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October 4, 2019 Business Technologies

How to Create Budgets with QuickBooks

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By Brainsell Editorial Team

Budgeting is an important part of managing the income and expenses of your company, which will in turn help you reach growth objectives. It allows you to budget for a given year and then compare those numbers to the actual results at the end of that year. Winging it isn’t the best way to budget – you may find that you’ll overspend or underspend if you don’t have a good grasp on budgeting. But having a strategy in place will enable you to plan ahead and turn a profit at the end of the year.

If you don’t have much experience creating budgets you might feel overwhelmed. No need to worry – you don’t have to start with a blank excel sheet. Many accounting solutions have a budgeting and planning tool, which makes this process a lot simpler. As the main accountant at BrainSell, I create budgets for our company (with input from our COO) using QuickBooks. It’s much easier than it sounds! Follow these three steps to start budgeting today:

1. Analyze data and set financial goals.

You can start the budgeting process by analyzing historical data (from 12 months to date is a good chunk of data to start with) to come up with values that reflect your company’s growth projections.

Before you create the budget, you will want to define the goals for the period that you wish to achieve and figure out how you will go about doing so. Let’s say you want to increase gross sales by 10% from last year. Will you have to increase your marketing efforts to do so? Or hire new employees? Maybe there are some expenses that can be reduced or cut? Look at the amounts you’re spending in certain expense categories that you’d like to trim, and discuss with your leadership team what can be de-prioritized.

2. Track month-to-month trends.

You need to look at previous year data to track trends that occur from month to month. This will help determine the percentage increase you want to allocate over a monthly basis, since this is how a QuickBooks budget is organized. For instance, if sales are generally slow in April and May you won’t want to have a large growth percentage goal for that quarter, because the probability of hitting that mark is very low. On the flipside, if sales are generally high in November and December you may want to have a bigger growth percentage goal for that quarter.

3. Creating a Budget

Once you have determined your growth goals, you can increase or decrease the amounts allocated to each Chart of Account category to create your budget for the year. It is very important that your Chart of Accounts is clear and concise. These are the accounts the budget will be made up of since budgets show as a Profit and Loss. The great thing about creating a budget in QuickBooks is having the ability to look at actual numbers against projection data at any time, whether it be monthly, quarterly or year to date. This gives your company the capability to quickly measure your current performance against the expectations you set for yourselves.

This is a tried-and-true method for using your accounting solution to create a budget for your company – but if you’re struggling to start, we’re here to help! Contact us and let’s chat about your budgeting goals.

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