When you drive to a new location, you need a map. When you lead a meeting at work, you need an agenda. When you manage a business, you need a budget. QuickBooks allows you to enter your company budget, even if you’re new at it.

Getting Started

You can find QuickBooks’s budgeting feature on the Company Navigator page or under the Company menu (follow Planning & Budgeting, then Set Up Budgets). The first time you access this section, you’ll be asked for the year you want to budget for. You’ll also be asked whether you want to budget for income statement accounts or balance sheet accounts.

Most small companies budget only for their profit and loss, or income statement accounts.

You’ll also be asked whether you want to budget at the account, customer, or class level. If you’ve never budgeted before, it’s best to start at the account level and try these other variations later. If you agree, choose No Additional Criteria. The last screen will ask you whether you’d like to create the budget from scratch or from the prior year’s data. I recommend choosing the prior year’s data if you have been in business long enough because it’s always good to see actual history when creating a budget.

In those cases where there isn’t prior year data, you will decide to Create budget from scratch.

Spreadsheet Modifications

You’ll now see a spreadsheet with your accounts listed on the left as rows and months across the top for columns. From this display, you can start editing the individual month’s values to correspond to what you think you’ll earn and spend in each account.

You might want to do the easy accounts first. Rent is a good place to start because it is fixed. If you pay $1500 rent each month, you can enter $1500 in January, keep your cursor in that field, and click the Copy Across button on the bottom left corner of your screen. Rent, utilities, and telephone are all items that are fairly constant, so they may be easy ones to plug in first.

Use the Copy Across button to copy recurring monthly costs through the year.

Next, fill in the accounts you can do from history, such as office supplies, dues, and subscriptions. After that, you can fill in amounts that you know based on what you plan to do for the year, such as travel, based on the number of trips you’ll take this year. On any account where you have an annual payment, such as insurance, you can plug the whole amount into the month it’s due or spread the expense across twelve months.

If you’ve had no change in staffing from the prior year, then you can use the payroll cost history to budget for salaries. You might want to increase it by a small percentage to allow for raises and cost-of-living adjustments. You can do this by using the Adjust Row Amount button on the bottom of the screen. This function allows you to enter a percentage or dollar amount that will be used to automatically increase the row amounts on the spreadsheet.

To anticipate rising costs, you can use the Adjust Row Amount button to iterate an increase across monthly columns.

Payroll Tax Budgeting

Budgeting for payroll taxes can be done after you’ve calculated the salaries. Taking 6.2 percent of the salaries up to $87,900 for each person will give you the amount you’ll spend on Social Security payments. The Medicare percentage is .0145, and the federal unemployment rate is .008. You’ll need to look up your state unemployment percentage. Federal withholding, the employee’s portion of social security, and state income taxes are not budgeted since they’re an in-and-out item paid by the employee.

Figuring your expected revenues might be the hardest part of the budget in terms of accuracy, but it should be the most fun figuring out how many customers you will have and what they will buy from you.

Budget Reports

Once you have your budget completed, you can create reports that will compare your actual income and expenses to your budget. Select Budgets from the Reports menu, then select Budgets vs. Actual. Choose the budget to apply, the layout you want, and click Finish. This report will show you actual income and expenses in the first column, budget amounts in the second column and the difference in the third column.

Comparing budgets to actual expenses and revenues will help the business owner with valuable financial information.

From here, it’s up to you. As the months pass, you’ll be able to analyze how you’re doing against your budget. Now that you have a budget, you’ll be able to better manage your business.