Liens are sometimes referred to as encumbrances. An encumberance is a name for an amount that will be spent in the future. It can be thought of as funds that have already been committed to be spent.
Liens are an indispensable planning tool because they can affect the total funds available in an account fund. This allows for real-time reflection of funds available as GUS will reflect the committed expenses immediately while it may take a period of time for the expense to show up on the ledger.
When Liens are marked as ‘billing complete’, a post is created to ‘zero-out’ the lien.
Example: If there were a piece of machinery that took a month to fabricate and cost $100, a department needing 15 could place a lien for the total amount ($1500). After receiving 8, the company notifies the department that they no longer produce that piece of machinery. The department can post an expense for the 8th one and mark ‘billing complete’, to ‘zero’ the remaining $700, releasing the lien. After this point, the $700 would show up as funds to be spent.
What’s the difference between a Lien and an Expense?¶
Liens are future costs which you expect to incur but for which you have not actually been billed.
Expenses are costs which for which you have already been billed, either by receiving an invoice or by seeing the expense on a campus ledger.
Liens and expenses frequently don’t exactly match. In the case of purchasing, commonly this is because tax or shipping costs may not be included or known exactly. In the case of payroll, it’s often because benefits costs may vary from month to month.
I place an order for a computer. The vendor tells me that the cost will be $1500. Since the vendor hasn’t actually billed me yet and I haven’t received the invoice I now have a lien for $1500.
I place an order for a computer and a monitor. The vendor tells me that the cost will be $1500
Since the vendor hasn’t actually billed me yet and I haven’t received the invoice I now have a lien for $1500.
The computer arrives, but the monitor is delayed.
An invoice of $900 is received for the partial order received.
The expense is now $900 and the lien is reduced by $900. Leaving a balance of $600 on the lien.
The monitor arrives and you receive the invoice for the remaining $600.
There is now an additional expense of $600 and a corresponding lien reduction of $600.
|The transactions are now complete.||0||1500|
How does GUS deal with liens and expenses?¶
GUS does not require that you enter liens. If you wish you can choose to only enter expenses as you receive them. However, if you choose to do this you lose the ability to project future costs as well as the ability to keep track of expenses you’ve already initiated (such as a purchase order) but for which you haven’t yet received actual invoices.
GUS ties liens and expenses together via the “Control Number”. For this reason, control numbers must be unique to the particular financial activity being tracked.
This is usually easily accomplished in Purchasing as PO numbers provide unique tracking numbers. Personnel liens are more difficult as you must have control numbers which are unique to each project and payroll category (such as salary, benefits, fees, etc.)
If you use the GUS Purchasing and Personnel modules, the control numbers will be managed automatically for you. If you choose to use the manual posting option, the user is responsible for the uniqueness of the control numbers.
Many departments wish to enter descriptions such as “Recharge”, “UFIN”, “Benefits”, “Form 5”, etc in the Control Number field. Since these are not unique they can’t be used to tie liens and expenses together. Restricted control numbers are defined by the users in the Posting form (Budget:Post) under the “Restricted Ctrl Numbers” pull-down menu.
When GUS encounters a restricted control number in the Post screen it will allow you to enter Expenses, but will not allow you to enter Liens.
When GUS sees a group of transactions with the same control number it will automatically reduce any liens by the amount of the expenses (total of expense, shipping and use tax).
If the expenses exceed the liens, the lien will only be reduced to zero. For this reason you may see expenses in which the lien reduction is not the same size as the total of the expenses.
If the total expenses are less than the lien, a lien balance will remain. This balance will be released when the order is marked “complete”. If you are using the Purchasing module, this will happen when the “Billing Complete” box is checked on the PO form. If you are manually posting expenses, this will happen when any of the transactions associated with the control number are marked “Complete” in the Edit/Reconcile form.