This article is in continuation to the previous article i wrote on configuring the basic budgeting, which enables you to track the budget versus actual amounts within your account structures.
Budget Controls in Microsoft Dynamics 365 Finance and Operations (D365FO) offer a powerful framework to monitor and manage cashflows, helping organizations stay within their financial boundaries. By implementing budget control, companies can proactively track expenditures and enforce checks to prevent budget overruns across departments, cost centers, or other financial dimensions.
This article builds upon our previous guide on configuring basic budgeting in D365FO, which focused on setting up budget structures and enabling budget vs. actual tracking. If you haven’t read it yet, it’s recommended to start there to understand the foundational setup.
Real-World Use Case: Enforcing Budget Limits in Cost Centers
Let’s consider a practical example. An organization wants to:
- Track budget vs. actual spending
- Prevent overspending by setting up budget thresholds for operating units like cost centers or departments
- Enforce financial discipline across the organization by triggering budget checks during transactions
In Dynamics 365 Finance and Operations, this requirement is effectively addressed using the Budget Control feature. It allows businesses to set up budget thresholds, define rules for validation, and configure alerts or approvals when a transaction exceeds the allocated budget.
Such a requirement is addressed in Dynamics 365 through the implementation of budget control functionalities.
To activate the budget control configuration, there are 12 components of the configuration as depicted below.
1Basic Budgeting
Basic budgeting configuration is a pre-requisite for the budget control activation. If you want to activate the budget controls, basic budgeting needs to be configured first. As a rule of thumb, Budget needs to be “Tracked” first before it is controlled. I’ve covered complete basic budgeting implementation in my previous article here.
2Budget Cycles
In Dynamics 365 Finance and Operations, budget cycle time spans are closely tied to fiscal calendars. These time spans define the duration of each budget cycle and determine how budgeting periods are structured throughout the financial year.
Organizations have two flexible options when configuring budget cycles:
- Align budget cycles with fiscal years – Ideal for annual planning, where each budget cycle spans the full fiscal year.
- Define custom time spans using a set number of periods – Useful for organizations that operate on quarterly, bi-annual, or other non-standard budgeting intervals.
This flexibility ensures that budget cycles in D365FO can match your organization’s planning cadence, whether it’s a traditional yearly cycle or a more agile, period-based approach.
Navigate to Budgeting -> Setup -> Budget Control -> Budget cycles
3Define Parameters
Here we define the budget control parameters, for the budget control functionality to be activated.
Navigate to Budgeting -> Setup -> Budget Control -> Budget control configuration
Account Structure
The first element to configure on the budget control parameters is the account structure. The account structure specified here will be used for the budget control feature, that means, whatever main accounts are mapped to this account structure selected on this form, will be considered as a part of budget control. Any account outside this structure can not be used for budget control purpose.
Financial Dimensions
The next stop is to configure the budget control dimensions, here we’re given all the dimensions that are used for budgeting, select the dimension and move it to the Budget control dimensions list.
Budget Control Interval
The budget control interval works with the budget cycle to determine how amounts are aggregated for budget checking. For example if you select Fiscal year, all the funds for the fiscal year are aggregated for budget checking. If you select Fiscal year to date or Budget to date, the ending date is determined from the fiscal period and the accounting date of the source document or accounting journal that is being checked.
Budget Cycle Time Span
Select the budget cycle time span as defined in the previous step.
Budget Manager
Budget Manager is a user who can approve budget workflows. Another budget manager can be defined by using a budget control rule.
Budget Threshold
In the Budget threshold field, enter the percentage of the budget that can be spent. The threshold can be used to provide warning messages or to define budget permissions to prevent specific user groups from exceeding the budget threshold. This threshold can exceed 100 percent.
Display Message
Select the Display a message when exceeding budget threshold check box to display messages when the budget threshold is exceeded.
4Define Over-Budget permission for user groups
You can let specific user groups exceed the available budget or restrict user groups from exceeding the available budget or budget thresholds. The Prevent processing at over budget threshold setting is applied to all users who are not in a user group. The settings in this form can be overridden by a budget control rule or budget group.
As shown in the above screenshot, For different user groups, you can prevent or allow over budget processing. By default if a user is not in a user group, the default setting of “prevent over budget processing” is applied.
5Budget Funds Available
This is where we define the formula for calculating the available budget funds. Simply mark the elements that you would like to include in the calculation of available funds.
6Documents and Journals
Here, we select the documents that are subject to budget control. For example, if you don’t select Purchase Orders, the budget control configuration will skip checking the available funds for Purchase Orders.
7Assign Budget Models
This option ensures that the budget check is performed for the budget model, during the budget cycle time span. If your cycle time spans are defined on yearly basis, then each fiscal year needs to be mapped here with the relevant budget model. Only one budget model can be associated here on this form.
8Define Budget Control Rules
D365FO validates the available budgets for a particular account account combination from this form. Define the ranges of all the main accounts and dimensions that you would like to control the budget for.
D365FO checks the ranges define here, and ensure that these accounts and dimensions are controlled while a user tries to post a transaction exceeding the assigned budget balance.
9Select Main Accounts
Here on this screen, you add all the main accounts that you would like to use for budget control, Only if main accounts is not selected as a budget control dimension in the budget control parameters.
As shown below, we have already selected the Main Account as a budget control dimension in the Step 3, so this step is not required.
10 Define Budget Groups
Budget groups are used to form a collection of financial dimension values whose budgets will be pooled for a secondary budget check.
The financial dimension combinations that are found in the budget control rule are always checked for budget amounts. If a financial dimension combination is also found in a budget group, a second budget check is performed at the budget group level.
11 Define message levels
You can specify that budget control warning messages will not be displayed for selected user groups. Users in the selected user groups will continue to receive error messages based on their over budget permissions.
12 Activate Budget Control
Budget control configuration only takes effect when you turn on the budget control and activate the configuration. Click on the Turn On Button and Activate simultaneously.
To Conclude..
According to the setup defined here, If user tries to create a journal and the selected account combination exceeds the assigned budget, the system will through the error message and prevent the transactions from posting.
In the upcoming article related to budgeting, i’ll cover the end to end process for implementing budget planning with all the details included.
Stay Tuned.
