Budget Workflow

Standard Operating Procedure (SOP) for Budget Planning & Control

Operating Budget
Capital Budget
Project Budget
Revenue Budget
Variance Analysis
GL Integration
Phase 1: Cost Center Setup
Goal: Configure the organizational cost center structure for budget allocation and expense tracking.
Cost Center Hierarchy

Level 1: Business Units / Divisions

Level 2: Departments

Level 3: Sub-Departments / Teams

Level 4: Projects (if applicable)

Cost Center Configuration

Basic Information

Cost Center Code

Name & Description

Parent Cost Center

Classification

Type: Revenue/Expense/Capital

GL Account Mapping

Cost Center Manager

Output: Complete cost center structure ready for budget allocation
Phase 2: Budget Header Creation
Goal: Create the master budget document with fiscal year settings, currency, and overall budget parameters.
Budget Header Fields

Identification: Budget Name, Code, Description

Period: Fiscal Year, Start Date, End Date

Financial: Currency, Total Budget Amount

Type: Operating / Capital / Project / Revenue

Budget Types
Type Purpose Examples
OperatingDay-to-day business expensesSalaries, utilities
CapitalLong-term asset investmentsEquipment, buildings
ProjectSpecific project fundingNew product launch
RevenueIncome projectionsSales targets
Budget Status Flow
Draft
Submitted
Under Review
Approved
Active
Closed
Output: Budget header created with fiscal year and parameters defined
Phase 3: Budget Line Allocation
Goal: Allocate budget amounts to cost centers with monthly distribution for detailed expense planning.
Budget Line Entry

Select cost center from hierarchy

Map to GL expense/revenue accounts

Enter annual budget amount

Add notes and justifications

Monthly Allocation Methods

Even Distribution

Total divided equally across 12 months

Formula: Total / 12 = Monthly

Seasonal Pattern

Higher allocation for peak months

Example: Nov/Dec at 150%

Manual Entry

Custom amount for each month

Month1 through Month12
Monthly Allocation Example
JanFebMarAprMayJun JulAugSepOctNovDecTotal
8,3338,3338,3338,3338,3338,333 8,3338,3338,3338,3338,3338,337100,000
Output: Complete budget with cost center allocations and monthly distribution
Phase 4: Approval Workflow
Goal: Route budget through multi-level approval process for authorization before activation.
Approval Levels
Level Approver Authority
1Department ManagerLines up to $50,000
2Finance ManagerLines up to $250,000
3CFOLines up to $1,000,000
4CEO/BoardAll amounts
Approval Actions

Approve

Budget activated

GL integration enabled

Variance monitoring begins

Reject

Returns to Draft

Comments provided

Creator notified

Request Changes

Lines flagged

Limited editing

Resubmit required

Output: Budget approved and activated for expense tracking
Phase 5: Budget Monitoring
Goal: Track actual spending against budget in real-time and identify variances for management action.
Variance Calculation

Formula: Variance = Budget - Actual

Percentage: Variance % = ((Budget - Actual) / Budget) x 100

Variance Types
Scenario Variance Type Indicator
Actual < BudgetPositiveFavorableGreen
Actual = BudgetZeroOn TargetGreen
Actual > BudgetNegativeUnfavorableRed
Alert Thresholds

Normal (Green)

Within 5% of budget

No action required

Caution (Yellow)

5% - 15% variance

Monitor closely

Critical (Red)

Over 15% variance

Immediate investigation
Drill-Down Analysis

Click on variance to drill down

View contributing transactions

Identify root cause

Document findings

Output: Continuous budget monitoring with variance alerts and drill-down capability
Phase 6: Reporting & GL Integration
Goal: Generate comprehensive budget reports and leverage full GL integration for financial decision-making.
Standard Reports
ReportDescription
Budget vs ActualSide-by-side comparison by cost center
Variance AnalysisDetailed variance breakdown with drill-down
Monthly Spending TrendChart showing actual vs budget over time
Cost Center SummaryAggregated view by cost center hierarchy
Department RollupSummary by department with child totals
YTD PerformanceYear-to-date budget utilization
Full GL Module Integration

Transaction Pull

Actual from GL journals

Real-time variance

Cost center mapping

Commitment Tracking

Approved POs tracked

Encumbered amounts

Available = Budget - Actual - Committed

GL Integration Summary
Integration PointDirectionPurpose
Journal EntriesGL → BudgetPull actual expense amounts
Cost CentersSharedCommon master data
Chart of AccountsGL → BudgetAccount structure mapping
Purchase OrdersAP → BudgetCommitment tracking
Financial PeriodGL → BudgetPeriod-based calculations
Output: Complete reporting suite with full GL integration for budget management
Budget Lifecycle Summary
Draft
Submitted
Under Review
Approved
Active
Closed
Best Practices

Budget Creation

Start with previous year baseline

Adjust for known changes

Include contingency (5-10%)

Monitoring

Review weekly/monthly

Investigate variances promptly

Document deviations

Year-End

Close out budgets

Analyze full-year variance

Prepare next year baseline
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