In previous articles, I’ve discussed reviewing your existing sales and profitability to see if you wanted to make any changes. Now it’s time to plan for your new year and profitability.
Many of you may have already worked on a business budget for 2018. If you haven’t (and perhaps have not in the past), I encourage you to do so – no matter what size your business is. If it helps, think of your sales, gross profit (profit after direct/job costs but before overhead expenses) and net profit (bottom line after all expenses) as goals you want to achieve. And I think you’ll agree that it’s much easier to hit a target you can see ;-).
Once your budget is in QuickBooks, it’s easy to monitor how you’re doing during the year, so you don’t have to do updating in spreadsheet or just wonder. I find it can also help you pay closer attention to your expenses as well. After all, you’ll want to keep those down so you achieve your profit goals!
If you’ve never done a budget before, you can have QuickBooks create a budget based on your past year. If you do that, be prepared for odd numbers because QuickBooks will take your actual numbers and divide by 12 to give you monthly, so you will get actual dollars and cents – rarely even numbers like 500 per month. But it can be a nice start for some
For those of you who have divisions or departments or services lines or locations (like landscapers, painters, builders etc.) you can also plan for each “profit” center – and QuickBooks can help with that, too. In fact, many of you probably have staff members how work up budgets for their area(s) of responsibility.
If you have multiple people working on the budget, then quite often Excel is where many people work up their numbers. In fact, I find that’s where many work on their budgets anyhow since you can do more with formulas to help you with some of your numbers. The good news is, we can usually find a way to import those numbers into QuickBooks.
Once the budget is in QuickBooks you can get the following reports:
- Budget Overview (great way to see your original budget as a whole)
- Budget vs Actual – the default is by month, but you can do month, quarter, or year
Profit & Loss Budget Performance lets you evaluate where you are the time period you’re evaluating (e.g. month or quarter), and what your budget is for Year-to-Date as well as for the entire year.
You can even get a graph. Let’s face it, sometimes a picture (graph in this case), makes it easier for some aspects to jump out at you.
We have a separate article for “how-to” but if you want help with this, let us know!