Having just done this myself I wanted to put this information out from my monthly news letter so everyone can get a look at it. QuickBooks is a very useful tool with very useful tools.
If you took a break from budgeting this summer and are now ready to get back on track, QuickBooks can help. The software’s budgeting tools are easy to use and very powerful when improving your financial profile.
Using a budget, you can determine how your real income and expenses compare to what you anticipated. It can also be a jumping-off point for discussions about long-term planning.
A Good Benchmark
Budgets. Many people make them, but few stay on top of them. QuickBooks simplifies this process, making it easy to track your progress.
Note: Before you take on this task, consult your accounting professional. This greatly increases the odds of creating a successful financial blueprint.
To get started, click on the Company menu. Select Planning & Budgeting, and then Set Up Budgets. If you’ve already set up a budget, that one will appear. You’ll be able to edit it or create a new one. If you haven’t created a budget, the window shown in Figure 1 opens.
Figure 1: You’ll start working on your budget by selecting its year and content.
Select Profit and Loss to include all of the previous year’s activity and click Next.
On the next screen, you’ll also be able to include the criteria Customer:Job or Class so you can budget for individual customers/jobs or classes instead of by account only. Leave this box unchecked for now. Click Next.
Determining the Content
Next, you’ll indicate whether you want to start from scratch with your own figures or let QuickBooks pre-populate your budget with last year’s numbers. Select Create budget from scratch. Click Finish. A window similar to the one shown in Figure 2 opens.
Figure 2: Budgets in QuickBooks are account-based, so yours will be set up that way.
As an example – click on Rent Expense and enter 3,500 in the January column. Hit Tab. You’ll notice that the Annual Total column changes to reflect that entry. If you expect that number to fluctuate over the year, continue to enter those figures in the month columns. If it will remain the same, click Copy Across in the lower left corner. Every column (except for Annual Total) now displays 3,500.
When you’re satisfied with your budget, click Save. You can easily access and edit it anytime from the Company menu.
More Budgeting Tools
QuickBooks’s budget flexibility doesn’t end there. Let’s say that your major office supply vendor has just lowered its bulk prices by 5%, halfway through the year. It’s easy to make this change to your existing budget. Click the Office Supplies row, and then click on Adjust Row Amounts at the bottom of the screen. The window shown in Figure 3 opens.
Figure 3: Need to make a global dollar amount or percentage change to a row? QuickBooks makes this easy.
At the top of the window, you can choose to have the change begin at the first month of your budget or at the currently selected month. Check one of the two buttons below that to indicate whether you want an increase or decrease, and then enter the numerical value in the box.
Tip: Want to start over? Click on the Clear button in the lower right corner. This deletes all of the data in the current page of the budget.
To switch back and forth among budgets, click the arrow under Budget in the upper left corner of the window. A list of your budgets drops down. To build a new one, click on the Create New Budget button in the upper right corner.
Seeing the Fruits of Your Labor
Keep in mind that you can only create one budget per fiscal year for each combination of accounts, customers and jobs, and classes, as shown in Figure 4. This still gives you a lot of budgeting power. You can create budgets for individual customers, for example, and use some of the same accounts found in your overall company budget.
Figure 4: You can create one budget per fiscal year for each unique combination of accounts, customers and jobs, and classes.
Of course, the real power of QuickBooks budgets lies in its budget reports. Using these, you can get an instant, insightful look at how your income and expenses are performing. Go to Reports | Budgets and Forecasts to find them. They include Budget Overview, Budget vs. Actual, and Profit & Loss Budget Performance.
These reports tell you precisely what you may be doing wrong – and right.
If you’re doing more of the former than the latter, share a copy of your budgets and corresponding reports with me. I’ll evaluate your history and offer advice for strengthening your financial health where possible.
If you have any other QB questions please give me a call.
© 2010 – 2011, Bruce Mc. All rights reserved.
