To Budget in QuickBooks or Excel?
Clients often ask us whether they should budget in QuickBooks or Excel. For most, we recommend using both software programs during the annual budget process. Below you’ll find a few tips about how to integrate the two software programs.
First, from QuickBooks, export to Excel last year’s P&L, columns spread by month. This is a 60-second way to start this year’s budget with summary historical data and a complete list of your active revenue and expense accounts. Add columns for each month of this year and you’re ready to work on this year’s budget.
Next, run different budget scenarios in Excel until you reach your desired level of profit. Save time by auto- calculating numbers that derive from others — payroll taxes at 9% of wages, for example.
Your target profit should cover debt service, income taxes, owner draws/distributions, capital expenditures, and an increase to your working capital reserve, i.e. your rainy day fund.
Once you’ve finalized your budget, enter the data into QuickBooks, line by line, month by month. Use the spreadsheet view of the QuickBooks budget feature. For fixed expenses like rent, use the auto-fill right feature. This data entry should take no more than an hour or two.
The result is well worth it. After you close each month’s books, in one minute you’ll be able to print from QuickBooks an actual vs. budget report — both for the month and year-to-date, collapsed or expanded version.
Now the real work begins — sticking to your budget.
If you go over budget on one expense, you have to come in under budget on another. If sales are higher than expected, don’t succumb to irrational exuberance and overspend just because you feel richer. Conversely, don’t under spend, either — you budgeted for key strategic investments; pulling back might hurt you in the long run.
Finally, don’t change your budget mid year. Let it remind you of your best effort, and then ask, “Why?” about each variance at year’s end. Hold yourself accountable. It’s the best way to master the art of this essential business tool.
