PM Commitment Accounting - Entering Commitments

• Data Entry Overview
• General Ledger Data Entry
• Purchasing

Data Entry Overview

Entering Commitments

The exact point in time at which an intention to buy becomes a commitment is determined by the user when setting up company level commitment controls and also document code controls. For example, you could elect to measure commitments on requisitions, or you could only measure commitments at the point at which orders are raised, or a receipt made.

The recording, or entering of commitments can be achieved in various ways, but these can be classified in to two main areas.

• General Ledger Data Entry
• Against Purchasing Management documents.

See also Enter Batch Details MEDB and Accrual Control Accounts Edit MDAB.

General Ledger Data Entry

To denote that a batch being entered into General Ledger contains commitments rather than actual financial values, the only action required is to enter the commitment balance class on the Data Entry Header Screen MEDB. This must be a valid balance class, and must have a commitment type of 2 (Manual) set against it in MAKT - Balance Class.

After completing all entries on the header screen press the Detail key to move on to the detailed data entry screen.

Each line entered in Data Entry Detail denotes an individual commitment, however, funds checking is performed on the total batch, as well as on each commitment. Thus, if one commitment in a batch fails a funds check and causes the batch to be put on hold, then all commitments will be held. You may at this point remove or amend the value of the overspending commitment, and so allow the remainder of the batch to be accepted.

When all commitments have been entered, press the Update key.

If the commitment balance class has the Funds Check Flag set to Y in MAKT and the Update Indicator on the Batch Type in (MAKL is set to Immediate Update then the funds checking routine will be invoked.

Should the funds check routine fail, then the resulting action will be dictated by the funds check response field on the element being checked. This element could be any part of the entered account numbers or analysis codes. See Funds Checking for detailed description of the funds check routine and its responses.

Purchasing

During the Data Entry options of Purchasing Management the user is always required to identify the document in use by type and code. This enables the system to decide whether the document is required to participate in the commitment accounting process. The Commitment Accounting Company Controls MESB contain a PM Document Defaults section where General Ledger Balance classes may be entered for each Document Type. If a balance class is found here for the document type the system will use this unless a different balance class has been entered at the document code (MDAJ) level. The e5 Commitment Accounting module requires the entry of the following three fields in order to function:

• A General Ledger Account (by split analysis if required)
• A Monetary value
• A Commitment date

These fields are therefore mandatory at line level for documents which represent a commitment.

e5 Commitment Accounting allows the user to determine the date for which the commitment will start. The date is entered for each line of a purchasing document but the decision is made at Commitment Accounting Company Controls MESB for the procedure of choice of commitment date. The choices are:

NOTE For the purposes of this help topic, whatever decision is made at Company Level will be referred to as the commitment date.

The commitment date used must be within the fiscal boundaries for the General Ledger in use. For example, a date in the next financial year may not be used if that year has not been set up in the General Ledger and therefore cannot be converted to the relevant General Ledger Period.

Consider the following example to clarify the Commitment Accounting processes viewed from a data entry and balance class point of view.

To simplify matters considerably, balance classes are only used at Company Level:

Using the above model we will proceed with a single requisition line for 1,000 items at £5 each, attributable to a single account code. This requisition may subsequently be drawn off by call-off orders and receipted in the usual manner.

The commitment of £5,000 will always be held by the balance class representing the current stage of processing. For example as the requisition is called off the balance class B1 needs to be decreased by £5,000 and B4 increased accordingly. This is achieved by credit and debit postings respectively.

The above example also serves to illustrate further permutations possible from the use of Balance classes.

• Although Contracts do not possess a balance class this does not exclude their use. It simply means no commitment accounting records will be kept at this stage. Any commitment accounting data existing will be passed on once the contract is converted to another document where a balance class exists.
• It is not necessary to begin the commitment accounting process at the requisition stage. The user may nominate any level where they consider it reasonable that the funds availability should be checked.
• Although straight forward processing of requisition to order to receipt and invoice is common, documents are not always restricted to a fixed sequence. However, receipts are only possible against orders.
• Once a receipt has been processed the commitment is at the point of becoming a General Ledger posting thus ending its commitment status and becoming an actual expense. This can happen in three ways:

1. • Invoice matching
   • On line Accrual Posting
   • Batch Accrual Posting

If on-line accrual postings are made, the system prohibits the user from targeting commitment postings at the point of receipt. If the accrual provision is on-line (GRNI = 'Y' on Common Purchasing Company Level Controls, MPAB) then the measuring of receipt commitments is suppressed in order to avoid double- counting of outstanding commitments.

5. The example offers the user the opportunity to determine the degree of commitment based on document type i.e. we are able to establish the commitment for all requisitions using B1.

Alternatively, should the user want to view commitments by another means, for example by department, then the following settings at document level might be more useful:-

The above represents the simplest model possible although it should be stressed that more balance classes might be considered especially to indicate the point where a tentative commitment becomes an irrevocable commitment or perhaps to control where funds checking occurs.

See also

PM Commitment Accounting

Purchasing Management Home Page