8 STEPS TO CREATING A SMALL BUSINESS BUDGET

A business without a budget won’t work — at least not for long.Brought to you by Lendio.

1.CLEAN UP QUICKBOOKS Open QuickBooks and find where payments were made twice in a

month, and not at all in the next month. Get rid of expense categories that you don’t use, or haven’t used,

in a while. The more accurate and complete your historical data is, the better

your budget will be.  Also, import actual data from QuickBooks every month into your

budget to be able to monitor your progress.

2. EXPORT YOUR CHART OF ACCOUNTS AND HISTORICAL REVENUE AND EXPENSES

Base your future expenses on your past expenses. Use the same account and expense category structure you have in

QuickBooks so you can export actual data for monitoring progress. 

Exporting that data from QuickBooks is the quickest way to get started:

Go to Reports > Company & Financial > Profit & Loss Std and set the dates for the period you want to export, then export to Excel. Bam! You just started your budget.

3. CREATE YOUR COMPANY ROSTER Since salaries are the largest expense for most small businesses,

you’ll want to forecast it in detail. Make a list of your employees and their pay, and forecast that out

month-by-month over the next year. When you look at each person, consider whether they are

compensated up to market rates. What kind of raise might you give them this year (and when)?

Building a detailed roster helps you forecast this important expense accurately.

4. CREATE YOUR SALES FORECAST Your sales forecast drives every decision in your budget, so it’s

important to create it as accurately and thoughtfully as possible. The sales forecast will start with estimating current and past

customer sales, line by line.  Then, you forecast sales to new customers by

forecasting typical items. This data will form the milestones to measure your progress

through the year.

5. CREATE YOUR EXPENSE FORECAST Now that you know your revenue, what will your expenses be? Each expense line has something that drives it. You don’t just

spend money, you spend it because you need something. So what need is driving that expense? Figuring out the expense driver helps create a formula for each

expense line, which accurately forecasts expenses and keeps the whole budget interactive.

That way, when you change your sales or staffing assumptions, those changes are reflected in the budget.

6. LINK IT ALL TOGETHER Now that you have a revenue and expense forecast, you can hook

it all together and see what the profit looks like. Do you like that number? Does that provide enough for you to

reach your goals? If not, what do you want to change, sell more of, or spend less on? Make the adjustments you need in order to get your ideal number.

7. ADJUST AND FINALIZE If you’ve made adjustments to reach a profit number that matches

your goal, make sure you know how to make those numbers a reality.

If you need to cut expenses, where will you spend less? If you raised sales, how are you going to find the leads, or close

the sales, in order to stay on track with that goal? Once you’ve got all that down, you’ve got your final budget.  But the most important thing is to USE your budget to monitor

your performance and make decisions, which is the next step.

8. MONITOR AND ADJUST Each month as you finish up your accounting, you need to export

your actual results and compare them to your budget. Once you do that, you can analyze how you are doing and

understand what changes need to be made to stay on track. This is where your budget really starts to pay for itself. You will know so much more about your business with a solid

budget.

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