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SAP makes a distinction between planning and budgeting. Planning implies that an iterative process may occur in which many different versions of the plan may be developed until one is decided upon. The budget which can be defined as a detailed work plan describing how the approved amount will be allocated is developed once the overall plan has been confirmed.
Budget is an approved cost structure for an action or project in a particular period of time.
Budgeting differs from cost planning in that it is binding. While you must estimate costs as accurately as possible during the planning phase, it is in the approval phase that you prescribe your funds, in the form of a budget.
Budgeting is meant for monitoring the utilization of funds, either monthly bases or yearly.
Planing is meant for spending budget funds, either daily bases or monthly.
Planning is financial estimate to prepare the organization for the future possible situations that it is likely to face in the environment in which it operates.
Budgeting is a control process to ensure that actual expenses do not exceed the assigned limit for a type of expense.
SAP Planning - outlines the company's financial direction and expectations for the next three to five years.
SAP Budgeting - documents how the overall plan will be executed month to month,
specifying expenditures.
Both are different.
Budgeting is to utilize and monitor the funds for a certain period but Planning is different as the values may diffeer from the budgeted values.
Budget is foretasted value decided using previous variance analysis for the current year.
But Planning should be in place again for the whole year and month on month to spend the actually so that there will not be much variance in the current year spend.
This is in regards to finance terms
Budgeting is meant to monitor expenditure within approved limits and need controls, approvals for spending.
Planning is meant for in-advance preparation for allocation of funds and to compare with actual funds utilization
Budgeting is used to put an anuual financial cap and the spend cannot go above that figure. While planning is used to monitor actuals against each Cost elements, WBS, cost centre etc
Planning is from down to top
(Define the activities and collect the requirements to make the budget)
Budgeting is from top to down
(After planning you start execution within the budget)
Planning is input for budgeting
Theoretically, planning is related to strategies and long term management of your resources to achieve your business goals while budgeting is meant for managing and monitoring how you spend your funds in your day-to-day transactions.However, in SAP there are some differences between budgeting and planning that you should be aware of and we can put them under three main headings:
Level of details: When you record your planning in SAP, you are able to detail your planning as much as you can. You can plan by cost element, activity type, resource, etc. You can also plan using quantities and capacities. On the other side, budgeting uses one lump sum amount per object.
Availability control: Availability control is the function you use to make the system checks the available amount to be spent on a specific object and issue warning or error messages at some levels of spending. Availability control can be activated using budgeting and can’t be activated for planning. This means that you are just able to report on the variances occurred between planning and actual expenditures, but you cannot automatically stop spending over the planned amounts which is possible only using budgeting.
Allowed controlling objects: Planning can be done on all types of controlling objects, so you can plan on cost centers, profit centers, internal orders, WBS elements while budgeting is applicable only on the temporary or the project-like CO objects (internal orders and WBS elements). Actually, you can record a budget for a cost center but you can’t use availability control with it which is the main purpose of budgeting.
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