Tracking loan payments in P&L Budget

Hi Clerk. I’d like to provide insights on tracking loan payments through Profit and Loss budgets and explain how it works in QuickBooks.

In QuickBooks Online (QBO), when you create a budget specifically for the Profit and Loss (P&L) statement, you will only see the accounts that fall under the Income and Expense categories. Any financial planning or projections made in this type of budget will exclusively reflect anticipated income and expenses over a designated period, excluding other financial aspects, such as assets, liabilities, or equity.

However, if you want to track payments related to a loan—such as principal and interest payments—or if you wish to create a budget that reflects these loan payments accurately, you will need to utilize a Balance Sheet budget instead. The Balance Sheet type of budget encompasses a broader range of accounts, including those related to assets, liabilities, and equity, allowing for comprehensive financial tracking.

Here's how:

1. Sign in as an admin or accountant to access budgets.
2. Go to Budgets then Create budget.
3. Next to Budget type, choose Balance sheet, select Period and choose your Default view.
4. After clicking Next, hover to the Liabilities account and enter the amount to set your budget.
5. Click Save or Save and close.

You can also refer to this article for more information on updating and managing your budget or generating related reports: Create budgets.

Moreover, you can utilize this link if you want to customize and memorize reports.

Please let me know if there's anything else I can assist you with creating a budget in QBO. I’d be more than happy to help. Stay safe always!

@clerk-ketoctin-o 

Good question.  The loan payments are a reduction in the loan liability as well as your cash (both balance sheet accounts).  They are not an expense.  Using a P&L budget serves to project your income and expenses which the loan payments don't affect.  Therefore, you track the effects of the loan payments on your cash balance using the cash flow planner (Dashboards > Planner).  If you're not familiar with it, there's a decent video on how to use the planner here.   

Thank you for trying to answer... I've seen the instructions on how to create a balance sheet budget, but that doesn't help our church know how much we should be spending each month. I guess this is accounting "magic" that ensures accountants can make lots of money. If I have $240,000 of income and $5000/month loan payments, what does the budget look like? Can I budget expenses of $20,000/month because the loan payment isn't an expense? If so, where do the funds come from to pay the loan? Or do I budget $20,000/month income, and $15,000/month expenses, and know that the $5,000 net profit shown is false information? In that case I have to keep a separate budget somewhere of all my loan principals that need to be repaid and split my income between the two budgets. Neither of those sounds like a good option.

Thanks for trying to explain. You say the loan payments don't affect expenses. I'm guessing "expenses" means something different to accountants, because if we spend all out income on salary, software, etc. then there will be no money to pay the loan. We obviously have to lower expenses to pay the mortgage, which sounds like a big effect to me.