QuickBooks 2018 All-in-One For Dummies
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After you record your budget in QuickBooks, you can compare your actual financial results with budgeted amounts by choosing commands from the Budgets & Forecasts submenu that QuickBooks displays. When you choose the Reports → Budgets & Forecasts command, QuickBooks provides several budgeting reports, described in the following list:
  • Budget Overview: This report summarizes your budgeted amounts. You can use it to look at and error-check your budget.
  • Budget vs. Actual: This report lets you compare budgeted income statement information with actual income statement information. The report, therefore, lets you compare your expected revenue and expenses with actual revenue and expenses.
  • Profit & Loss Budget Performance: This report lets you compare your actual income, expenses, and profits with your budgeted income, expenses, and profits.
  • Budget vs. Actual Graph: This graph isn’t a report. It’s a chart that shows budgeted and actual information.
  • Forecast Overview: This report summarizes a QuickBooks forecast. A forecast is basically a prediction about your future revenue and cash flow. You use forecasts to do “what if” planning.
  • Forecast vs. Actual: This report compares a forecast with what actually happened.
The way that you use a budgeting report’s information is key — and also the secret to getting value from your budgeting efforts. With a well-constructed, common-sense budget, you can look for variances between your budget and your actual financial results. You want to use your budget to spot situations in which, for example, an expense item is too low, an asset item is too high, or some revenue number is trailing what you expect. Variances between expected results and actual results indicate unexpected results. Unexpected results often suggest problems . . . or opportunities. Think about the following examples of variance and what the variances may indicate:
  • Monthly revenue is $40,000 instead of $50,000. Monthly revenue that’s 20 percent less than expected may indicate problems with your product, problems with your sales force, or problems with your customers. In any case, if sales represent only 80 percent of what you expect, you probably need to implement immediate corrective action.
  • Inventory balances are averaging $50,000 at month’s end rather than $100,000 at month’s end. Having a lower-than-expected inventory balance may be either good or bad. The ending inventory balance that’s half what you expect may indicate that you’re selling products much faster than you expected (and, therefore, you should increase your inventory investment and purchasing of inventory). Having a low inventory investment may also mean, however, that you’re simply not getting materials from your vendors as fast as you need them, and as a result, you’re at great risk of losing sales because of inadequate stock levels.
  • Research and development expenses equal $50,000 a year instead of $25,000 a year. Research and development expenses that are twice what you expect seem to be bad. How can it be good to spend twice as much on an expense as you expect? Doubling your research and development expenditures may be good, however, if you’re unexpectedly investing in some promising new product, idea, or technology.
  • Sales to a particular class of customer are 50 percent higher. Suppose that you used classes to track sales to customers inside the country and outside the country. If you see that, quite unexpectedly, sales to customers outside the country are 50 percent above what you expect, that variance may indicate an opportunity to sell even more outside the country. Maybe with more effort and energy, outside-the-country customers can become an even larger part of your business. Sometimes, variances identify opportunities that you’d otherwise miss.

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Stephen L. Nelson, MBA, CPA, is the bestselling author of more than 100 books on computer and business topics, including all the previous For Dummies books on Quicken.

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