This post is by Loredana Stroup, author of QuickBooks for Dummies 2012 (UK edition). She also runs Alta Training, a QuickBooks training and support company.
A budget is basically a plan that outlines how you intend to generate sales, how you should spend your money and how you can best organise your firm’s financial affairs.
Does every business need a budget? Not necessarily – you may have a simple financial plan that you can monitor some other way. For most, however, a budget improves your chances of getting your business wherever you want it to go financially. It gives you a way to “plan your work and work your plan”.
Here are five ways to increase the chances that your budget will work.
- Plan your income and expenses as a team, if that’s possible. It’s more likely that everyone will adhere to the budget if it reflects the priorities and feelings of all those who have to live within the plan: partners, partners’ spouses, key employees and so on.
- Include a contingency cushion in your plan. Don’t budget to spend every last pound. If you do, you’ll undoubtedly be faced with paying for unexpected expenses (like equipment breakdown, rises in cost of materials and so on) when you don’t have any money.
- Compare your actual income and expenses with your planned income and expenses on a regular basis. If you find that you’ve budgeted £1,000 per month for shipping costs but discover that you consistently spend twice that amount, you may need to make savings elsewhere…unless you like being over budget.This comparison is what QuickBooks can help you with the most. As long as you use QuickBooks to record what you receive and spend and to describe your budget, you can print reports that show what you planned and what actually occurred.
- Make adjustments as necessary. When you encounter problems with your budget – and you will – you’ll know that part of your plan isn’t working, and you can make adjustments.
- A word to the wise: don’t gear up your business overheads or your personal living spending and lifestyle when you have a great year (or even a few great years) in the business. When you have a good year or even a few good years, keep your overheads and expenses modest. Stash the extra cash. If you can, build up some financial wealth that’s independent and apart from your business assets. For example, contribute to a pension plan.
*This post refers to QuickBooks Premier and Pro
QuickBooks for Dummies is out now and available from Amazon and major booksellers like Blackwells and Waterstones. It covers everything from setting QuickBooks up to correcting mistakes and getting even more from the software.