QuickBooks Budgeting Tips

Using QuickBooks to create and monitor your annual budget is simpler than it appears. Because QuickBooks budgeting requires month-by-month entry for the annual budget users often shy away from using the budget module. However, with a few simply changes you can create a budget that works for your business, is easy to review and easy to change.

The Secret to a Painless Budget

The secret to a great budget is simplification. Do you really care about each detailed account when you are reviewing your organization's performance? Only if there is a question, and using the budget report can provide one click detail.

1. Review your chart of accounts, whether numeric or alpha. It's easier if you print a profit and loss statement and highlight the results that matter, for example, total income, total cost of goods sold, total sales expense, and total general and administrative. The goal is to budget at a high level to make monitoring performance quicker.
2. For the accounts you have marked as important, set up an account that will be the parent account, for example, payroll liabilities. The individual payroll liabilities FICA, Federal, State, State Unemployment, Worker's Compensation, etc, will become subaccounts of this parent (this becomes clearer when viewing the chart of accounts in the hierarchical view).

 Reviewing Budget Reports in QuickBooks

QuickBooks supplies basic reports for reviewing budget performance. By modifying the reports and saving them with a new name, you can control how often you review and modify your budget.

For example, using the basic QuickBooks budget report Profit & Loss Budget Performance run the report to the screen. Choose Modify Report from the menu bar. Several tabs will appear. On the Display tab, change the report range date to quarterly. To view the difference between actual and budget, on the Display tab choose show actuals and show dollar difference. To reduce the amount of data shown on the report, choose the advanced tab and choose show only rows and columns with budgets.

Entering the Budget in QuickBooks

QuickBooks budget is set up for monthly entries. If your organization generates only annual budget amounts take the annual budgeted amounts and divide the amount by twelve. Enter the monthly amount in the January field and choose "Carry this across."

To enter a budget based on quarters, individually divide each quarter by 3 and enter the correct amount for each month of the quarter.

Using QuickBooks budgeting helps businesses stay on track. You can easily see when you are compared to your budget, and what you need to change. Using the budgeting module may seem like a lot of work, but in the end, it saves time and prevents surprises.

 

Roll in the Dough with Rolling Forecasts

I am working on rolling forecasts, a good way to replace your annual budget process and position your business for future growth. Rolling forecasts are not new. Rolling forecasts have been in use for some time, and large organizations undertake these with some regularity.
As a small or mid-size business, rolling forecasts can give you real power to control your financial future. The concept is simple, and involves setting targets for where you want to be profit wise in, say, five years. Lets say you want your profit level to be at $5 million, or $500K. Either way set the target.
What you are going to do is make a plan. But, instead of setting a one-year plan and going through an exercise of sticking to that plan, you are going to set a plan that involves real time business operations. The plan will be set up by quarters, so you will be setting up the first five quarters, or the next 15 months.
Now, instead of nickel and diming your financial expenses set the main levels of production and inventory expense, sales and marketing expense, and administration.

Have patience and wait under the end of the first quarter. How did you do? Where did you fall short? Is there a product that needs to be marketed more? Or costs too much to be profitable? Are you paying too much?

After the first quarter is complete, decide how you will achieve your sales and profit again for the next 15 months. Redo the second through fifth quarter of your original rolling forecast, and add another. Second now is the first quarter, third is now the second, etc.

After you do this for a few quarters, you'll get the hang of it. And you will be able to see where your business is going, and decide where you want it to go.