Updated: Sep 6, 2022
Can you believe we’re in the final quarter of 2020? Believe it or not, now is a good time to start doing some budgeting for 2021. A budget increases your awareness of all your projected income and expenses, which may help prevent running short on funds.
Here are some tips to help make your budgeting process more effective and realistic.
Use what you already know. Unless you’re starting a brand-new business, you already have the best resource possible: a record of your past income and expenses. Use this as the basis for your projections.
Be aware of your sales cycle. Even if you’re not a seasonal business, you’ve probably learned that some months or quarters are better than others. Budget conservatively for the slower months.
Distinguish between essential and non-essential expenses. Enter your budget items for the bills and other expenses that must be covered before you add optional categories.
You can use data from a previous year to create a new budget in QuickBooks Online.
Keep it simple. Don’t budget down to the last paper clip. You risk budget burnout, and your reports will be unwieldy.
Build in some backup funding. Create an emergency fund for your business, as you would in your personal life.
Make your employees part of the process. By being transparent about budget expenses with your employees, you can get input from staff in areas where they have knowledge.
Overestimate your expenses, a little. This can help prevent “borrowing” from one budget category to make up for a shortfall in another.
Consider using excess funds to pay down debt. Debt costs you money. The sooner you pay off your debt, the sooner you can use those funds for some non-essential items.
Review your vendors. As you’re creating your budget think carefully about each supplier of products and services. Can you find less costly alternatives?
Revisit your budget frequently. Evaluate your progress at least once a month. In fact, you could even start by budgeting for only a couple of months at a time. You’ll learn a lot about your spending and sales patterns that you can use for future periods.
How QuickBooks Online Can Help
QuickBooks Online offers built-in tools to help you create a budget. Click the gear icon in the upper right corner and select Budgeting under Tools. Click Add budget. At the top of the screen, give your budget a Name and select the Fiscal Year it should cover from the drop-down list by that field. Choose an Interval (monthly, quarterly, or yearly) and indicate whether you want to Pre-fill data from an existing year.
QuickBooks Online supplies a budget template that already contains commonly used small business items.
The final field is labeled Subdivide by, which is optional. You can set up budgets that only include selected Customers or Classes, for example. Select the desired divider in that field, then choose who or what you want included in the next. Click Next or Create Budget in the lower right corner (depending on whether you used pre-filled data) to open your budget template. If you subdivided the budget, you’ll see a field marked View budget for. Click the down arrow and select from the options listed there.
To create your budget, you simply enter numbers in the small boxes supplied. Columns are divided by months or quarters, depending on what you specified, and rows are labeled with budget items (Advertising, Gross Receipts, Legal & Professional Fees, etc.). You simply enter numbers in the boxes that apply. When you click in a box, a small arrow appears pointing right. Click on this, and your number will automatically appear in the rest of that row’s boxes. When you’re done, click Save in the lower right. You can edit your budget at any time.
QuickBooks Online provides two related reports. Budget Overview displays all the data in your budget(s). Budget vs. Actuals shows you how you’re adhering to your budget.
We know creating a budget can be challenging, but it’s so important – especially right now. We’d be happy to help you understand how QuickBooks’ budgeting tools—and its other accounting features—can help you get a better understanding of your finances.