The Line-Item Budgeting Approach in Funds Management with SAP

A budget management system provides reporting tools that determine whether resources were obtained and used in accordance with an organization’s budgetary discipline, and also ensures that the organization is in compliance with internal and external audit requirements.


Budget evaluation is essential for measuring effectiveness in achieving an organization’s stated goals and objectives. This process involves an analysis of how funds were spent, the outcomes that resulted from the expenditure of funds, and the degree to which these outcomes achieved the declared goals. This preceding phase is key for the development of the subsequent year’s budgetary allocations. 


Funds management, a submodule of public sector management in SAP, will support the most common approach for budgeting: line-item budgeting. Below, let’s look at the placement of line-item budgeting in the funds management process. 


The Funds Management Process 

Line-iteming budgeting offers flexibility in the amount of control established over the use of resources, depending on the level of expenditure detail—fund, fund center, and program—registered in the document. This allows for the collection of expenditure data at each functional level and by organizational units for use in historical analysis and planning activities for subsequent fiscal years. 


Funds management controls the budget planning and workflow process and monitors budget consumption in an organization. From a user’s perspective, the tasks performed in the funds management module can be divided into four main domains: master data management, budget management, budget availability control, and year-end close  in the funds management module. 


Core Activities  

Here are some of the core activities that take place within the funds management domain and will be executed by users: 

  • Create and maintain master data
  • Maintain organizational hierarchies for funds management objects, including budget structure
  • Map master data from other SAP components to funds management entities
  • Manage budget versions (actual and supportive)
  • Prepare introduce budget figures
  • Assess budget reports for funds shifting
  • Establish budget entry controls
  • Maintain budget derivation logic
  • Prepare and maintain a platform for special budget processes, such as revenue increasing the budget of cover groups for expenditures
  • Classify transactional data (revenues and expenditures) in other SAP components and its mapping to corresponding funds management objects to ensure proper integration of all SAP S/4HANA and SAP ERP documents
  • Handle earmarked funds (EMFs) and other special funds management postings
  • Maintain availability controls and tolerance profiles
  • Handle budget deviations
  • Prepare reports on budgetary performance and their analysis for more efficient budget planning
  • Execute year-end exercises, set rules for carryover of the residual budget, and handle of open commitments

Managing organizational budgets can be obligatory or optional. Either way, even the smallest organization has to monitor its expenses and compare them to available funding sources. 


About the Funds Management for the Public Sector with SAP Book

Ready to take on funds management? We’ve published Funds Management for the Public Sector with SAP to guide consultants through configuration steps and assist business users with core activities. 


Readers will be introduced to the basic configuration essential for comprehension of the module. The main business activities are outlined, and a perspective on what processes can be managed is provided. You’ll explore the basic master data objects in funds management and understand their functionality and configuration settings.  


Budget operations are not cross-component transactions and are stored exclusively in funds management tables. The two major processes in this domain—budget planning and actual budgeting—will both be explained.  


Then you’ll learn about the configuration points used to integrate the business data from other SAP components to register budget consumption, and funds management-specific postings, such as earmarked funds. 


Next, availability control objects and derivation strategies are discussed. You’ll get to know tolerance profiles for budget exceed scenarios and learn how to set them up in various business situations. Then discover the necessary customization to ensure a smooth year-end exercise for organizations with an operational funds management module. 


Workflows in funds management are an integrated part of almost any financial corporate system, implemented in organizations who use budget management functionalities. While there are limited customization settings related to this, this book covers some available settings that you’ll need to know.  


Learn about the main activities used by business users in the funds management module and get a brief introduction to the information system concept in funds management, consulting examples of a few different reports. You’ll also get an overview of specialized funds management functionalities that are not always used on a day-to-day basis. 


Who Is This Book For? 

This book is intended for funds management consultants with little practical experience implementing the funds management module. It’s also useful to key users within an organization where funds management is already implemented, but who have questions about integration with other modules. Consultants specializing in other SAP domains who are interested in the way funds management integrates with other modules will also find some useful information. 


About the Author 

Since 1995 Eli Klovski has worked for private and public sectors in several EMEA countries, providing SAP ERP solutions in accounting, controlling, materials management, funds management, and project management for full-cycle implementations, roll-outs, business flow coordination, and data migration projects. Other IT ventures included BI implementations, data mining, and development of end-user applications. 

He has a strong academic and practical background in finance and economics. Apart from IT projects, his activities have been focused on performing financial analysis, costing, budget management, and business models. Currently, Eli is an independent IT consultant who contributes to SAP Community as a forum moderator. He is also an SAP Mentor alumnus. He has a master’s degree in economics and a bachelor’s degree in business administration. 


How to Purchase 

If you’re interested in purchasing Funds Management for the Public Sector with SAP, follow this link and choose the format that works best for you: e-book, print edition, or bundle (both e-book and print). 


If you want to continue learning about funds management, or if you want information on other upcoming books or special offers, make sure to sign up for our topic newsletters or our weekly blog recap. 


Funds Management for the Public Sector with SAP: Configuration and Use
Funds Management for the Public Sector with SAP: Configuration and Use

At last, your all-in-one resource for funds management is here! Start with an overview of the funds management process and the SAP S/4HANA user interface. Next, customize all aspects of your budget, from budgetary management to workflows to financial close. Finally, walk through step-by-step instructions for user transactions, including budgeting, posting, and closing. Get everything you need to keep your costs and expenses on track!

Learn More

SAP PRESS is the world's leading SAP publisher, with books on ABAP, SAP S/4HANA, SAP CX, intelligent technologies, SAP Business Technology Platform, and more!