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10 steps to a better budget for your business using QuickBooks Desktop

QuickBooks Desktop offers many tools that can help you easily create an accurate budget for your business. 


Budgets require discipline to maintain through the best of times, let alone through times when expenses, staffing, and demand fluctuate like they have over the past couple years. But in any season of business, determining realistic target numbers for your budget while building in some flexibility is vital to your business's health.


The good news is that we have a few ideas to share that might help you create a more effective budget using QuickBooks Desktop.


TIP 1: Start your budgeting process by separating essential and non-essential expenses.


First, start by calculating the essential expenses you plan to have next year (such as rent, electricity, software supplies, etc.). Do this before you start tallying up non-essential expenses.


TIP 2: Use your historical data to make more accurate budgeting estimates. 


If your business has been operating for a few years, you can use past financial information to help shape a new budget! Take a look at previous expenses, as well as your most recent bills for those expenses, to predict your costs for the new year as accurately as possible.


Unless you're just starting a business, you can build a budget based on historical data in QuickBooks.


TIP 3: Consider how your sales cycle could affect your budget.


Even if you don't identify as a seasonal business, like a restaurant, you may start to notice trends in sales year after year (for example, accountants might expect to gain more bookkeeping clients in the early part of the year, when people have new goals to start a business!)

Knowing when your busiest months are can also help you analyze spending trends; when your revenue increases seasonally, do your expenses increase seasonally, too?


TIP 4: When you first start to build a budget, keep things simple.


Think macro, not micro, when you're first building a budget. Too much complexity can cause budget burnout, and if your reports are too granular, they may help you less. While it might make sense to have a "general admin" expense category and subcategories for "software costs" or "shipping costs," you likely don't need a line item for writing utensils, for example.


5. Be sure to budget in an emergency fund.


Just as you set aside money for your personal needs, you should build in some backup funding for your business.


6. Seek input from your team and vendors.


If you have employees, consider including them in the budgeting process. They might have more detailed "boots on the ground" information about previous expenses and may chime in with budgeting requests that can make their work more efficient. Vendors you work with annually may also be willing to share information about how their fees may change in the new year.


TIP 7: Always err on the side of overestimating your expenses when budgeting


If you've ever tried to work within a budget, you may have had to "borrow" from one category to compensate for overspending in another. Setting realistic goals, or goals with a little extra padding for uncertain costs, can help mitigate the need to dip into another category.


TIP 8: Consider using excess funds in the budget to pay down debt.


Carrying debt can be expensive. If you're carrying balances and see leftover cash once your budget needs are satisfied, consider applying it to outstanding debts, starting with the ones with the highest interest rates.


TIP 9: Review your suppliers and shop for more affordable alternatives


Budgeting season can be a great time to review your recurring expenses and see if more affordable solutions are available, such as liability insurance, paper suppliers, water cooler suppliers, and more. Can you find less costly alternatives for the goods and services you have to purchase to keep your business going? It's also a good idea to review your monthly dues and subscriptions. You may have signed up for automatic monthly payments for services you no longer use and could cancel.


TIP 10: Revisit your budget regularly


Analyze how your budget is serving your business monthly. If this is your first time creating a budget for your business, you may want to start by budgeting for just a couple of months at a time, rather than an entire year. It won't be as intimidating, and you'll catch problems early.



QuickBooks allows you to modify budget amounts as you learn how well your estimates are working.


Building Your Framework


Now that you've learned our ten tips for building your most successful business budget, let's explore the tools available in QuickBooks. Open the Company menu and click Planning & Budgeting | Set Up Budget. The Budget field in the upper left should default to the next fiscal year (Profit & Loss by Account). Click Create New Budget in the upper right. Change the year if you need to, then click Next. Leave no additional criteria selected and click Next.


Make sure Create budget from scratch is selected on the new page, then click Finish. Your empty budget will open, containing income and expense types from your Chart of Accounts, like Insurance Expense, Office Supplies, and Meals and Entertainment. The only way to modify those categories is by changing your Chart of Accounts, which you should only do with professional supervision. We'd be happy to help with that.


Now comes the hard part. You'll have to start estimating your monthly budget amounts and entering them in QuickBooks' budget template. The software offers two tools to help with this. If you anticipate the costs to be the same every month, like your internet access charges, enter that number in the first column, then click Copy Across. That number will appear in every box.


If you want QuickBooks to increase or decrease the number every month, click Adjust Row Amounts and indicate your preference in the small window that opens.



The Adjust Row Amounts window


When you're finished working on your budget, click Save.


Evaluating Your Progress


QuickBooks makes it easy to see how well you're adhering to your budget by providing four insightful reports: Budget Overview, Budget vs Actual, Profit & Loss Budget Performance, and Budget vs Actual Graph. These are relatively self-explanatory, but if you want help analyzing the trouble spots in your budget, let's schedule some time together! We can help you with the mechanics of budgeting and answer other questions you might have about QuickBooks.


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