Accounting, Bookkeeping, and QuickBooks Tips for Small Businesses

Posts tagged small business budget

Cash Flow Budgeting For the Small Business

Cash Flow Budget for Small BusinessCan I make payroll this month? Do I have enough cash to fund my business’ growth? How much money do I have left to pay myself? If you find yourself asking these questions, you are not alone. Cash flow is an important step to running your small business. Without cash, your company (big and small companies alike) can not last for very long. Learning to manage, budget, and track your cash flow is an important step for small business owners. It is possible for companies to report a positive income while having negative cash flow. Which is why, contrary to popular belief, cash flow troubles are usually a businesses downfall, not profitability issues.

Creating a cash flow budget, also known as a cash flow projection, is a great way to manage your small businesses cash flow. The purpose of your cash flow budget is to track and project the cash inflows and cash outflows over a specific period of time. Most businesses will track their cash flow on a monthly basis, but it is not uncommon to see daily or weekly projections. The first step is to determine how far in the future you should be forecasting. As you know from creating your Profit and Loss Budget, projecting your future sales and expenses can be tricky because of the many uncertainties and unforeseen events that exist. The general rule of thumb is to budget your business’ cash flow for 6 months in advance. This provides the business owner time to look into the future and plan for future events.

Follow the steps listed below and you will have a cash flow budget for your business in no time.

  1. Prepare a Profit and Loss Budget (also known as a Sales Forecast).
    The easiest way to do this is to use your previous year’s financial statements and budget from there. If this is the first year you are in business it will be a little trickier, but not impossible. Research your industry, your competition, and economic factors and create a profit and loss budget for your business.

  2. Forecast Your Cash Inflows
    Working from your Profit and Loss Budget, determine how much money you plan to collect each month based on your monthly invoices. Pay special attention to your billing terms. If your invoices are due in 30 days, but your customers typically take 45 days to pay, use this time frame for your cash flow budget. This means January invoices will most likely be collected in March, not in February. If you offer discounts for customers paying early and three-quarters of your customers take advantage of these discounts, make sure to use these figures on your cash flow budget. For example, a 5% discount if the invoice is paid in full in 10 days, results in a receipt amount of $95.

  3. Forecast Your Cash Outflows
    Again, working from your Profit and Loss Budget, look at your expenses and enter them on your cash flow budget. Think about other cash disbursements that might affect the months you are budgeting for as well. Figure out what expenses will be paid and when. Some items to consider are rent, payroll, leases, office supplies, insurance, fixed asset purchases, etc. Don’t include your non-cash expenses (depreciation and amortization). Even though they show up as an expense on your income statement, they are not cash outflows.

  4. Cash Inflows – Cash Outflows = Net Cash Flow
    Now you have the tools to start managing and predicting your company’s cash flow. You can predict when your cash flows will be positive and also forecast for gaps in your cash flow (cash outflows exceed your cash inflows). This allows you to plan for the future and make any necessary arrangements or adjustments before you find yourself in cash flow troubles.

Here’s a great Cash Flow Budget Template courtesy of the U.S. Small Business Administration (www.sba.gov).

Next week I will give you tips on how to effectively use your cash flow budget, things to watch for, and how to plan for future events.

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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.


Coupon – Small Business Budget

The past few weeks we have discussed the importance of having a budget, how to create a budget, and how to set up a budget in QuickBooks. Budgets can be intimidating or maybe you just don’t have the time to create your own. No worries, let me help you!

Mention this blog coupon and I will create a customized 2011 Profit & Loss Budget for your Small Business for only $300!

It gets better, order your 2011 Small Business Profit & Loss Budget by November 12, 2010 and get a $50 discount! That’s right, you can get a personalized 2011 Profit & Loss Budget for your Small Business for only $250!

You must mention this blog coupon when ordering your Small Business Profit & Loss Budget to receive this special discount. $300 Small Business Budget offer expires 12/31/2010.



Michelle Edwards, CPA
Trailhead Accounting Solutions CPA, LLC
720-295-4CPA (4272)
info (at) TrailheadAccounting (dot) com


How To Create A Budget in Quickbooks 2010

Create Small Business Budget With QuickBooksLast week we discussed the importance of a budget and the process to take when creating a budget. I know a lot of you out there use QuickBooks for your bookkeeping. This week I will teach you how to make a budget in QuickBooks 2010. It’s important to note that you need either QuickBooks Pro or above to be able to create a budget in QuickBooks. You can not enter a budget in QuickBooks Simple Start.

Follow these simple steps and you will have a QuickBooks budget.

  1. Open your QuickBooks company file.
  2. Click on the Company menu, select Planning & Budgeting from the drop-down menu, and then click on Set Up Budgets.
      If you have already created a budget in QuickBooks, your most recent budget will appear in the next window. To create a new budget, click the Create New Budget button in the top right corner of your budget window.
  3. The Create a New Budget window will appear. First, you need to select a fiscal year for your new budget. Then, you can choose whether you would like to create a Profit and Loss (i.e. Income and Expense) or a Balance Sheet Budget. Make your selection and then click Next.
  4. When creating a Profit and Loss Budget, the Additional Profit and Loss Budget Criteria window allows you to use Customer:Job or Class criteria in your budget (assuming, your company has the class tracking turned on). Make your choices, then click Next.
  5. The Choose How You Want to Create a Budget window allows you to either Create a budget from scratch or Create a budget from your previous year’s actual data. Make your selection and then click Finish.
      Create a Budget From Scratch – Lets you manually enter amounts for each account you are interested in tracking.
      Create a Budget From Previous Year’s Actual Data – This option will automatically enter monthly totals from last year for each of the accounts listed in your budget.
  6. Your Budget will appear in the next window. This window allows you to enter your monthly budget amounts for each account. QuickBooks will automatically calculate your annual budget amount for each account. When finished, click Save.
      Tips:

  • The Copy Across button will copy an amount entered in Jan across the rest of the months. Saving you the hassle of entering the same amount 12 times!
  • The Adjust Row Amounts button is a neat feature. It allows you to start at the 1st month or start at your currently selected month. Then you can adjust (increase or decrease) the monthly amounts in this row (for this account) by a dollar amount or by a percentage.
  • Beware of the Clear button. It clears your entire budget!

Congratulations, you have entered a budget in QuickBooks and are ready to track your financial progress for the year.

Related Budget Blog Entries:
Simple Steps to Creating Your Own Small Business Budget

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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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