D365 Budgeting Cookbook (Part 1 of 3). Basic budgeting

Since budgeting aim is planning, control and analysis cash flows, in this post I’d like to go through one of the stage of financial planning: creation, allocation and usage of financial resources of the company on the example of cost budget.

In AX budgeting consists of 4 main components:

  • Basic budgeting
  • Budgeting register entries
  • Budget planning
  • Budget control


In this example, we will be creating Cost budget manually (fixed costs) through Basic Budgeting and Budget Register Entries. And then we will compare actual and forecasted (budgeting) results in order to assess the effectiveness of operations.

Basic Budgeting requires Basic Budgeting configuration. This configuration includes the following:

Configure Budgeting Parameters

Define currency exchange rate

Identify Budget models. Budget model it’s type of the company’s budget (budget of expenses, sales budget or budget of payments). Company might have several budget models and they can from a complex tree structure. Each model might have submodels and those submodels might have their own submodels and so on. The number of level is unlimited.

Setup Budget cycles

Setup Budget code for each Budget Type. Identify Default Budget code.

Identify Financial dimensions that will be used for Budgeting. Further we will be transferring budget amounts either to or from them.  This is essentially the combinations financial dimensions who could hold budget amounts.

Identify Main accounts that will be used for Budgeting. Further we will be transferring budget amounts either to or from them.

Setup budget allocation terms. This is an optional setup. It’s used to define the financial dimension values and the percentage that will be used to generate allocations in budget account entries for budget register entries.  In general, budget allocation terms is used to split the budget into small pieces. For instance, budget for the period you could split into smaller periods or distribute general administrative expenses by departments, cost centers and other dimensions in any combination.

Configure Budget workflow (in case if Budget register entries requires approval). Assign Budget workflow to Budget code. This is an optional setup.

Basic budgeting components setup

Now let’s jump into AX and look at the settings.

Go to Budgeting > Setup > Basic budgeting > Budgeting Parameters

Budgeting parameters

Go to Budgeting > Setup > Basic Budgeting > Dimensions for budgeting

Budgeting dimensions

Go to Budgeting > Setup > Basic Budgeting > Budget Models

Budgeting models

Go to Budgeting > Setup > Basic Budgeting > Budget Codes

Budget codes

Budget codes_Budget type

Go to Budgeting > Setup > Budget Planning > Budget cycles

Budget cycles

Go to Budgeting > Setup > Basic Budgeting > Budget allocation terms

Budget allocation terms

Go to Budgeting > Setup > Basic Budgeting > Budget transfer rules

Budget transfer rules

If you see the error message: No budget transfers are allowed outside of these rule lines unless you use workflow to approve the transfer. If no criteria are specified, then the rule applies to all dimension values, select Use rules for budget transfers in the Budget parameters form.

Once we did all the settings we can enter budget data into Budget Register Entries form.

Navigate to Budgeting > Budget register entries.

Budget register entries

Click New button

Specify Transaction date: the date when Budget will be posted

Select Budget Model created beforehand

Select Budget Cycle created beforehand

Budget register entriesHeader

As far as we are creating budget for the Administrative costs let’s create the following budget items:

– costs of operating and maintaining buildings (electricity/gas/water bills),

– grounds and equipment

– depreciation

– general and departmental administrative salaries and expenses

– library costs.

In the Budget account entries section click Add line button

Select Account structure within your legal entity

Select Account in the Dimension values field

Select dimension in the Dimension values field: for which business unit, department, cost center this budget is.

Select dimensions values

Specify Budget amount

Select Amount type

Budget Amount Type

You can enter all budget items manually or you can use one of the allocation ways.

From here we have several options how we can allocate budget amount:

  1. Recurring entry. Amount is divided equally through each period. For instance, rent, leases, insurance, interest lost
  2. Allocate periods. Breaking out the budget amounts by period keys, predefined beforehand. Moreover, it allocates based on the percentages that you’ve set up in period key.
  3. Allocate dimension. Amount allocated by different percentage to different financial dimensions.

Let’s look at each allocation method in details.

Recurring entry.

Highlight budget line that you’d like to allocate and click Enter recurrence.

Specify the Interval and Interval type: Is it Days, Months, Years

Specify the Expiration date: End date of the allocation

Click Create

Recurring entry

Recurring entryResult

Allocate periods.

Before you can use this method of allocation you should complete the pre-requisites.

Go to General ledger > Ledger setup > Period allocation categories

Period allocation categories

Highlight necessary allocation key and click Lines

Period allocation lines

Based on the Allocation percentage we are going to allocate our budget amount

Switch back to budget register entries

Highlight the budget item and click Allocate across periods

Allocate across periods

Select Period allocation key and click Allocate

Allocate across periodsResult

Allocate to dimensions.

Highlight the budget item and click Allocate to dimensions

Allocate to dimensions

Select Budget allocation terms predefined earlier and click Allocate

Allocate to dimensionsResult

Once you’ve filled in the budget, you need to finalize this budget by clicking on the Update budget balances on the top. And now, what we have is we have budgets for a specific main account and for a specific department.  When you use the dimension value combinations on transactions and these dimension value combinations exist in your budget, AX will let you know if you are exceeding your budget.

To continue reading these series of posts, please follow the links

D365 Budgeting Cookbook (Part 2 of 3). Budget control

D365 Budgeting Cookbook (Part 3 of 3). Budget planning


2 thoughts on “D365 Budgeting Cookbook (Part 1 of 3). Basic budgeting

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