Budgeting

 

Budgeting

Budgeting is the process of creating a plan that outlines expected income and sets spending limits for a specific period, such as a fiscal year. The budgeting tool in ERPNext helps businesses track spending by allocating funds to Cost Centres, Projects, or Accounting Dimensions.

 

It ensures financial restraint by comparing actual spending to budgeted amounts. You can also set alerts or blocks to prevent overspending. This helps with better planning, decision-making, and the achievement of financial goals.

 

To access the budget list, go to:

 

Home > Accounting > Cost Centre and Budgeting > Budget

1. Why Budgeting Is Important?

  • It helps you keep business expenses under control.
  • It helps with long-term financial planning.
  • Establishes boundaries to stop excessive spending.
  • When budgets are exceeded, it either stops or sends out alerts.

 

For instance: If you’re running online sales campaigns, you can set up ERPNext to Halt or Alert you when spending exceeds a budget for Search Advertisements.

2. How to Make a New Budget

 

Budgeting

 

In ERPNext, to create a budget:

 

  1. Navigate to: **Home > Accounting > Budget and Cost Centre > Budget
  2. Select Add Budget.
  3. Select if the budget is for an accounting dimension, a project, or a cost centre.
  4. Choose the budget’s fiscal year.
  5. Select the income or expense account (such as Telephone Expenses) for which you wish to create a budget in the Accounts table.
  6. Enter the account’s budget amount.
  7. Save the budget, then submit it.

3. Essential Elements of Budgeting

3.1 Distribution Each Month

 

 

  • A Monthly Distribution record allows you to specify how your budget is allocated each month.
  • ERPNext will divide the annual budget evenly over the course of 12 months if it is not specified.
  • Businesses with seasonal spending patterns can benefit from this.

3.2 Control Measures (Warnings)

Control measures guarantee that spending is tracked and curtailed as necessary. They start when:

 

  • A request for materials is made.
  • A purchase order is made.
  • A real expense is recorded (for example, through a purchase invoice or journal entry).
  • Control actions for monthly or annual budget limits can be defined.

 

 

Types of Control Actions:

 

  • Stop: If the budget is surpassed, users are prevented from submitting the transaction.
  • Warn: Shows a warning but permits the purchase.
  • Ignore: Regardless of financial situation, there is no caution or limitation.

 

Note: Depending on the control action you have chosen, ERPNext will either display a warning or halt the transaction if the actual cost exceeds the allocated budget.

4. Budget Variance Report

You can track and contrast your budgeted and actual amounts with the help of the Budget Variance Report. For every account, cost centre, or project, it gives you a real-time picture of how well you’re doing financially.

 

To access this, go to:

 

Home > Accounting > Cost Centre and Budgetting > Budget Variance Report

 

This report is beneficial because:

 

  • It Keep tabs on excessive or insufficient spending.
  • Examines the financial results of projects or departments.
  • Throughout the year, make wise budgetary adjustments.

6. More to Follow