Budget Control in Dynamics 365 Finance and Operations

By Nandita Nityanandam posted Jul 27, 2018 08:07 AM


Budget control in any organization is critical to monitor the budget funds that are available for planned and actual purchases, and expenditures. It enables you to carefully plan, measure, manage, and forecast financial resources throughout the fiscal year and restrict expenditures that exceed budget.

Setting up Budget Control in Dynamics 365 for Finance and Operations

Using Budget control in Microsoft Dynamics 365 for Finance and Operations, you can manage your financial resources using a chart of accounts, workflows, configurable calculation of available funds, budget cycles, and thresholds. You can approve budgets and use the budget register entries to record the expenditure budget for your organization.

Once budgets have been approved, budget plans can be used to generate budget register entries and track the expenditure budget for the organization. This can be done using main accounts and financial dimensions. Following are the steps that are necessary to enable budget control in Dynamics 365 for Finance and Operations:


Budget cycle

Budget cycle time spans are associated with fiscal calendars to determine the length of each budget cycle; they either specify the fiscal year or the number of periods for the budget cycles that are associated with the budget cycle time span.


Budget control configuration


On the budget control configuration page, the following criteria needs to be defined:

  • Parameters – The financial dimensions and the default parameters for budget control
  • Budget permission – Default over budget permissions for user groups
  • Budget funds available – This determines the budget funds that are available

Budget funds available = (Original budget + Carry forward amount+ Budget revisions + Budget transfers) - (Actual expenditures + Unposted actual expenditures + Budget reservations for encumbrances + Budget reservations for unconfirmed encumbrances + Reduction to budget reservations for unconfirmed encumbrances + Budget reservations for pre-encumbrances + Budget reservations for unconfirmed pre-encumbrances)

Since companies generally create a budget on a daily, monthly, or annual basis, a Budgets Register entry is created. The amount which is unused can be carried forward using the Carry forward amount functionality.

  • Documents and journals – The source document and accounting journal which are subject to budget are defined.
  • Budget models – Budget models perform budget checking for the budget cycle.
  • Budget control rules – Financial budget combination for budget control are defined.
  • Main account – The main account for which budget control will be applied to is selected.
  • Budget group – Optional budget groups can be defined to build a collection of financial dimension values for a secondary budget check.
  • Activate budget control – You can activate budget using this tab.

Budget Register Entries

Once the budget control is activated, you can create budget register entries that are key for maintaining budget information. There are multiple ways in which budget register entries can be generated:

  1. Manually enter the document information on the budget register entries page.
  2. Use Microsoft Excel template by clicking “Open in Excel” on the Budget register entries page.
  3. Use the “Budget Account Entries” data entity in data management to import budget register entries. 
  4. Use the “Generate Budget” register entry periodic process if your company uses budget planning functionality to prepare budget data.

The following types of budgets are mainly used:

  1. Original budget – When you are creating an initial budget amount for an account.
  2. Transfer – When you are moving a budget amount from one account to another.
  3. Revision – When you are changing the budget amount for an account. You can use this budget type after you have posted an original budget register entry for the account.
  4. Fixed assets – When you are transferring fixed asset budget forecasts to the general ledger.

You can enter information such as the budget model and budget code. You can also create a budget financial dimension wise, transfer budgets and allocate amounts across various periods. You can also apply workflow to approve budget register entries. Let’s look at some scenarios of manual budget entry creation:

Scenario 1-Prevention of over budget entries

Over budget permission is set to prevent over budget processing. Using this functionality, a transaction amount over a budgeted entry can be restricted by the system.


Budget control rule used here is when the Main Account is labeled 605150, the threshold of 90% of the budget will be applicable. So, any transaction of more than 90% of a budget register entry won’t be allowed by system.

Here a Budget Register Entry of $10,000 is created with the following financial dimensions:

  • Main account number: 605150
  • Business unit: 001
  • Department: 022.

So, in case a transaction of more than $9,000 takes place, the system will show an error message.


While validating a transaction using the Invoice Journal, the system will prevent the user from transacting as the amount of $300,000 exceeds the threshold limit of $9,000.


Scenario 2: Actual v/s Budgeted

Here a Budgeted Register Entry is created of $12,000 for

Main Account: 604400

Business unit: 001

Department: 022


Whereas the actual entry created in the invoice journal is for $1,0000.


The actual v/s budget report shows revised budget amounts which are a total of the original budget, revisions, transfers, and carry-forward amounts. Using this report, you view actual budget v/s actual expenditure and make decisions based on that information.


Scenario 3: Carry forward of budgeted entry amounts

The latest version of Dynamics 365 Finance and Operations offers an add-on feature in budget fund available that enables you to carry forward budgeted entry amounts. The “maintain carry forward status for documents” functionality maintains the carry-forward status on related documents that have been updated based on the originating document having been noted as carry-forward.


In earlier versions, the functionality of source document and accounting journal were separate. But now, they have been combined as “Documents and Journals”. Also, the advanced report functionality has been removed from the source document in this version.


Scenario 4: Revision budget

For several reasons, companies may want to modify the budgeted amount already posted in the original budget. In these types of situations, the original budgeted amount cannot be edited but a revised budget can be created instead.

For creating a revised budget, a budget code with type revision needs to be created:


If you want to decrease the budget amount, a negative line entry needs to be updated.


The amount is updated in the balance report.


Budget Control for Efficient Financial Resources Planning

Budget control enables organizations to create a robust plan for their expenditures and ensure they always have enough budget to purchase the things that are important and the things that need to efficiently run the business. Since excessive spending can have an unfavorable impact on corporate profits, budget control helps organizations to ensure spending limits are adequate and in control. With Microsoft Dynamics 365 for Finance and Operations, you can efficiently manage financial resources and plan, measure, manage, and forecast financial resources throughout the fiscal year for improved efficiency.


About the Author - Nirav Modi

Nirav Modi is a Project Manager with over a decade of working experience in the Dynamics suite of ERP systems, spanning multiple industries across various geographies. He is a certified SCM, Trade & Logistic, Production, and Implementation Methodology Techno-functional consultant who essays the dual roles of a project manager and engagement manager for several of Indusa’s key accounts’.

Contributing Author: Malavika Nityanandam