Module 42 · Core · 8 min read

The budget: by item, by nature, in versions

You will be able to: Explain how a budget is stored and approved; Distinguish the original baseline budget from the current budget; Check how much of an item's budget is still available.

  • Read not done yet
  • Self-check: not taken not done yet
  • Lesson complete not done yet

The budget is what you plan to spend, set per item of work and per cost nature, in versions. Estimate, contract and budget are different things: the estimate is your price build-up, the contract BOQ is what the client agreed, and the budget is the cost you commit to control against. At the award the first budget equals the estimate cost, but they can diverge: the budget may be tighter than the estimate, for instance after a buying gain.

Versions and approval

  • A budget version moves from draft to submitted to approved. Only a draft can be edited; to change an approved budget you start a revision, which copies the current figures.
  • Approving makes the version the current budget (one current budget per project) and supersedes the previous current one.
  • The first approved baseline stays as the locked original forever. Later versions are revisions.
  • Amounts cannot be negative, and each node takes one amount per nature and version.
The Budget tab of a project showing the budget by item and cost nature and the version of the budget.

Budget tab: amounts by item and nature, in versions.

Budget tab: amounts by item and nature, in versions.

On the node page the Budget tab lets you type the amounts for an item by nature; saving puts them in the latest draft version, creating one if none exists.

How much is still available

The Finance tab (budget control) compares for each item and nature the budget, the commitments still open, and the actual cost posted. The money available to an item or nature is budget less actual less open commitments. This is the figure that decides whether a transfer of budget from that item is possible.

The Finance tab of a project comparing budget, open commitments, actual cost and the amount still available for each item and nature.

Finance tab: what is still available.

Finance tab: what is still available.
Moving budget between itemsItem W2 has a material budget of AED 80,000, actual cost AED 30,000 and open commitments AED 25,000. Available is 80,000 - 30,000 - 25,000 = AED 25,000. A transfer of AED 20,000 to item W3 is allowed. A transfer of AED 30,000 is refused with the message that the source has only 25,000 left, unless the requester gives an override reason. The transfer needs two approvers and creates a new budget version; the approved baseline never changes.
Watch outA budget transfer moves control, not money: it posts nothing to the ledger. If an item is simply overspent, a transfer from another item hides the overrun inside the project total. Record the reason, and watch the forecast margin, not only the item.
TipSet budgets by nature, not just by item. A budget of 100,000 on an item with no nature split cannot tell you whether the overrun is in materials or subcontract.

Walk it through

  1. For one item write a budget by nature (six natures) that adds to the item's cost.
  2. Compute the available budget for an item after you add assumed actual and committed amounts.
  3. In the demo, open a project's Budget tab, create a draft version, and look at how the current approved version differs.
Open the live demo

Public demo company, sign in as admin / demoAdmin123. Data refreshes nightly.

Key takeaways
  • A budget is by item, by nature and in versions.
  • Only a draft can be edited; approving makes a version current; the original baseline is kept.
  • Available = budget - actual - open commitments.

Check yourself

3 questions on this lesson. Not timed, not the exam, and you can try again. Score 60% or more, and read the lesson, to complete it.

1. A budget version can be edited only when it is:

2. What does the first approved baseline budget do after later revisions are approved?

3. Item W2: budget AED 80,000, actual 30,000, open commitments 25,000. How much is available to transfer?

Previous: From tender to a locked contract baselineNext: Revisions, transfers, contingency and baselines

Practice questions for this module · Printable study sheet