over a specified time period in Microsoft Dynamics AX 2012. Other options for entries include: line by line, transfer histories, and imports from Excel.
A graphical workflow editor allows budget workflows to be configured for different scenarios such as Original Budget approval based on amount, Budget Transfers, Budget Revisions or Adjustments.
Budget Approval Workflow in Microsoft Dynamics AX is managed through a graphical workflow editor
Budget Control with Microsoft Dynamics AX 2012
Built into Microsoft Dynamics AX is the ability to track budget versus actuals and stop over-spend at the point of approval or entry of a transaction. Budget control dimensions can be selected from the financial accounting structure that will be used for budget control. Budget control can be applied to a variety of transactions including purchase requisitions, purchase orders, vendor invoices, expense reports, travel requisitions and more. If a budget fund is about to be exceeded due a transaction then Microsoft Dynamics AX can stop the transaction from moving forward, warn the user or go through relevant approvals to allow the spend to exceed the budget.
Organizations have the flexibility to define the calculation that is applied for checking budget funds availability. This calculation is applied to the source documents and accounting journals that are enabled for budget control.
For More Information
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