on 03-04-2019 4:28 PM
I have an Investment project in company 'A', it has a budget of $ 900,000 $ and they are making an asset, the expenses of which will be partly shared by company B and Company C. For, eg, consider I have actual expenses of $ 900,000 on this project, I want to backcharge company 'B' and company 'C' with $ 300,000 each. Now, company 'B' and 'C' will also have projects to capture the backcharges from company A and these project will have budgets($ 300,000 each).
Overall, if I look at my total budget for all companies put together it will be 900,000(company A) + 300,000(company B) + 300,000(company C) = $ 1.5 Million. This is incorrect because budget for this project should have been only $ 900,000. How are these projects handled.
When it's known affront about each company's contribution to build asset, is it just WBS hierarchy and budget distribution. I mean to say the top WBS with company A will have rolled budget of 900k from down hierarchy WBS of all three company codes. Each WBS will be budgeted with 300k. This way you will be able to do budgetary control at each company code WBS and settle the cost to up WBS of company A. Cost from up WBS will get settled to asset which is owned by company A.
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Active Budget Control is when you turn on Budget Availability Checking. This is where business transactions receive warnings or are stopped depending on amount of budget left.
Is there a reason the costs have to flow through Company A?
Budget management is meant to apply at the point of charging and not from settlement. I would budget the Company A WBS with 900k and not apply any budget to the settlement receivers in the other company codes.
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Yes, we have Active budget control. I understand your point to have budget of 900K on company A and incur all costs at that level and then settle to other company WBS elements. You suggested that at the time of settlement we don't have to budget check, but this is a peculiar case wherein we are charging the other companies so we need a budget check.
Are you trying to use active budget control? What is your purpose for using budgeting? To be honest your scenario doesn't make sense, if the asset costs 900k why are you only capitalizing 300k? If you are going to capitalize 300 and expense 600, then use 2 Company A WBS one for CAPEX and the other for OPEX.
But I would do one project with 2 WBS, Company A WBS to capitalize 300k, Company B WBS to expense 300k and Company C WBS to expense 300k. The budget for the whole project is 900k and the actual charges on the whole project will be 900k.
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Thanks for having the patience to answer. Yes, we have budget control, I did not understand what you mean by active budget control. Company A is doing a Project which has to be partly paid by company B & C. Company A, B and C have each been given a budget of $ 300K for this project. In total, budget is $900K, but project is being managed by company A. All cost is directly posted on company 'A', they then have to back charge to company B and C. There has to be a budget check for all costs whether it is on company A, B or C. It could be possible that company B or C may capitalise or expense out the backcharges. It is upto them.
You can't back charge the other companies through settlement and settle the whole amount to the Asset in Company A. If you settle 300k x2 to Company B and C from an initial expenditure of 900k you will only have 300k left on the WBS to settle to FA. It sounds like you want Company A to hold the 900k Fixed Asset.
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Although the above solution is most preferred solution, if you are just starting with project creation or new process implementation. if you already have projects created and posted with cost, another way you can achieve by settling % cost to WBS from other company codes. You don't have to budget WBS in company B and C. You can use this as your work around to deal with existing projects.
Pramod
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You do it all under one project definition. The only organizational restriction in PS is that all objects belong to the same Controlling Area. Different WBS can be assigned to different Company Codes. You move the costs within the project through settlement.
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The issue I have is that I want all cost to come on WBS of company A and from this WBS distribute to WBS of company B and C. In doing I will consume the entire budget of WBS of company A, it may also result in overrun of budget for this WBS. When I do settlement from WBS of company A to WBS of company B, the budget availability of WBS A is not going to increase because of the recharge/settlement. Usually what is the best practice in these type of situations?
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