What’s in the Budget? (The “Why” and “How” of a QuickBooks Budget)

[Denise Merritt]

Did you know you can easily create a budget for your business in QuickBooks? I promise you can! But before I outline the basics of creating and reviewing your budget in QuickBooks, I need to address the “Why” your business (and personal) finances need a budget.

First, the obvious reason would be to help you forecast how much revenue and expense you believe your business will incur in an upcoming period; typically the next calendar or fiscal year. The budget then allows you to measure how you expected you would do –vs. - how you actually did (Budget vs. Actual). Additionally, you can make smart, informed business decisions based on whether or not you have money in the budget to purchase that new printer or not.

Second, as I write this blog article, our economy is in dire straits. Unemployment is currently 10.2%. Factor in the government's own U-6 unemployment statistics (people unemployed plus those who have simply given up trying to find work, people whom are underemployed and people who want full-time work but are currently working part-time) and the true unemployment rate is a staggering 17.5%. If you want your business to succeed, and not become another statistic, then you MUST know where your money is going and you MUST have a viable plan.

One part of this plan needs to ensure you have a sound budget in place and that you are consistently checking this budget to measure how your plan is performing. I cannot think of a better time of year for you to create a budget for the upcoming year.

The above represents the “Why”. Next, let’s look at the “How".

To begin the budgeting process, I suggest printing out a Profit & Loss for the current year-to-date and then total columns by month so your report reflects each month and then a total. This, of course will show your actual revenue, cost of goods and expenses for the year. With this data in hand, begin thinking about the upcoming year. Here are some basic questions to ask yourself (and you need to be completely honest with yourself):

* What would or should you do differently to increase revenues, while decreasing expenses?

* When your annual date occurs for your leased space, does your rent increase?

* How about CAM charges?

* Insurance costs – Is your Workmen’s Comp insurance likely to increase or decrease?

* Does your business accept credit cards? Is it time to look at the merchant service rates you are paying to accept credit cards? (Shameless plug #1 – QuickTrainer can help you get started with an Intuit Merchant Service account which offers highly competitive rates, not to mention the tight integration you enjoy with QuickBooks or QuickBooks Point of Sale.)

* Paying too much for your monthly telephone bill? Perhaps it’s time to look at the various options to having an AT&T landline. At QuickTrainer, we use Voice Over Internet Protocol (VOIP) technology. Our monthly telephone bill is only $64.97 and includes a fax number and voice mail technology which delvers both faxes and voice mails as emails. It’s great!

* Can your business decrease the monies spent on accounting? It can if the QuickBooks data you provide your CPA is clean and accurate (Shameless plug #2 – QuickTrainer can help you with your data cleanup and ensure proper management going forward.)

* Will you be hiring additional employees? Don’t forget to factor in the other costs of employees (e.g., company Social Security, Medicare, FUTA and SUTA, Company Medical/Dental costs, 401-K matches).

* Are you currently outsourcing your payroll? If so, GOOD! But how much are you paying to your outsourced vendor? (Shameless plug #3 – Perhaps it’s time to look at Intuit’s Assisted Payroll. QuickTrainer can help you get started with this service and save you money.)

* If your business model currently has you traveling a good deal, you might want to seriously consider the many technology choices you have today which can keep you grounded and save you some serious bucks. All the while, providing the same excellent client service your clients have come to expect.

No doubt, I could go on and on with areas you should consider. But I believe you get the idea. Regardless, question with boldness.

With the above in hand, you are ready to create your budget within QuickBooks. For a short video tutorial on the steps involved, click this link:

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Happy budgeting!

---Jim Merritt