Creating and Managing a Budget (Plan)

In SAP the budget is referred to as "the plan." This is the terminology that will be used throughout this procedure.

General Overview

In SAP there are five versions of a plan, the versions are used as follows:

Version 0 This is the current forecast. This version is used for reporting purposes. Do not transfer a budget to this version until you want it to be viewed on the board reports as the current forecast.
Version 1 This is the current approved budget. If there have been no revisions approved by the board then this is the original budget. This plan should only be changed based on board approvals of budget changes.
Version 2 This is the original approved budget, if there have been subsequent approvals. This plan should only be populated if the original budget has had a subsequent approval.
Version 3 This version is used as a working copy. In this version you can work on the latest estimates, that are not yet ready for distribution. In essence this is the "scratch copy". Once you are ready to move something from scratch to the current forecast you copy it from version 3 to version 0.
Version 4 This version is used for the recording of funding receivables only.

Having these five versions of the plan will give you great flexibility as you manage your plan.

Creating the Plan

The plan in SAP must be entered for WBS element and G/L Account by Year. Currently the system will not take your total budget and spread it by year; you must input the information by year.

The first step is to input the budget. This should be input into plan version 3. Once you have input all of it and it balances, then you are ready to transfer it to the appropriate plan version. If you are in a pre-approval phase then you would transfer it to plan version 0, current working forecast. If the board has approved the budget then you would transfer it to plan version 1. At the time that the budget is approved by the board, the approved budget and the current forecast should be the same. As a result you need to have the same budget copied into plan version 1 and plan version 0.

Maintaining/Managing the Plan

Once the budget has been loaded into R/3 then the task is to keep it current. As discussed above all the scratch work is done in version 3. Once you are ready to change the reported current forecast then you would copy it from version 3 to version 0. Some example of items that would change the current forecast would be; changes in the schedule, that would either change the total cost, or would move the cost from one year to another; changes in the estimated overall cost, no matter what is driving the change, either an increase or decrease.

If the board formally approves a revised budget, then the original budget should be copied from version 1 to version 2 and the new approved budget should be put into version 1.

On a quarterly basis, prior to the end of the quarter all current forecasts need to be reviewed with cash flow in mind. What do you now anticipate the total amount to be spent by year is?

When you look at this you need to keep in mind the actual expenditures to date this year versus what you anticipated. If the total amounts by year are no longer current, then you need to determine which line items need to be modified in order to make the current forecast reflect a more realistic expenditure trend. When you have completed the quarterly review you need to make any necessary changes in the system. The changes should be made in version 3 and then copied to version 0. Before you copy to version 0 make sure that the only changes that have been made from the current forecast are the ones that you want to publish.

The quarterly review becomes more important the later you are in the year. If you do not do an adequate quarterly review then the cash flow forecast that is submitted to the board will not be valid. It is critical that the information presented to the board is as accurate as possible.