Active Budget Control in SAP Business ByDesign – Encumbrance Balance Carry Forward

This is a detailed blog post  in the context of SAP Business ByDesign capabilities related to active budget control –  see main blog post: Active Budget Control in SAP Business ByDesign

Overview – Encumbrance Balance Carry Forward

The encumbrance balance carry forward is a part of your year end closing activities. It assures that all open encumbrances of the fiscal year subject to being closed are carried forward to the new fiscal year opened. This will assure that ‘consumed’ budgets and still open encumbrances of the closed fiscal year are carried forward to the new operational fiscal year. That means that the carried forward open encumbrance amounts from the previous fiscal year will immediately reduce the available budget for the current year.

Process in year end closing activities

The encumbrance balance carry forward is accessed in the work center ‘General Ledger’ as part of the periodic tasks.

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Encumbrance Balance Carry Forward – PeriodicTasks in General Ledger

The encumbrance balance carry forward shall be executed as late as possible in the year to be closed. The final period should already be blocked for operational postings. That means creation of purchase orders, goods receipts and supplier invoices and alike that influence the encumbrances are already blocked and no further changes expected. In addition it is also recommended to have the encumbrance balance carry forward executed as early as possible into the new fiscal year as the carried forwarded encumbrances are already reducing the available budget in the new fiscal year.

So to wait 2-3 weeks into the new fiscal year is not recommended. The carried forwarded open encumbrance amounts are not subject to active budget check since this are commitments made in the  last fiscal year and the actuals are to be expected to happen in the new fiscal year.

To create an encumbrance balance carry forward run is straight forward:

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Encumbrance Balance Carry Forward – New Run

After the run has been executed detailed information can be accessed in the list of runs and detailed log information be retrieved.

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Encumbrance Balance Carry Forward – List of Runs

The posting logic of the encumbrance balance carry forward can been seen in the run log or in the report ‘Encumbrance – Line Items’. The run computes the open encumbrance balance on purchase order line item level for the year to be carried forward and balances the encumbrance to ‘0,00’ at the last date of the fiscal year. In addition it carries forward the same amount to the first date of the new fiscal year. All type of fiscal year variants (e.g. shifted fiscal years) are supported.

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Encumbrance Balance Carry Forward – Log and Posting Logic

Special Use Cases

  1. Multiple years – example:
    Assume the new fiscal year is 2023 and just has started.. You started using encumbrances in 2021 – but never used encumbrance balance carry forward before. Please carry forward the encumbrances initially 2021 to 2022. Thereafter carry forward the encumbrances 2022 to the new fiscal year 2023. We limited this multi year encumbrance carry forward to maximum 2 years into the past.
  2. Late changes into an already closed fiscal year – encumbrance balance carry forward already conducted. The SAP Business ByDesign team has also looked into this exceptional case. By proper closing the fiscal year this is an exceptional case – but it happens. So some corrections are made already in the new fiscal year affecting the to be closed fiscal year and these would affect the encumbrances. The SAP Business ByDesign detects an active encumbrance carry forward has been executed and posts encumbrance adjustments into the old fiscal year but automatically also on transactional basis carries these values forward to the new active fiscal year. This avoids the need to conduct a reverse of the encumbrance carry forward run and re-execute thereafter to assure that these ‘late and exceptional’ adjustments to encumbrances are properly reflected in the actual active fiscal year.

Summary

The enhanced capabilities of encumbrance balance carry forward described in this blog post are available as of the SAP Business release 2211. I hope this background information helps to assure that this activity will be incorporated into the year end closing procedures in case you opted to have encumbrances or active budget control in place. It shows that in active budget control also the scenarios that span fiscal years are to be considered from multiple perspectives:

  • financial planning
  • budget release
  • carried over open encumbrances

I’m curios o learn from your projects how these scenarios are handled and adressed in your implementation.

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