It’s a new year! Did you do your 2013 budget yet? If you are like most small business owners the answer is going to be “no”. While determining your budget can be a bit time consuming, it is a valuable exercise and the output is a valuable tool. It is also easy to enter into QuickBooks.
Budgeting is typically done using one of two methods:
- Actual dollars
- Percentage of sales
Actually, if you are selling a product, a combination of the two methods is best. Actual dollars are just that: how much am I going to spend in a particular category? This is ideal for fixed cost items such as rent, utilities, telephone, etc.
Percentage of sales is best for cost of goods sold accounts. This does, of course, assume you have a firm grasp on your cost of the products you sell. These accounts will include materials cost, labor, subcontractors, etc.
Once you have the numbers it is simple to enter them into QuickBooks:
- From the Company menu select Planning & Budgeting, then select Set Up Budgets
- Click Create New Budget and choose the fiscal year
- You will also have an option to do either Profit & Loss accounts or Balance Sheet Accounts (both are recommended)
- Choose whether you will enter a budget from scratch (which you will do if you went through the above exercise) or use last year’s actual data.
- Enter your data for each month and click Finish
You now have budget information entered into QuickBooks that you can use and compare to your actual spending. The reports are already built into QuickBooks.
Keep in mind that budgets are inherently different than forecasts, which we will return to in my next post.
