Cost Center - Budget Availability Control

[arafatajmal]

Budget is a vital part of business planning that plays a crucial role in reporting to hold a check on expenses and shows the influential aspects of business health.  The budget planning shows the management’s plan to achieve the desired outcomes, especially in terms of deducting expenditure in some of the areas of business and allowing other areas to have more freedom to expand. Budgeting is a widespread practice all over industries hence SAP recognizes this as essential and provides cost center budgeting in SAP S/4HANA.

Introduction

This Blog shall discuss cost center budgeting in SAP S/4HANA and explore the real-time execution of the same.  Budget planning is an unignorable step of annual activities, and we shall try to explore the SAP Cost center budgeting. In Short, we shall explore the SAP standard configurational, Master & transactional steps to sync with business budget requirements.

Objective Of Blog

The Budget shows a comprehensive list of expenses or categories as per the plans of management and we would try to execute the following SAP functionalities in the SAP S/4HANA system. The availability control starts with budget allocation and runs with each commitment and actual cost transaction.

1. Configuration Steps
   1. Maintain Budget Availability Control Profile for Cost Centers
   2. Maintain Category for Planning
   3. Define Budget Checks for Categories
2.  Master Data
   1. General Ledger Account
   2. Account Groups for Budget Availability Control
   3. Cost Center
3.  Transactional Data & Reports
   1. Upload Budget
   2. Commitments Consumption of Budget with Reports
   3. Actual Consumption of Budget with Reports
   4. Manage Budget with Reports

Configurational Steps

The SAP S/4HANA system is already very much pre-configured, especially in the case of cost center budgeting. We just need to follow a few steps to design the ERP system as per the business requirement. consultants must be very clear about the requirements and business practices that are being configured as some changes are not reversible or changeable.

You may easily search for the following steps in CBC, SIMG, or SPRO. There are other optional steps as well in Budget Document Settings where you may define the number range, Budget Type, and Document Type.

Now we shall try to explore all three highlighted configurational steps in depth.

   Maintain Budget Availability Control Profile for Cost Centers

The Budget availability control profile must be maintained for cost center budgeting which controls the budget currency types, G/L Account groups, and Tolerance limit.

SPRO-> Controlling-> Cost Center Accounting-> Budget Availability Control for Cost Centers-> Maintain Budget Availability Control Profile for Cost Centers

Currency Types: The Currency Type configuration is responsible for the currency of budgeting where we can give our company code Currency or Global Currency. We are selecting the company code currency which is SAR in our case, and we also can opt for the global Currency which is USD for our company code 5910. Businesses must make sure that data is available in configured currency.

Note: Once the profile is created cannot be deleted while currency type settings can be changed.

Account groups: The Account groups must be defined before configuration. The accounts group is nothing but the group of G/L Accounts that need to be used for budgeting purposes. We must create a hierarchy of all expense/Cost accounts so they can be used for budget planning or definition.

Here, we are using the standard account hierarchy – YBA000_CE in this blog.

Note: The assigned account groups cannot be delinked once it has been assigned. The changes are possible in tolerance limit only.

Tolerance Limit: The Tolerance limit is responsible for the message type. Here architects can configure the message type as “Error” or “Warning” with respect to the budget usage rate according to the business requirements. In our case, we shall configure the error message for 100% consumption or usage of the budget and the warning message for 90% usage.

In Short, the system will not allow the posting of transactions that exceed the budget in case of “Error” and “Warning” will allow to posting of all the transactions irrespective of the allocated budget.

We have assigned all activities to message type as a warning for 90% budget consumption, and hardcoded error for 100% consumption. Instead of all activities, you can assign particular transactions such as Purchase requisition and purchase orders for more precise controls.

   Maintain Category for Planning

SAP has delivered all relevant plan categories for budgeting such as project budgeting and cost center budgeting. The planning category is responsible for distinguishing or differentiating between plan/budget data.

You may use the SAP delivered BUDGET02 category for planning that is already assigned to Usage 002 which is cost center budgeting. Hence, we can use this budget category for uploading the cost center budget in this blog.

The configuration expert can assign the exchange rate type to the planning category and the SAP system uses the exchange rate maintained for the exchange rate type. In our case, we are going with exchange rate type P hence we need to maintain the foreign exchange rates for P with exchange rate type M that is being used in actual transactions.

SPRO-> Controlling-> Cost Center Accounting-> Budget Availability Control for Cost Centers-> Maintain Category for Planning

The consultants can add as many categories as they need according to the business requirement.

   Define Budget Checks for Categories

Here, the last step of configuration, which is again an optional step can facilitate us to specify whether budget control should be there or should not be there.

If an expert activates the availability control, then the system checks the allocated budget with day-to-day posting whether it is still available.

The Budget consistency check validates whether the actual amount is less than the plan amount while allocating the budget data.

SPRO-> Controlling-> Cost Center Accounting-> Budget Availability Control for Cost Centers-> Define Budget Checks for Categories

Note: we should not change the settings while the category is in use.

Here all the relevant configurational steps are completed, and we can move with Master data.

Master Data

The Master data plays a critical role in the day-to-day transactions and reporting hence we must have consistent and proper master data in place, to execute the transactional data and fetch the accurate reports.

   General Ledger Account

The general ledger accounts are essential master data that record the transactions, and each account is responsible for recording the specific kind of financial transaction such as travel expenses that can be booked in a distinct P&L G/L account – 61007000.

We don’t require any specialized change in account master data for the cost center budgeting relevance. The significant thing that must be in mind is that budget control can be in place for Expense and revenue G/L Accounts. There is no budget control available for balance sheet accounts.

   Account Hierarchy

The account groups are required to be defined before the configuration as these account groups need to be assigned with budget availability control profiles. you just need to have the correct expense and revenue account so that can be assigned to respective account groups that shall assist to do the configuration of tolerance limit and assist in the reporting.

The G/L Account – 61007000 for demo purposes used in this blog, is assigned to accounts group – 1900_CE (Travel Cost).

Here, businesses may use the SAP predelivered hierarchy YBA000_CE where the groups are created, and G/L accounts are assigned to respective nodes. The Hierarchy can be maintained, displayed, and imported through the app “Manage Global Hierarchies”.

Note: There is no budget Availability control for balance sheet accounts.

   Cost Center

The cost Center is again an influential cost-controlling object that needs to be assigned with each expense transaction as cost assignment.  The Cost center can be created or changed through the app “Manage Cost Centers” and GUI T-Code KS03 but KS03 does not support budget-oriented changes.

Here, the user needs to assign the required budget availability control profile and activate the budget control. In our case, we shall use the marketing cost center 59101601 to go ahead with this blog.

Budget Carrying Cost Center: The budget Carrying cost center can be itself or another cost center. If we upload the budget in one specific cost center and can be consumed by several cost centers, then users can assign the one specific cost center as budget carrying cost center in several cost centers hence system will consume the budget from the budget-carrying cost center.

In our case, we shall upload the budget for all the cost centers hence each cost center will carry the budget for itself. The Cost Center 59101601 will have itself as the “Budget Carrying Cost Center”.

Budget Availability Control Profile: We must need to assign one budget availability control profile that helps the system to read the configuration of the tolerance limit.

Budget Availability control: Activation of budget availability control in cost center master data enables the comparison of actual cost and cost center allocated budget. The tolerance limit and message type configured against the account group are used to check the actual cost and budget amount at the time of activation.

Note: Lock Commitment updates must be disabled in cost center master data, or the system shall not consider the purchase requisition and purchase order as budget-consuming transactions.

Transactional Data

Once all the master data is created and maintained appropriately, we can proceed with the transactional data. In this section of the blog, we shall try to post some transactional data and validate the impacts on reports.

   Uploading Budget

Uploading a budget in the SAP system is quite an easy task because we can use the spreadsheet to upload the budget in the SAP system.

Users may use the app “Import Financial Plan Data” to download the budget “upload template” by clicking download templates and then clicking on “cost center budgeting”.

Business users can upload multiple lines in one go while maintaining the externally planned data in Microsoft Excel. Row-3 shows the “X” marks which represent the overwrite of the current data if available, hence row-3 in templates has a significant impact on upload values.

The Users can use the same app “Import Financial Plan Data” to upload the budget values.

The budget data must be maintained periodically otherwise period-wise execution of the budget report could show inconsistent data. The budget reports can show all the values including commitments, and actual values periodically.

Subject matter experts can final test before importing the data by clicking the “Test Import Source file” and then “Preview list” in the middle of the screen message. The Preview list would be a great option to validate the data before actually uploading it into the ERP system.

As quickly as the user clicks on “import Source Data” the system starts the upload, and users can display the uploaded data by clicking on “Display Financial Plan Data” or the app “Cost Center Budget Report”.

Budget Report After Uploading Budget.

The Budget of 8000 SAR has been uploaded and can be seen in the reports. The Other dimensional information such as period, Fiscal year, company code, Global Currency, and descriptions can be added to the report by clicking on settings.

Note: There is no budget carry-forward functionality available, and the user can consider the remaining amount of the previous year in the new fiscal year budget planning.

   Commitment Budget Consumption Through Purchase Order

The non-financial documents Purchase Requisitions & Purchase orders hold the budget for future expenses and the SAP ERP system shows these holds or consumptions separately in the reports. In our example, we are creating a service purchase order with a budget-oriented Cost Center & G/L Account.

Note: Scope Item 2I3 (Predictive Commitments Management) must be activated and the activation in the running system shall not be considered the already created purchase documents. Please refer to the SAP KBA 2906351.

Budget Report After Purchase Order

The app “Cost Center Budget Report” shows the commitment values by summing up the values of all open purchase requisitions & purchase orders.

In our example, the report is showing the 5000.00 SAR as future commitments while actuals are still zero.

Cost Center Commitments Report

Here another app “Commitments by Cost Center” may assist in analyzing the commitments specifically and more precisely. users can have more columns such as purchasing document, period, and fiscal year through a change layout in settings.

   Actual Budget Consumption

As soon as the user posts the service entry sheet against the same purchase order, the actual consumption takes place with the accounting document. Here another important thing is the initially consumed commitment value gets reversed with actual consumption.

In our example of this blog, we have booked the hundred percent actual cost against the purchase order which is 5000 SAR.

Cost Center Budget Report after SES Creation

The cost center budget report always shows the real-time reconciled values automatically. The commitments and actuals get reconciled in the report with day-to-day posting.

In our case, the commitment Value has reached zero due to the convertibility of the Purchase order to the service entry sheet.

Cost Center Commitments Report

The Report “Commitments by Cost Center” also shows the same values as the “Cost Center Budget Report” shows. The specific commitment report helps to deep dive into the commitment's values or future actual expenses.

Finally, the users may analyze, that both the real-time reports are showing the values and getting updated with postings.

   Managing Budget

The uploading or allocation of the budget would not be sufficient for the business to handle the day-to-day budget transactions & reporting. There could be business requirements of deducting the budget, increasing the budget, or transferring the budget from one combination of Cost center and account to another combination.

The SAP comes with a separate app “Manage Cost Center Budgets” to handle these budget-related transactions. This same app could be used for reporting and posting the cost center budget transactions.

Let's take an example of increasing the budget by 1000.00 SAR for the same earlier used combination of cost center and account in this blog.

Budget Supplement

Initially, we allocated a budget of 8000.00 SAR, and now let's increase the budget by 1000.00 SAR hence the revised budget will be 9000.00 SAR.

The users can maintain the reference in the description for the header and line items for their reference. The attachments option may also used for attaching the physical documents.

Budget Report After Supplement

The budgetary report gets immediately updated after all budget managing transactions such as commitments or actual postings.

The Process of Deducting the Budget (Return) & transferring the budget would also be the same. The user must check the appropriate budget process type. In case of transferring, the budget process types “SEND” and “RECV” will take place, and “SUPL” and “RETN” will take place for increasing or deducting the budget respectively.

Summary

The Cost Center budget functionality is revolutionary for businesses to handle or report their budgets and transactions. The businesses can use this scope without creating new master data or activating and implementing other modules such as SAP – Funds Management as far as basic cost center budgeting is concerned.

The SAP cost center budgeting feature is quite applicable to all businesses in several industries.

References

The readers may refer to the following references for more information.

Budget Availability Control | SAP Help Portal

Budget Availability Control for Cost Centers | SAP Help Portal

Predictive Commitments Management | SAP Help Portal

2906351 - Status of existing PR's/PO's after activating scope item 2I3. - SAP for Me

3048467 - Availability of Period-Control and Carryforward in Cost Center Budgeting - SAP for Me

Disclaimer: The above master & transactional data used in this blog is purely for demo purposes and not associated with the actual entity. The Matching of data with real-time entities or organizations is simply a coincidence.

We would like to hear from you if you have any suggestions, Query, and feedback regarding this blog.

Thanks & Regards
Arafat Ajmal

[NghiaNV]

Thank you.great explanation. But may I confirm whether cost center budget can be applied for stock purchase order. we have to use account assignment K and input G/L Account/Cost Center in order to system can check budget by cost center but for posting, when we create goods receipt, it should post to stock account and GR/IR as normal. Im not sure concept will be like that or not?

[arafatajmal]

Hello nghiaNV,

I am glad you loved the explanation of the blog!

If we use the account assignment category "K" in the purchase order, then the SAP system automatically fetches the Consumption G/L account, or we can assign it manually as well.

The System also requires the cost center in the PO itself as a CO object assignment.

The SAP System performs the budget availability check at the PO creation level for commitments and actually consumes the budget at the Goods Receipt level in case of account assignment category "K".

The Account assignment category "K" posts the consumption instead of stock hence system checks the budget for consumption P&L account with assigned Cost center.

The Stock Account always will be from Balance sheet and SAP Cost center budgeting does not support the budget availability control for balance sheet accounts. you may check the SAP-Funds Management.

Hope your query resolved!!

[nejo5001]

Hello!

Thanks for this BLOG. I am little bit confused here, hope you can help me.

I'm searching information for budget availability control On-Prem. I understand Predictive Commitments Management is mandatory which is not standard, thus need to be asked for. (You have to request the activation of scope item 2I3. This scope item is nonstandard and isn't activated by default. Source: Predictive Commitments Management | SAP Help Portal). Do you know where to reuest the scope item? I assume it needs to be requested somehow with SAP.

Can you explain at what time which message comes up when the tolerance is set to W or E? Is it while creating PR or PO, or is it while posting a GR / IR?

Thank you,

Joachim

[arafatajmal]

Thanks Joachim for commenting your query

The Scope Item Predictive Commitments Management is not activated by default hence you need to request your technical BASIS team to look into that.

As far as your budget control message is concerned, the message appears for purchase requisition, and you also can see the same in subsequent documents.

Hope your query resolved!!

Thanks & Regards
Arafat Ajmal.

[nejo5001]

Hello Arafat,

Thanks for explaining. Are postings to cost centers without connection to a PO taken into account?
E.g. there is a cost center XYZ with a budget of 100k in 2024. There is a PO about 60k, creating a commitment, meaning budget is reduced by 60k. Hence 40k still available.  Let's assume there is a manual posting without PO involved debiting the same cost center with 40k. Is that taken into account and therefore the available budget is 0 for this cost center? If the tolerance is set to 100% with error, then no further PR, nor PO can be created nor any further manual posting w/o PO can be done to that cost center.

Is my understand correct?

Thank you very much,
Joachim

[arafatajmal]

Yes Joachim, All the Postings made in the Expense account with the Cost center are taken into account, and reports get updated in real-time. If you are posting more than 40k through a simple journal entry the system will prompt the message or if you post the J.E with 40k then the cost center budget reports will show you the available budget as “0”.

Thanks & Regards
Arafat Ajmal

[ALtheBest]

Hi Arafat,

I appreciate this blog. I noticed in your testing that you used a single account assignment with a budget-carrying cost center in the PO and did the actual posting via the service entry sheet, which is being checked by the cost center budget control. I have a question, though. Currently, my team is working on an S/4HANA implementation project and utilizing this cost center budgeting functionality for our client's business process. The budget upload is done via the Import Financial Plan Data Fiori app, where the cost center budget template file can be downloaded. To fill out the cost center budget template file, the following parameters are required: 'Plan Category', 'G/L Fiscal Year', 'Posting Period', 'Company Code', 'Cost Center', 'G/L Account Number', 'Amount in Company Code Currency', and 'Company Code Currency'. Each line item in the template file corresponds to a cost element and cost center. For example,

PlanCat    G/L FY   Period  CoCode    CostCntr          G/LAcctNo.    Amt in CoCode   CoCode Currncy

 

BUDGET02    2024     1       1000       ZADMIN_HQ     61000360       1000000            PHP

BUDGET02    2024     10     1000       ZADMIN_HQ     61000200       1000000            PHP

BUDGET02    2024     11     1000       ZADMIN_HQ     61000500       1000000            PHP

I have been testing the cost center budget control functionality by posting common costs (e.g., water, electricity, rental) using cost elements (expense G/L accounts) associated with a budget-carrying cost center via the Manage Journal Entries Fiori app. During document simulation, the budget control check triggers once the total debits exceed the 90% tolerance limit (current configuration), causing a warning message that 90% of the budget has been exceeded, but posting is still allowed. Similarly, the budget control check also triggers when the total debits exceed the 100% set tolerance limit, causing an error message, and posting is not allowed by the system. For example,

• Total Budget: 3,000,000.
• Actual Debits per cost element: 1,000,000 + 800,000 + 1,000,000 = 2,800,000.
  • 90% Tolerance: 2,700,000 → Warning triggered.
  • 100% Limit: 3,000,000 → Error budget exceeded.

    Now here's the dilemma. The cost center budget check functionality I explained above does not meet the expectations or requirements of our client, as they want the budget control to be cost-element specific, not aggregated. See the example below:
    
    

    Per Cost Element

    If cost center budget control is based on per GL account:

    • Budget checks:
      • Cost element 1 → Budget: 1,000,000, Actual: 900,100 → Budget check triggers. 
      • Cost element 2 → Budget: 1,000,000, Actual: 800,000 → No budget check.
      • Cost element 3 → Budget: 1,000,000, Actual: 1,000,001 → Budget check triggers. 

        
        With this in mind, is it possible to configure the cost center budget control check functionality to make it cost-element specific or based on individual GL accounts rather than an aggregated budget? It would be of great help if you could provide a solution. I am looking forward to your response, as my team is currently in the UAT phase, and our client is not satisfied with the current setup of the cost center budget functionality in the system.
        
        
        
        Best regards,
        AL