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How Encumbrances Work with Marketplace POs

Learn more about how encumbrances lift for Marketplace transactions

Encumbrance logic

An encumbrance related to a Marketplace transaction is created for each individual line item on the purchase order (PO). The encumbrance lifts when an invoice is processed* against a purchase order. The encumbrance lifts for each individual line item on the PO. Once the full quantity ordered on a given PO line item has been invoiced, the entire encumbrance for that line lifts (no remaining balances). If the full amount has not been invoiced on the PO line, the encumbrance lifts based on the invoiced dollar amount of the line.

*Exports to IFIS in completed/approved status

Legend for the tables below:

+ Increase
- Decrease

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Marketplace Encumbrance Logic Matrix

Action PO Balance Financial (Revenue/Expense) Liens (Encumbrance) Process Owner
Marketplace PO Completed in IFIS + + Procurement & Contracts
PO Revision Increase + + Procurement & Contracts
PO Revision Decrease - - Procurement & Contracts
MP Invoice Processed - - - Disbursements
MP Invoice Cancelled + Disbursements
Credit Memo Processed + Disbursements

Previous Marketplace Encumbrance Logic (2008-2013)

Previous encumbrance logic was well suited for low dollar products, where line-level encumbrances created by a Marketplace PO were removed as invoices associated to the lines on the PO were processed. Encumbrances were lifted based on the invoiced amount of the line, unless the quantity of the line was fully invoiced, in which case the entire encumbrance lifted.

But this caused problems for POs that had multiple or an unknown number of invoices received against it. For example, when a PO was set up with a single quantity for a line, the entire encumbrance lifted as the first invoice was processed, regardless of whether there was additional money allocated by the department for the PO.

New Marketplace Encumbrance Logic (as of 2013)

Due to the FinancialLink Order Transition, the scope of Marketplace has expanded to accommodate more complex types of purchases. Partnering modifications have now been made to the kind of encumbrances associated with Marketplace POs, invoices, & credit memos to allow for two types of encumbrances, which will be applied based on the Account Code defined for each line in an order:

  • Option 1: For lines identified as goods by the Account Code: Encumbrance will lift based on the invoiced amount of the line, unless the quantity of the line is fully invoiced in which case the entire encumbrance will lift
  • Option 2: For lines identified as services or inventorial equipment by the Account Code: Encumbrances will lift based solely on the invoiced amount of the line. As additional invoices are processed, the encumbrance will continue to be reduced based on the dollar amount of the invoice processed and any remaining, non-invoiced encumbrance will be the department’s responsibility to lift

Key Examples

Example 1:

10 Pens ordered at $1.00 each (10 pens x $1.00 = $10 extended price)

  • Invoice lists the 10 pens at $0.95 each (10 pens x $0.95 = $9.50 extended price)  
    • Full $10.00 encumbrance is automatically lifted when invoice is processed ***Rather than let the extra $0.50 from the PO’s encumbrance sit on the ledger, it's lifted automatically

Example 2:

Quarterly pipette calibration services are estimated at $100 per quarter for 1 year (4 quarters x $100= $400 extended price)

  • First invoice: $90.00 (Qty 1 x $90.00)  
    • $90.00 is lifted from the original $400 encumbrance when the invoice is processed (Remaining quantity = 3; remaining encumbrance = $310.00)
  • Second Invoice: $130.00 (Qty 1 x $130.00)
    • $130.00 is lifted from the remaining $310 encumbrance when the invoice is processed (Remaining quantity = 2; remaining encumbrance = $180.00) 
  • Third Invoice: $50.00 (Qty 1 x $50.00)
    • $50.00 is lifted from the remaining $180 encumbrance when the invoice is processed (Remaining quantity = 1; remaining encumbrance = $130.00)
  • Fourth Invoice: $100.00 (Qty 1 x $100.00)
    • $100.00 is lifted from the remaining $130 encumbrance when the invoice is processed
    • ***It will be the department’s responsibility to lift the remaining $30.00 encumbrance once all services have been completed and no additional invoices are expected. 

Example 3:  

 Subaward PO set up for $350,000 for a one year budget period (1 year x $350,000= $350,000 extended price)

  • First Invoice: $10,000 (Qty 1 x $10,000)
    • $10,000.00 will be lifted from the original $350,000.00 encumbrance when the invoice is processed (Remaining quantity: 0; remaining encumbrance = $340,000)
  • Second Invoice: $25,000 (Qty 1 x $25,000)
    • $25,000 will be lifted from the remaining $340,000 encumbrance is processed.
    • ****As the quantity of the PO was 1, that quantity will be used up with the first invoice and all subsequent invoices will be considered “Out of Tolerance” and will trigger email notifications accordingly.

How Encumbrances Used to Work with FinancialLink POs

Action PO Balance Financial (Revenue/Expense) Liens (Encumbrance) Process Owner
IFIS Dept Order Invoice Processed - - - Disbursements
IFIS HVPO Invoice Paid - - - Disbursements
IFIS Blanket Order Invoice Paid - - - Disbursements
IFIS Installment Contract Invoice Processed - Disbursements

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