Problem in initial budgeting

[Former Member]

Hi,

For execution of projects funds are made available through budgeting in SAP PS. But how we can handle following scenario:

Project ABCD is project of client 123.

Payment schedule of project is:

• on srs completion --- 20% payment

• on design completion & approval----------30% payment

• on Implementation completion --------------50% payment

• on warranty completion--------------------20% payment

Project has planned costs under following head:

• manpower

• capital

• travel

• other expenditures.

Now, we are are facing problem in budgeting, as payment will be received after srs completion, then how to put initial budget into project as there is no funds available.

Also, can we skip budgeting part of projects completly?

Thanks!

Edited by: Harsh Saxena on Jan 12, 2010 5:37 PM

[Former Member · Accepted solution]

Hi,

This is the contract with your customer so here create Milestones in project and link it with the Sales order.

Payment schedule of project is:

• on srs completion --- 20% payment*

• on design completion & approval----------30% payment*

• on Implementation completion --------------50% payment*

• on warranty completion--------------------20% payment.*

Now Plan your costs in terms of Primary and Secondary in CJ40 do Budgeting in CJ30.

Yes you can skip budgeting but there will be no cost overrun then .

Muzamil

[Former Member · Accepted solution]

Thanks! muzamil, but how there is no fund available currently for project ABCD, then how we assign budget.

[Former Member · Accepted solution]

Hi,

You can do budgeting in CJ30 .

You are working on customer projects not investment projects where you use IM Module also.

Muzamil

[Former Member · Accepted solution]

right, that means for customer projects the budget will be its total planned costs?

[Former Member · Accepted solution]

Hi,

On completion of the planning phase, a project needs to be approved and budgeted. The budget differs from cost planning in that it is binding. While you must plan project costs as accurately as possible during the planning phase, it is in the approval phase that funds are allocated, in the form of a budget.

Muzamil

[Former Member]

thanks to all for helping me in clearing my confusion.

[pradeep_mahamuni]

hi Harsh,

You want to control the the cost as per incoming revenue coming in different phases.

As all exprt said you can budget the project as per plan cost the project.

As you said you want control on consumption on the base of receiving payments in different phases.

then you have to

1. Enter initial original budget 20% - profit margint of toal project revenue.

2. Do budget supplement after of 30 - profit margint of toal project revenue after receing initial 20%

3. Do budget supplement after of 50 - profit margint of toal project revenue after receiving 30%

4. Do budget supplement after of 20 - profit margint of toal project revenue after receing 50%

this way you can control the project expenditure on the base of receivable.

regards,

[Former Member]

no not between revenue and budget.

we have customer project abcd which has total planned cost equal to Rs. 20lakh. now i am confused in how much amount to put in original budget of project abcd (currently no funds are available).

[Former Member]

Harsh,

The logic behind budgeting is that when you budget a project e.g for INR 1,00,000 then you can create orders and post the actuals till this amount.

So if you have planned cost of 20 lacs then you can the same amount as budget and then you execute your project but it is not any hard and fast rule.

Muzamil

[Former Member]

Hi Harsh,

What Muzamil is saying is perfectly right. Depending on your business process you can allocate whatever amount you want for initial budgeting. Once the budget is approved by the concerned department it entirely depends on the project management team as to how much amount should be allocated as a budget for the respective fiscal years. You can proceed with the project excution without having a budget, however as stated by Muzamil and others there wont be any check on you expenditures and you can post whatever costs you want without having control on your expenditures.

If you wish you can allocate the planned costs as your budget and then decide on the amount to be released for the execution of the project. You can set up your availability control in such a way that system will check budget only for the released amount.

Hope i have provided a satisfactory answer.

Regards,

Gokul

[former_member203108]

Harsh, I think you have confusion in Revenue and Budget.

[Former Member]

Also, can we skip budgeting part of projects completly?

Yes. But that means that the availability control can't be activated, i.e. there's no control for the project expenditure and you can post any amount of cost against the project