Happy new year!
We wish you all have a great 2022.
After being disrupted by the COVID pandemic for two years, it’s time to regroup and plan for your next move.
The world ahead of 2022 could be bright and sunny.
It is a recovery phase for many businesses.
But, are you ready?
Will your customer come back after this pandemic?
Will the operational costs increase?
Do you need to cut back on expenses?
Or increase the marketing spending?
Any change in the product line?
Do your customer still need your product?
Or is it better to switch business models?
The pandemic has changed how a business operates.
Consumer buying behaviour has changed.
Goods may no longer supply the way they used to be.
Being a small business, you may have to change to meet the changes.
Do you have sufficient financial muscle to change?
What should be a realistic projected sales revenue?
What is the new operational cost?
You need a budget.
The business costs changed when the business environment changed. The cost changes can be range from distribution, marketing, direct cost, finance cost, etc. With an appropriate cost allocation (fixed and variable) and desired margin to achieve, you derive a realistic sales revenue and input the budget into the accounting system.
Create a budget in the accounting system
Most of the budgeting feature in a small business accounting system is simple to operate. Budgeting is usually a wizard or form-based, easy for an accountant to follow and create.
QuickBooks Online (QBO)
Click on the Gear icon and select Budgeting from the list. Then, click on the Add Budget button from the budget list to start a budget.
Follow the budgeting wizard, enter the name (e.g. Budget 2022) and select the date range, budget interval (monthly, quarterly or yearly), building the budget from scratch or based on last year’s actual data, etc. Finally, enter the budget figure into the appropriate budget cell.
You may “alter” the budget from time to time to reflect a more realistic goal or create a new budget if the actual has deviated too much from the ideal, and print a Budget vs Actual report to compare your budget against the actual performance.
QuickBooks Desktop and Reckon Accounts Desktop
Reckon Accounts (formerly known as Reckon QuickBooks) has a similar feature and program layout as Intuit QuickBooks.
If using Intuit QuickBooks Desktop or Reckon Accounts, go to the Company menu, Planning and Budgeting sub-menu, and select Setup Budget.
Click on the New Budget button from the budget list page to create a new budget. Then, follow the wizard to set up the budget year, budget for Profit & Loss, or Balance Sheet, any additional criteria for the budget, etc.
Besides copying the budget figure across the months, you can adjust the row amount based on a percentage increase or decrease in QuickBooks Desktop (or Reckon Accounts).
Then, measure the performance with the Budget vs Actual report.
MoneyWorks’ budget feature is under the Show menu. It provides a list of accounts (both Balance Sheet and Profit & Loss account) and the sub-ledger if you have switched on the departmental accounting.
Enter the budget figure into the cell and filling down, duplicate the data or distribute the value across the months.
Then, monitor your progress with the Budget Profit report, comparing the budget against the actual.
We don’t plan to fail but often fail to plan
Small businesses are usually more concerned about cash flow and day-to-day operation, but having a budget is extremely important when moving towards a new normal. With limited resources, it is more crucial to monitor the performance in an uncertain market.
Budgeting is like a compass, helping the business navigate, achieve the revenue and costs as planned.
Stay safe and healthy.