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This is the second of four blogs on Quickbooks’ ability to help you see into the future.   In this one, we evaluate Quickbooks’ budget functionality.

Feature QBO Pro Prem Commentary
Budget – Income Statement Monthly income statement for 12 months of fiscal year, from scratch or using last year’s actuals. Can modify line by line; allows conversion to cash basis (i.e. create cash flow forecast). Can be saved for comparison to actuals.
Budget – Balance Sheet Monthly balance sheet for 12 months of fiscal year.
All data must be entered manually/ doesn’t link to the income statement budget.
Forecast As per budget, but Forecasts can be saved separately for comparison to Actuals.

Input Process

Budget – Income Statement

From the menu, select Company > Planning and Budgeting > Budgets.

  1. Choose the year, and that you want a profit and loss.
  2. Decide whether you want to prepare the information by Job, by Class, or (by default) in aggregate.
  3. Choose “From Scratch”, or from prior year’s actual data (which you can then modify).

Inputting the actual numbers is fairly user-friendly.  You cannot specify a formula (for example that Cost of Sales is 65% of Revenues), but you can input one cell value and copy it across the rest of the row – and also have it change by a specified simple or compound percentage each month.

Budget – Balance Sheet

Don’t bother.  All the Balance Sheet budget figures are entered manually; the resulting “budget” does not link with any Income Statement budgets, which really defeats the purpose.

Forecast – Income Statement

From the menu, select Company > Planning and Budgeting > Forecasts.

The rest of the process is identical to the one for the Income Statement Budget.

Pro Con Commentary
If you are a job shop, Budgeting by Job (aka Project) is useful, limited only by the number of projects you have (or expect to have) in hand.
✔✔ Budgeting by Class is probably more useful across the board: any business with multiple divisions (eg Retail and Commercial) can track performance by division.
You can adjust the figures to more closely reflect actual cash flows, for example by removing Depreciation
You can have up to three Budgets for any one year: By Class, By Project, or in aggregate.
You can’t annotate/ document your assumptions within the budget.
Pro and Premier 2015 and later allow users to comment on the standard reports, so you can provide explanations for variances from budget.
Each Budget is limited to a 12-month period, so you can’t build a rolling 12-month Budget.  You could build two 12-month forecasts, but the first 12 months’ numbers will not get picked up automatically in the second 12.
In the reports, the Net Income figure displays only as “per period” and “total”, not period-to-date.
Biggest drawback is that none of the income statement forecasts talk to, or create, a budgeted Balance Sheet.

Quickbooks’ Budgeting Modules – Overall

Balance Sheet module

Skip it.  It requires lots of manual data entry.  We don’t think it passes the cost-benefit test.

Income Statement Modules (Budgets and Forecasts):

It might be for you if: You’re just getting in to the budgeting process for the first time – it will help you generate a 12-month forecast
It might not be for you if: Your business is fairly complex (more than one division and/or multiple projects, and you want to budget by both);

You realise the need to document your assumptions in the budget;

You’re at the point where you need to integrate your balance sheet;

You’re graduating to rolling 12-month forecasts.

All of that said:  relatively inexpensive third-party software exists that talks to Quickbooks, and allows you to create (rolling) budgets and forecasts that integrate the balance sheet and income statement, and allow you to create annotated comparisons to actual results.

We welcome your Comments!  Please also feel free to Contact us, either via email or using our website, for more information.