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Funds Management -Multiyear deferrals

Hi,

Any ideas on how to handle with funds management and procurement in place the following scenario?

Scenario: software license bought for a 3 year period with a year cost of 10K.

The contract starts the 1st January 2020 and expires 31st December 2022.

The idea is to be able to handle an invoice payment the first year for the 3 years all together.

They operate under yearly budget but they would like to handle this situation via a deferral functionality.

Currently, each purchase order item points to one year.

Thanks and best regards,

Pablo

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4 Answers

  • Best Answer
    Posted on May 16, 2019 at 08:02 AM

    Hi,

    Yes, with multiyear fund source you would be able to do it. Actually, you have only three options:

    a) If your update profile is working on delivery date, you would need to define your budget also in future years, thus make it possible to make the commitment split in 3 years

    b) If your update profile is based on posting date, than you would have commitment of 30K already in 2019 and, hence, you would need to inscribe your budget also totally in 2019

    c) If you still want to split the commitments over the years, i.e. working with delivery date, but exclude this budget from annual management, you can work with this multiyear horizon fund source I mentioned. Invoices and good receipts will follow the same rules as PO, as they would adopt the FM address from it.

    Regards,

    Eli

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  • Posted on May 14, 2019 at 07:25 AM

    Hi,

    You can define a fund source with a horizon of multiple years and consume budget on that fund source. Another option would be managing this budget in CO. One more option would be changing update profile for POs, basing it on delivery date and not on posting date, thus consuming the budget in one go. And, of course, there is always a way to deal with it from procedural perspective, assigning the budget and making the regularizations every year.

    Regards,

    Eli

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  • Posted on May 15, 2019 at 05:44 PM

    Hi Eli,

    Many thanks. Could you help me on understanding the proposal of the multiyear horizon.

    You mean to use the dimension fund, establishing it with an horizon of multiple years.

    Let´s imagine that for 2019, my fund is Y19, the c.item is 123 and the fund center is ABC.

    When loading the budget for 2019, the budget address Y19; 123; ABC gets 10K.

    For the correspondance of 2020 budget I should have then Y20; 123, ABC and for

    2021 I have the structure Y21; 123 ; ABC.

    Now the updated profile is on delivery date and hence the Purchase order created in July 2019 has in po items :

    10 K for Y19; 123; ABC gets 10K with delivery date Sept 19.

    10 K for Y20; 123; ABC gets 10K with delivery date Sept 20.

    10 K for Y21; 123; ABC gets 10K with delivery date Sept 21.

    Based on this multiyear horizon, would it be then possible to made a goods receipt for the 30 items on September 19 and also the invoice in November 19.

    Please note that in July 2019, the 2020 it´s not loaded on a final version but is used as an estimation/ obligations collector.

    Did your proposal and my further detail on the scenario would work based on this concept?

    To be honest, I never faced with FM an annual budget management the need to receipt and invoice for elements in the future. In this customer, they considered a valid approach towards IFRS management but due to funds management they work blocked in this process. They needed to handle the process on a ficticious vendor and then handle, every year a "ficticious delivery " and invoice.

    In your experience, once posting done, the deferral process in FI would be independent?

    Many thanks and best regards,

    Pablo

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  • Posted on Jul 04, 2019 at 12:17 PM

    Many thanks Eli. As I haven´t executed referrals in SAP do you have also how is this managed and what is the dependency in FM?

    Regarding the invoice and the payment, could you please also explain how the payment budget will behave as in 2019 we are paying the 3 entries but the budget 2020 and 2021 it has not been committed by documents? What is necessary to done the next years to provide this reduction reflection?

    Thanks

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    • Hi,

      Behaviour of the system will highly depend on the update profile, first of all. Please, refer to my earlier answer for the difference in budget consumption depending on the update profile. That's general remark. As to your question, can you elaborate with a clear example with numbers. It is quite difficult to get grasp on the picture from your description.

      Regards,
      Eli