Exploring the Budgeting feature in QuickBooks Online offers numerous benefits. Learn how to use this feature and create a more accurate budget in QuickBooks through the use of your unique Accounts Payable data.
Creating an effective budget can be one of the most challenging tasks of managing a business. Income can be unpredictable, and expenses are hard to estimate. However, a well-crafted budget is vital to running a successful business.
QuickBooks Online offers budgeting tools that can help you successfully establish a budget for your business. We have a few suggestions to help you use them and maintain a budget that serves as a roadmap for your business.
How to Create A Budget In QuickBooks Online
Click the gear icon in the upper right corner, then select Budgeting under Tools. Click Create budget in the upper right. For Budget type, select Profit and Loss. This is most typical. It allows you to plan your budget around income and expenses over a specific time period.
You’ll have to make other decisions about your new budget:
Time period. In this example, we’re going to create our budget for an upcoming fiscal year that starts in October of 2024. So we’ll select FY_2024_2025. Not sure when your fiscal year starts? Click the gear icon in the upper right and click Account and settings, then Advanced. The information for your company will be displayed here.
What Budget format do you want to use? We’ll select Consolidated, since we want an organization-wide plan. A Subdivided budget would allow you to create individual budgets based on location, class, department, or customer. (Reach out to us if you'd like help establishing a Subdivided budget for your business.)
Would you like QuickBooks Online to pre-fill data? If you're starting from scratch, you won't make a selection here. Otherwise, you can have numbers from a previous budget plugged into your new budget, which you can then edit.
QuickBooks helps you prepare the budget you want.
Click Next when you’re done. Your budget table will open.
Filling In Your Budget
Before you start filling in your budget, make sure the information at the top of the page is accurate. Is the fiscal year correct? The button in front of Compare reference data should be turned off, since we’re starting from scratch. However, if you have past budget data or a year’s worth of income and expenses that you want to bring in, make sure this option is turned on. QuickBooks Online will then ask you whether you want to transfer your Actuals (real money you received or spent) or your budget, and for what year.
Ensure the period is correctly set for your initial work (Yearly, Quarterly, or Monthly), but don't worry - you can switch between these periods without losing data. Click the gear icon in the upper right to see your options. You can Autosave budget (recommended), Hide empty rows (although you won’t want to do this until you have your budget set up), and make the Display density compact.
To create your budget, simply enter the desired amounts in the fields supplied. Depending on your specifications, columns are divided by months or quarters, and rows are labeled with budget items (Advertising, Gross Receipts, Legal & Professional Fees, etc.). You can enter your budget data by year, quarter, or month, and QuickBooks will automatically apply the correct sums:
Enter an annual total in the Budget totals field and let QuickBooks Online divide the amount into 12 monthly numbers (click the small “split” icon), or,
Enter the monthly amount in the first month’s column, and QuickBooks Online will multiply it by 12 and enter the annual number (click the small arrow). For quarterly amounts, you would enter a quarterly amount in the first quarter's column.
You can also enter different numbers in each box to reflect changing budget needs throughout the year.
You can enter numbers manually in individual boxes or enter annual or monthly numbers. QuickBooks Online will divide or total them.
When you’re done working with your budget, save it. You can come back anytime and make adjustments as needed.
7 Tips to Building the Best Budget for Your Business
Remember to consider seasonal upswings and downswings.
Make your goals as realistic as possible and distinguish between essential and non-essential expenses. Enter your budget items for the bills and other expenses that must be covered before you add optional categories.
Keep it simple; don’t budget down to the last paper clip. If you're just getting starting to budget for your business, it's best to keep your categories broad, and add sub-categories as the need arises in the future. Otherwise, you risk budget burnout, and your reports can become unwieldy.
Budget in some backup funding. Just as you’re supposed to have an emergency fund in your personal life, try to create one for your business.
Overestimate your expenses, at least a little. This can help prevent “borrowing” from one budget category to compensate for a shortfall in another.
Involve your employees in the process. You shouldn’t be secretive about the expense element of your budget. Try to get input from staff in areas where they may have greater knowledge than you do.
Revisit your budget frequently. You should evaluate your progress at least once a month. It might even make sense for you to budget just a few months at a time in the beginning. You’ll learn about your spending and sales patterns, which will be useful information for the future. The Budget Overview report displays all of the data in your budget(s). Budget vs. Actuals shows you how you’re adhering to your budget.
You can use us as a resource, too. We have plenty of experience budgeting and can help you determine the best way to create a budget for your business. We can also answer questions you have about creating and modifying budgets in QuickBooks Online. Just reach out.