Funds Management (FI-FM)

Topics

Introduction to Funds Management

Purpose
Integration with other Modules
Master Data
Budget Structure
Budget Execution
Closing Operations – Carry Forward
 Introduction
Fund Management offers all the functions for reproducing the budget structure of your
organization in Funds Management. The organization is split accounting to organizational and
functional viewpoints:

You must set up the following master data according to your individual requirements:

•Funds centers
Funds centers are used to represent organizational units (areas of responsibility, departments,
projects) and are arranged in a hierarchy.

•Commitment items
Commitment items are used to represent functional aspects (expenditure and revenue
structures) in a hierarchy. They are used to split budgets according to contents and business
transactions affecting liquidity into revenue items and expenditure items.
You can use funds to subdivide budgets.

•Funds
With funds enable you to create an exact proof of origin and application of funds. You can use
funds to manage funds from secondary sources.
Purpose

• Budgets all Revenues and Expenditures for individual responsibility areas

• Monitors Funds Movements in the light of budget available
• Prevents Budget Over-runs
• Integrates with all other SAP Modules
 Integration

Funds Management is fully integrated with other components in the R/3 System.
Which component is used in each case depends on the specific requirements of
your organization. A basic requirement for use of Funds Management is
integration with the General Ledger Accounting (FI-GL) component.

Integration with Materials Management means that you can, for example,
reproduce and monitor procurement transactions from start to finish.

Integration also ensures that all the data you need to manager your budget is
available as and when you need it.
 Integration with Other Components in the R/3 System

Integration Requirement
Financial Accounting
G/L account postings General Ledger Accounting (FI-GL)
Accounts payable Accounts Payable (FI-AP)
Accounts receivable Accounts Receivable (FI-AR)
Asset postings Fixed Assets Management (FI-AA
Travel Management (FI-TV or PA-TV)
Travel expenses
Personnel Administration (PA-PA)
Controlling
Actual assessment
Actual line item reposting
Actual primary cost reposting
Actual distribution
Overhead Cost Controlling (CO-OM)
Indirect activity allocation
Order settlement
Actual accrual calculation
Actual activity allocation
Materials Management
Purchase requisition Purchasing (MM-PUR)
Purchase orders External Services (MM-SRV)
Goods receipts
Inventory Management (MM-IM)
Goods issues
Invoice receipts Invoice Verification (MM-IV)
Plant Maintenance
Plant maintenance orders Maintenance Processing (PM-WOC)
Project System
Networks Operative Structures (PS-ST-OPR)
Sales and Distribution
Sales (SD-SLS)
Billing Shipping (SD-SHP)
Billing (SD-BIL)
Human Resources
Payroll Accounting (PA-PY)
Payroll accounting
Personnel Administration (PA-PA)
 Organization Structure

Client FM Area

Controlling Area

Company Code III

Company Code I Company Code II
 Fund Management Area
Client

FM Area 1100 FM Area 1200

Company Code 1100 Company Code 1110 Company Code 1200 Company Code 1210
Master Data
 Commitment Item

Commitment Hierarchy
Commitment item
represents Revenue &
Expenditure in FM
Expense
Commitment items in
Funds Management are
arranged in hierarchies. You
can create more than one
Operating
Expenses
Project
Expenses
Personnel
Expenses hierarchy for an FM area.
Example: one hierarchy for
revenues and another for
expenditures
 Commitment Item
Commitment items classify
Commitment Hierarchy budget transactions and business
transactions affecting liquidity
into revenue, expenditure, and
cash balance items. You can
Revenue
assign budget for responsibility
areas (funds centers) to the
commitment items. Budget is
used up as postings are made to
commitment items and funds
Operating Other Research centers, giving rise to
Revenue Revenue Revenue commitment and actual values
 Type of Commitment Item
There are two types of commitment item:-

Account assignment items (= lowest level in the hierarchy)

You can post to and budget these items.
Summarization items (= hierarchy nodes)
You can budget these items but cannot post to them. Summarization items are
needed for setting up a commitment item hierarchy. You define a commitment item
hierarchy by combining accounting assignment items at any summarization level
you want. Within the hierarchy, a summarization item can be succeeded by a
summarization item or an account assignment item. This means that budget
assignment is not tied to the lowest level in the hierarchy. The system totals up the
posting data from the account assignment items and displays it in the appropriate
summarization items.
 Fund Center

• Organization unit within an FM area which represents the structure of an

organization in the form of a hierarchy.
• You can assign budget to funds centers. Budget is used up as postings are
made to funds centers, giving rise to commitment and actual values.
• Funds centers in Funds Management are arranged in hierarchies. You can
define one funds center hierarchy per FM area. There is only one top funds
center in a funds center hierarchy. Every other funds center has one
superior funds center.
 Fund Center

Executive Board
Fund Center A

Department I Department II
Fund Center C Fund Center B
BUDGET
 Budget -Introduction
Before the start of the financial year, you must enter budget values into
the structure. There may be several run-within the budgeting process until
a budget can finally be chosen and compiled.
Depending on the planning approach, different versions of budgets may
be necessary. Here it will be explained how budgets can be represented in
the system and what functions are available for the operational support of
the planning process.
 Budget Structuring

• Budget Structuring basically helps in quicker creation of the budgets for the fund
manager.

• The following example will make that clear:

• Once the commitment level hierarchy for the company is drawn, each fund centre
manager can structure his budget to allow only those commitment items which he wants
to budget. In that way when he does his budgeting exercise, he saves considerable
amount of time by having only the necessary fields for input.
• In this example the fund center dept 1 uses a different budget structure than the fund
center admin. Thus, when each of these fund center managers enters his budget values it
would make life much easier for him. In fact, after he does his budget structuring SAP
provides a transaction code which automatically filters only the items selected and makes
life easier for the fund manager.
 Budget Execution
Once the master data and the budget structure is set up the budget
execution process has to be implemented. This exercise basically helps to
control the budget which has been set. This feature is one of the most
powerful features in Funds Management .
There are three types of messages which can be structured for every
budget profile based on the budget utilized. They can be combined with
the transactions.

The messages are :-

1.Warning Message
2.Warning + A Mail to the Fund Center Manager.
3.Error Message.
 Active Availability Control

Organization uses Active Availability to Control the generation of system

reactions to Budget & Actual Entry.
An Important function in the Funds Management system is the monitoring of
available Fund.
Active Availability Control determines which Budget structure elements have
Budget and what actual and Commitment values have been posted to them.
 Year End Activities

Fiscal Year End leads to some major decision regarding the carry forward of Commitment, Fund balances
& Budgets.
 For Year-end activities in Funds Management Following Activities require to be defined:
 Carry forward rules must be defined.
 Transactions may be reversed for open items that are not going to be settled in the current year and are also not
going to be carried over to the next year (such as deleting purchase requisitions, canceling reservations,
resetting purchase orders and notifying the vendors).

If the Year End process is not correctly carried out, then:-
 Any budget not used remains in the old year and cannot be used in the new year.
 Open items are reduced in the old year as soon as they are processed in the new year
Thank You