Accounting, Bookkeeping, and QuickBooks Tips for Small Businesses

Small Business Budgets, Made Easy

Cash Squeeze_Small Business BudgetThe 4th quarter has officially begun.  Now is a great time to start getting organized and begin planning for next year. I know, most of you cringe when you hear the word budget.  Don’t worry, they are not as bad as they sound.  Budgets are a great tool to help you plan ahead for the upcoming year.  By reviewing and planning your future expenses, you will know how many sales you need to make in order to break-even and better yet make a profit.  Let’s get started.

Creating a Budget
There are several ways to make a budget.  You can draw one up with pen and paper, use a spreadsheet program, or build it in your QuickBooks or other bookkeeping program.  Use any method that works best for you and one you’re most comfortable with.

Next, you have to determine what goes on your budget.  I use three main categories:

  • Projected Income – Be realistic. It’s better to under budget your future income rather than budget for the best year ever and then fall short as the year progresses.
    • Sales Forecasting can be tricky and is very difficult to do accurately.  Here are some things to consider when making your sales forecasts.
    • Previous years sales and trends (look at your company’s numbers along with your industry’s numbers)
    • Economic Trends (is the economy in a recession? is the economy growing? How fast is the economy growing or slowing? How is the economy impacting your specific industry?)
    • Your company’s pricing policy.
    • The estimated effect of your current and future marketing campaign, promotion, and advertising.
    • Competitors (are more competitors expected to enter the market? Brand new products in the industry affecting your sales?)
    • Other Factors (political, legal, weather, styles, trends, etc)
  • Direct Costs – These are the costs you incur to make and sell your product/service. Some examples include cost of materials, subcontractors, payroll & employment taxes (for employees who make the product and sell the product), etc.
  • Fixed and Overhead Costs – These are costs your company will incur whether or not you produce any products during the year. Examples of these costs include rent, mortgage payments, utilities, insurance, phones, etc.
  • Sample Budget

    Helpful Hits

  • Start with Expenses – That way you will know how much in sales you need to generate to cover your expenses.
  • Current Business Owner – Use previous years records to help estimate next year’s sales and expenses.
  • New Entrepreneur – Do your homework and research other companies in your industry to ensure you’re making realistic assumptions about your new business.
  • Budget for Taxes
  • Don’t Forget to Budget to Pay Yourself
  • Budget Benefits
    The main benefit to creating a budget is to able to plan ahead. You can allocate your resources to areas where they are needed most, to help keep your business headed in the right direction. Budgets also allow you to see if you are meeting your financial predictions. If not, you can see where you went wrong and make the necessary changes to improve. If you are meeting your financial predictions, you can continue to keep yourself on track and possibly discover new opportunities to capitalize on. Budgets are also a great way to control your company’s cash flow. Most importantly, budgets help you to make informed and educated business decisions.

    Remember, especially when starting out keep things simple. All you are doing is trying to determine how much you plan to spend, where the money will go, and how much you plan to earn for the given year. Continue to track your progress on a monthly basis, and adjust your budget as you go along. These simple steps will help you stay on track, manage your cash flow, and track your financial goals.

    Related Budget Blog Entries:
    Learn How to Create a Budget in QuickBooks 2010
    How to Create a Cash Flow Budget

    **Disclaimer: The example budget displayed above is for information and educational purposes only.  It is created using fictitious data. Everyone’s financial reporting, budgeting, and forecasting needs are different.  Please consult your financial advisor regarding your specific and individual budgeting needs.**

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    Michelle Edwards, CPA - QuickBooks Consultant Written by Michelle Edwards, CPA
    Certified QuickBooks ProAdvisor

    Michelle is the owner of Trailhead Accounting Solutions CPA, LLC, an Erie, CO based CPA firm focused on providing small and mid-sized businesses with day-to-day accounting, bookkeeping, and business solutions. Michelle is a CFO turned consultant who loves working with small businesses and entrepreneurs. When she’s not crunching numbers, she can be found hiking, remote camping, gardening, quilting, and hanging out with her family.


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