Managing budgets is an essential part of running a business. Budgets help people become more intentional with the way money is spent and direct people to organize and prioritize their work to meet financial goals. They allow you to plan your desired financial outcome and then measure your actual performance against the plan. Odoo manages budgets using both General and Analytic Accounts.
A budget is used for a financial plan for a defined period, normally a year. Budgets can be defined based on multiple criteria, such as departments, cost centers, cost types, commodity groups, users, and combinations of these. Some budgets are designed to be flexible budgets, while others are static budgets.
Effective budget management not only contributes to better cash management but also helps control financial results, increase financial control and performance measurement.
In Odoo Budget management is used to keep track of your financial status against the planned financial activities. Budget management plays an important role in the success of any business.
Also, Odoo budget application is used by a company to get a good grip on forecasted expenses and revenues.
How to manage budget in Odoo
First, you are required to install the relevant apps to use budgeting. The main module is the accounting application. Go in the “App module” and install the Accounting and Finance application
To enable budget management feature in Odoo
Go to Accounting -> Configuration ->Settings and tick the checkbox of ‘Budget Management’ and ‘Analytic accounting’ then click Save button.
Now you can configure the three things to work with Odoo budget management
1. To create Budgetary Positions
Budgetary positions are lists of accounts for which you want to keep budgets (typically expense or income accounts). They need to be defined so Odoo can know it which accounts he needs to go get the budget information.
The budgetary positions act as a type of restriction on what can be recorded in the 'practical amount' column in a budget.
Each budgetary position can have any number of accounts from the general ledger (the main chart of accounts) assigned to it, though it must have at least one.
Note: If you record a transaction that has an analytic account assigned to it that is included in a budget line but one of the general ledger accounts is not included in the budgetary position for that same budget line, it will not appear within the 'practical amount' column of that budget line.
Some budgetary positions might be already installed with your chart of accounts.
To define the positions enter the Accounting module ‣ Configuration ‣ Budgetary Positions.
Now you have to enter the name of the budgetary position and add the items to select the account. In this case you will be required to select all the relevant accounts used wherein you will book your expenses. At that time you can also add new accounts directly from this form through CREATE Button.
Save the changes to confirm your Budgetary position.
Repeat this steps to create a revenue budgetary position. Only in this case select the relevant income accounts.
2. Analytical account
Odoo needs to know which costs or expenses are relevant to a specified budget. To do so we need to link our invoices and expenses to a defined analytical account. Create an analytical account by entering the Accounting module and clicking Accounting module ‣ Configuration ‣ Analytic Accounts. Create a new Account called Reign and Bone Inc Project and select the related partner.
3. To set a Budget
To set those targets, enter the accounting app, Select Accounting -> Budgets -> Create New Budget and create a new Budget.
We have to give a name to the budget. In this case we'll call it "Smith Project". Select the period wherein the budget will be applicable. Next add an item to specify your targets in the Budget Line.
Now you can enter the name of the budget and create budget lines to click on add an item button.
At that time you can select the Budgetary Position related to the budget lines, In other words, select the position that points to the accounts you want to budget and set the start date, End date and Planned amount. In this case we will start with our TZS 5Mil maximum cost target. Select the "Cost" Budgetary Position and specify the Planned Amount. As we are recording a cost, we need to specify a negative amount. Finally, select the corresponding analytic account.
To add another budgetary position for the revenue budget, click on “add line”. Repeat entering the data for the Revenue, you should select the Revenue Budgetary position created earlier and the Planned Amount should be positive, as for our case let say its 20Mil. Then, after everything recorded clearly, you have to Save, confirm and approve the budget, to make it relevant.
Planned Amount: The amount that you have planned for that budget.
Practical Amount: How much amount you have spent in that budget.Real amount due to transactions you have recorded on your Odoo.
Theoretical Amount: It represents the money you theoretically could have spent / should have received till the date. For example, for a case where budget is TZS 24,000,000 for 12 months (January to December), and today is 31 of January, then the theoretical amount will be 2,000,000.
4. CHECK YOUR BUDGET
You can check your budget at any time. To see the evolution, let's book some Invoices and Vendors Bills.
Note: As we earlier use analytical accounts for our budgets, we have remember to specify the associated account in the invoice and / or purchase line.
Lets book an invoice for our client, from Accounting app, go to Customers → Invoices → Create, and record your new invoice
Also,Lets book an Bill that associated with the budget, from Accounting app, go to Vendors → Bills → Create, and record your new Bill.
Go back in the budget list and find the Reign and Bone Project. with the analytical account, Odoo can account the invoice lines and purchase lines booked in the accounts and will display them in the Practical Amount column.