SAP Fund Management: This section covers all aspects of the Funds Management (FM) module. Funds Management component in SAP supports in creating budgets. This component offers all the functions for reproducing the budget structure of the organization in Funds Management. The tasks of Funds Management are to budget all revenues and expenditures for individual responsibility areas, monitor future funds movements in light of the budget available, and prevent budget overruns. You can adapt the budget to changes in conditions by entering releases, supplements, returns, and transfers. The tasks of Funds Management are:
To budget all relevant revenues and expenditures for individual areas of responsibility Control future funds movements according to the distributed budget Prevent the budget from being exceeded.
FM Structure: FM Area: The Funds Management Area is the organizational unit within an organization, used to represent a closed system for funds management, budgeting, and budget execution. The Funds Management Area also contains attributes or settings that impact master data and/or transactions within the FM Area. FM Area is linked to Company Code and Controlling area, which will enable integration with all other organizational units within an enterprise. Funds Management within an Enterprise is controlled through Master Data called (a) Funds Centers and (b) Commitment Items. -
Fund Center: Funds Center represents the organizational orga nizational areas of responsibility for budgetary monitoring and reporting. It is linked to Cost Center. Funds Center identifies where in the organization revenue, expense, and budget are managed, reported, and controlled. Budget is assigned to Funds Centers and postings can be controlled against this budget based on the linking of other organizational objects. Funds Center usually represents the lowest levels of the organization where management responsibility exists. The Fund Centers are prepared on the basis of Cost Centers / Materials. The User Name (SAP User ID) and Name of the person responsible shall be mentioned on the Fund Center master data. The Superior Fund Center is to be mentioned properly for the proper maintenance of the hierarchy of the Fund Centers.
In Fund Management the Fund Center can be derived from the Cost Center / Material. Hierarchies are maintained in the preparation of Fund Center based on the hierarchy of Cost Center / Material.
Commitment Item: Commitment Item represents budget and fund accounting classification. It is used to reflect the type of revenue and expenditure being budgeted and also to detail balances for each fund in FM. Commitment Items are linked to revenue and expense general ledger accounts, as well as primary and secondary cost elements. Additionally, Commitment Items may be created for specific budgetary and carry forward needs. Commitment Item identifies the business transaction for which budget is consumed. Essentially commitment items will get mapped to General Ledger Account(s) or group of GL Accounts based on nature of Expenditure. For example: Traveling Expenses can represent one commitment item, different GL Accounts for Traveling like Foreign Travel, Inland Travel, Local Travel etc. All these GL Accounts can be assigned on one commitment item called Traveling for the purpose of Budgeting and control. In Fund Management the commitment item shall be derived from the General Ledger. Hierarchies are maintained in the preparation of commitment items for the grouping of commitment items of similar nature and reporting purpose. As a permanent structure to be used across an organization, Commitment Item should be centrally maintained to Centers are prepared on the basis of Cost Centers / Materials. The User Name (SAP User ID) and Name of the person responsible shall be mentioned on the Fund Center master data. The Superior Fund Center is to be mentioned properly for the proper maintenance of the hierarchy of the Fund Centers. In Fund Management ensure integrity in the creation and use of the master data.
Derivation Tool: The FM Derivation Tool is a flexible tool which manages all Fund Management assignments. It consists of different derivation rules which are used for the purpose of deriving different fields like Fund Center and Commitment Item. Usually the Fund Centers and Commitments shall be derived by the Derivation Tool. But in case of non derivation of Fund Center or Commitment Item it can be entered manually.
Budgeting:
Budgets are to be allocate to Funds Center for each Commitment Item. The Budget can be allocated on the top-down principle or bottom-up principle. In the top-down principle, the the Fund Center can be derived from the Cost Center / Material. Hierarchies are maintained in the preparation of Fund Center based on the hierarchy of Cost Center / Material. budget is entered at the top level of the hierarchy. Then it is further distributed among the lower levels. In case of bottom-up principle, the budget is entered at the lowest level of hierarchy. The budget automatically gets updated for the upper levels of budgeting hierarchy.Separate Budgeting needs to be done for Committment and Payment Budgets. Payment Budgets can be done only if commitment budgets exist.
Original Budget: The approved Budget shall be posted in the Fund Management Module of SAP as version '0'. The original budget shall be posted in at detail at Funds Center and Commitment Item. The original budget is required to be posted on a fiscal year basis. -
Budget Changes: The Fund Management module provides the option of budget to be changed by one of the following - Supplement, Return or Transfer. Each of these may be used as per the business need of the organization. (1) Budget Supplement: Supplements increases the original budget which was posted into the FM module. (2) Budget Return: Returns decreases the original budget which was entered into the FM module. (3) Budget Transfers: Transfers are offsetting increases or decreases of the original budget.
Budget Release:
The Fund Management module has a feature of the Budget Release which is used to release Budget entered for the purpose of consumption of budget. Budget is available to be used for the expenditure to be incurred only when it is released. SAP provides two strategies of the release of budget - Automatic Release and Manual Release. This provides flexibility to the organization to utilize this feature as per the business requirement. The Budget can be released annually, quarterly or on monthly basis.
Budget Availability Control: In SAP there are three types of budget availability control (AVC): hard stops, soft stops and reporting. Hard stops send an error to the user indicating that all budgeted funds have been expended and disallow the posting. Soft stops send a warning to the user indicating that all budgeted funds have been expended, but allows the user to enter past the warning and post the document. Additionally, soft stops can send an email to the Person Responsible mentioned in the Funds Center Master Data. Reporting control is monitoring and management of available balances through generated reports. AVC is configured at the start of the fiscal year and cannot be changed during the fiscal year. The Budget Availability Control can be exercised on the combination of soft stop, hard stop and reporting. For Example, the Tolerances for availability control can be entered into the system for the purpose of generation of Warning / Error messages the threshold limit of Budget as defined is exceeded as mentioned below: 1. Warning (Soft Stop) 2. Warning with Mail (Soft Stop) 3. Error (Hard Stop)
80% of Budget expended. 90% of Budget expended. 100% of Budget expended.
In addition the above mentioned controls through tolerance for availability control, the management also has the option to monitor the budget being exhausted and other requirements through the Standard Reports provided.
Closing and Carry Forward of Budget: During the fiscal year end closing operations, the budget as well as the open commitments can be carried forward to the next fiscal year. This option is to be exercised as per the requirement of the organization.
