For CFOs

Once you’ve finalized your 2007 budget, the real work begins — sticking to it. The best way to master the art of this essential business tool is to hold yourself accountable. If you go over budget on one expense, try to come in under on another. If sales are higher than expected, don’t overspend just because you feel richer. And though you might be tempted to boost short-term profits by under-spending on your budgeted R&D or other strategic investments, remember that doing so might limit your company’s long-term success.

While managing to your budget like this is important, you also want to use actual results and new information to guide your company as the year progresses. Keep your original budget intact but use the new information to create an updated forecast. The two start out the same but then diverge each month as you replace the forecasted numbers with actual results and change your projections based on new information — perhaps you hired three people instead of one, or you got a better deal on that piece of equipment, etc.

For QuickBooks techies

Enter the budget 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, and 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.

QuickBooks says you can create only one budget, but in truth, the forecast feature works almost exactly the same way in terms of entering data, reporting, etc. The QuickBooks desktop help index has technical details on both features: your original ‘budget’ and the monthly updated ‘forecast’.