Budgets and commitment accounting
What may be spent, where the money came from, what is already promised, and the four control levels.
A budget in TRANXACT controls spending rather than merely describing it, and it does so at the moment the promise is made rather than at the moment the invoice arrives.
The three numbers
| Number | What it is |
|---|---|
| Budget | What may be spent, by cost centre and account, for a period. |
| Commitment | What has been promised but not yet invoiced — an approved requisition, an open purchase order. |
| Actual | What has posted to the ledger. |
Available is the budget less commitments less actuals. Leaving commitments out of that arithmetic is how organizations discover in March that they spent February’s budget in January and had the paperwork to prove it all along.
Control levels
- None — the budget is recorded and reported against, and nothing is stopped.
- Warn — the person is told they are over and may proceed.
- Block — the document is refused.
- Block with override — refused unless somebody entitled to override records a reason, which is kept on the record.
Commitment accounting is not limited to procurement. Anything that promises money before it spends it can raise a commitment, and it is released when the actual lands so the same money is never counted twice.
Funding sources record where the money came from, which matters when a budget is funded from more than one place and the reporting has to say which pot a cost fell against.