# Budgets #core-concepts #budgets #financial-management Budgets in PAI serve as the active financial management tool for your projects after an estimate has been approved. The budget provides real-time tracking of expenses, variance against the approved estimate, and a direct connection to production logistics. Budgets are working financial documents that evolve throughout the project lifecycle. ## Budgets vs. Estimates While estimates are created during the bidding phase and represent what you project a project will cost both externally and internally, budgets are the operational financial documents used to track actual expenses during project execution: |Estimates|Budgets| |---|---| |Used during bidding phase|Used during project execution| |Multiple versions can exist|Only one active budget per project| |Focus on external costs|Focus on internal cost tracking| |Static once approved|Evolve throughout production| |Organized by line items|Organized by individual expense lines| |Versioned for external approval|Continuously updated with actual costs| ## Budget Creation A budget is created through the estimate-to-budget conversion process: 1. An estimate version achieves "Approved" status 2. The "Start Project" option appears for users with appropriate permissions 3. PAI will confirm the conversion action before proceeding 4. The system converts the approved estimate into a working budget 5. All estimate line items transform into budget expense lines 6. Production documents are created based on the estimate's logistical data > [!info] A budget can only be created from an estimate. This maintains financial accountability by establishing a clear baseline for tracking project expenses > [!important] > The conversion from estimate to budget is a significant transition in the project lifecycle. Once converted, the approved estimate becomes the baseline for variance tracking, while the budget becomes the active financial document. ![[start-project-action.gif]] ### Budget Creation Details When an estimate is converted to a budget: - **Line Item Transformation**: Estimate line items transform into individual expense lines based on QTY and UNIT QTY values - **Expense Creation**: Each combination of quantity, unit quantity, and day creates separate expense lines - **Day Assignment**: Each expense line is assigned to the corresponding production day - **Call Sheet Integration**: Expense lines are automatically assigned to corresponding call sheets - **Metadata Transfer**: All metadata from line items (category, department, account number) transfers to the generated expense lines - **Initial Status**: Each expense line receives an initial tracking status of "Draft" #### Example: Line Item to Expense Lines Conversion **In the Estimate:** - Line Item: Camera Operator - QTY: 2 (two operators) - UNIT QTY: 3 (three days each) - Rate: $800/day - Total: $4,800 **After Conversion to Budget:** - Six separate expense lines are created: 1. Camera Operator - Day 1 - Operator 1 - $800 2. Camera Operator - Day 2 - Operator 1 - $800 3. Camera Operator - Day 3 - Operator 1 - $800 4. Camera Operator - Day 1 - Operator 2 - $800 5. Camera Operator - Day 2 - Operator 2 - $800 6. Camera Operator - Day 3 - Operator 2 - $800 This detailed breakdown allows for precise tracking of each expense against specific production days. ![[estimate-to-budget.png]] ## Budget Structure ### Budget Expense Lines The fundamental unit of a budget is the expense line, which includes: - **Name**: Description of the expense - **Category**: Broad classification (e.g., Labor, Equipment) - **Department**: Specific department (e.g., Camera, Sound) - **Account Number**: For accounting system integration - **Day Assignment**: Which production day the expense belongs to - **Min Hours**: For Day Unit only, defines the work day length - **Vendor**: Who will be paid for this expense - **Rate**: The cost of this expense - **Status**: Current stage in the expense lifecycle - **Payment Method**: How this expense will be paid - **Notes**: Additional expense details > [!tip] Dont see a field or column? Check if its visible in the budget via [[PAI Tables]] ### Budget Organization The budget interface organizes expense lines for easy management via [[PAI Tables]] : - **Default View**: Displays all expense lines grouped by category and department - **Filtering Options**: Filter by day, vendor, status, or custom criteria - **Sorting**: Sort by any column to organize expenses as needed - **Grouping**: Group expenses by day, vendor, or category for different perspectives Unlike estimates, budgets in PAI: - **No Versioning**: Budgets do not use the versioning system that estimates do - **Single Instance**: Only one active budget exists per project at any time - **Change Tracking**: Changes are tracked at the individual expense line level - **Change History**: Each budget expense line maintains a change history - **Variance Tracking**: Total budget changes tracked against the original approved estimate & approved overages ## Expense Status Tracking Throughout production, expense lines progress through various states that track their lifecycle from initial creation to final payment: ### Status Workflow - **Draft**: Initial state when created from estimate conversion - Expenses in Draft status are not yet confirmed - No commitment has been made to vendors - Can be freely modified or removed - **Confirmed**: Expense verified but not yet submitted for payment - Indicates a commitment has been made - Resource or service has been booked - Financial commitment to the expense has been established - **Posted**: Expense posted to vendor dashboard - Makes the expense available to the vendor for invoicing - Automatically sends email notification to vendor > [!attention] You can only "Post" expenses to vendors connected to your organization, and billing via the [[Vendor Portal]] - once "Posted", the expense line is frozen from editing, status updates are handled via PAI's [[Accounts Payable]] features - **Requested**: Expense requires approval - Vendor has submitted an invoice against this expense - Amount exceeds the original posted amount - New expense added by vendor during invoicing - Requires manual review and approval - **Approved**: Expense approved from invoice - Invoice verified and accepted - Ready for payment processing - Applied automatically if vendor submits matching amount - **Rejected**: Expense disputed and sent back to vendor - Applied when disputing vendor invoice - Requires vendor to modify and resubmit - Automatically notifies vendor of rejection - **Payment Scheduled**: Expense scheduled for payment - Payment date has been set - Vendor automatically notified of scheduled payment - Payment date visible to vendor in portal - **Paid**: Expense has been paid - Final state in the expense lifecycle - Automatically updated after payment date passes - Vendor receives notification of completed payment > [!tip] Regularly update expense statuses to maintain accurate financial tracking. The system uses these statuses to calculate committed vs. pending costs in financial reports. ## Budget Modifications - Budgets do not use the versioning system that estimates do - Only one active budget exists per project at any time - Changes tracked at the expense level - Each budget expense line has a change history - Total budget changes tracked against the original approved estimate & approved overages ### Common Budget Modifications The budget allows for various modifications as project needs evolve: - **Rate Adjustments**: Update expense rates based on actual costs or negotiated changes - **Vendor Assignments**: Assign specific vendors to expense lines - **Day Reassignments**: Move expenses between production days as schedules change - **New Expenses**: Add expenses that weren't in the original estimate - **Expense Removal**: Remove expenses that are no longer needed - **Status Updates**: Track expense progression from draft to paid > [!warning] Any changes to expense amounts will generate variance against the approved estimate. This variance is tracked and displayed in the Live Margins & Finance panel to maintain financial accountability. ## Minimum Hours and Overtime Calculation #min-hours #overtime Each expense line in PAI with a "Day" Unit can have a "Min Hours" value that plays a crucial role in how the system handles overtime calculations when vendors submit billing through the vendor portal: - The "Min Hours" field defines the standard work day length for an expense line - This value is used to calculate the base hourly rate and any applicable overtime rates - PAI automatically calculates a "floating" straight hourly rate based on the total day rate and min hours specified ### Overtime Calculation Options PAI allows you to set different overtime calculation methods using the "O/T" field / column: - **Tiered (Default)**: California labor law standards - First 8 hours: Straight time (1×) - Hours 9-12: Time and a half (1.5×) - Hours beyond 12: Double time (2×) - **After 8**: Simplified overtime calculation - First 8 hours: Straight time (1×) - All hours beyond 8: Time and a half (1.5×) - No double time provision - **None**: Linear hourly calculation - All hours (including beyond min hours): Straight time only (1×) - Simply divides the day rate by min hours to get an hourly rate - Applies this same hourly rate to all hours worked ### Floating Rate Calculation Example If you set an expense at $700/day with 12 min hours: - PAI calculates the floating straight time rate to ensure the math works out correctly - System works backward from the total rate to determine the straight time hourly rate - In this example, the straight time rate would be calculated at approximately $50/hour: - First 8 hours: 8 × $50 = $400 (straight time) - Next 4 hours: 4 × $50 × 1.5 = $300 (overtime) - Total: $700 > [!note] > Min Hours only applies to expenses with "Day" as the unit type. Changes to Min Hours will affect how overtime is calculated during vendor billing. ## Budget Expense Line Variables ### Payment Method - Select a payment method for each expense line - Used for internal tracking on manual expenses - Helps categorize and filter expenses by payment method ### Reimbursable Expenses - Mark expenses as "Reimbursable" using the checkbox on any expense line - Reimbursable expenses appear differently in the vendor portal: - Regular expenses show their full billable value (e.g., "$500" for camera rental) - Reimbursable expenses display as $0 with a maximum allowance cap (e.g., "$0/$25" for a meal expense) - Vendors must upload receipts for all reimbursable expenses - The system prevents vendors from invoicing without an attached receipt ## Budget and Production Integration The budget maintains a bidirectional relationship with production documents: - **Budget-to-Production**: Assigning a vendor to an expense line automatically adds them to the corresponding call sheet - **Production-to-Budget**: Adding a crew member to a call sheet creates or updates the corresponding expense line - **Budget to Call Sheet**: Assigning a vendor to an expense line automatically adds them to the corresponding call sheet - **Call Sheet to Budget**: Adding a crew member to a call sheet creates or updates the corresponding expense line - **Rate Synchronization**: Rate changes in either the budget or call sheet automatically update both places This integration ensures that your financial planning and production logistics remain synchronized throughout the project lifecycle. ## Budget and Vendor Integration The budget has deep integration with PAI's vendor management system: - **Vendor Assignment**: Vendors are assigned to budget expense lines - **Billing Process**: Expenses can be posted to vendors for invoicing through the vendor portal - **Payment Tracking**: The system tracks when expenses are invoiced, approved, and paid - **Bidirectional Updates**: Changes in vendor assignments update corresponding information in call sheets, ie vendors name, email, and phone number ## Financial Reporting The budget provides comprehensive financial reporting capabilities: ### Live Margins Panel When viewing the budget, the Live Margins panel: - Shows approved internal costs (from estimate) - Shows current working costs (from budget) - Displays variance between approved and working costs - Helps track budget adherence rather than profit margins ### Finance Panel The Finance panel provides detailed financial tracking: - **Estimate Cost Overview**: Shows the total approved external and internal costs - **Internal Cost Tracking**: Breaks down current project spending - **Pending Costs**: Expenses that are earmarked in the budget but not yet spent - **Committed Costs**: Expenses that have already been spent or paid - **Project Summary**: - **Internal Cost Variance**: Shows if the budget is over or under the approved internal total - **Realized Margin**: Displays the actual profit being generated (difference between total approved external costs and actual internal costs) - Percentage representation of the realized margin ## Related Topics - [[Projects & Estimates|Projects and Estimates]] - [[Days In PAI|Days in PAI]] - [[Vendor CRM & Crew Finder]] - [[Accounts Payable]] - [[Production Days|Production Days]] © 2025 PAI Tech, Inc. 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