Do you ever get to the end of the year and wonder what happened to all your money? I have talked to many business owners that are running so fast trying to keep up with everything that they really don’t understand the big picture. They sometimes wonder why there are only pennies left in retained earnings at year end.
GOOD DATA = GOOD REPORTING
You will know exactly what happened at year end if you understand QuickBooks, keep on top of your Bookkeeping, post your transactions to the correct month and account code, know what reports to run and how to read them. If this is Greek to you I highly recommend that you outsource your QuickBooks Bookkeeping. That is unless you have the time and patience to learn the principles of accounting, QuickBooks software, and have time every month to keep up with it.
Once you have accurate and up to date data in QuickBooks I recommend that you create a budget and or forecast. I believe that almost any kind of business would benefit from doing so and monitoring them throughout the year. If you do so, you shouldn’t have any surprises at year end.
Creating budgets and forecast in QuickBooks is quite simple. Initially you set them up for the year and you can run your reports monthly to see if you are staying on track. QuickBooks will do a comparison of the actual against forecasted.
BUDGETING\FORECASTING AND GOOD DECISION MAKING
Keeping up with budgets and forecast can really help you make good business decisions. For example, let’s say that Michael & his wife Michelle own the Shadow Brook Inn. The Shadow Brook is a Bed & Breakfast as well as an event center hosting weddings and various events thought the year. Playing with a budget in QuickBooks can help them make sound business decisions so they have no year end surprises.
Michael and Michelle are doing all the work themselves and are getting quite burned out. They are cooking, cleaning, landscaping, setting up and taking down tables and chairs, keeping up with bookings, collections, and their QuickBooks bookkeeping. They want to hire some help but aren’t sure if they can afford it. They can play with the budget to add employees and will be able to quickly see if this is an affordable option. They might find that they can’t afford help year round but they can afford to bring help on in the busier summer months.
IS IT TIME TO BUY NOW OR DO I NEED TO WAIT?
Let’s say in 2015 Michelle would like a new oven, updated bedding, curtains, and a dining room table. Michael wants a new lawn mower and some fruit trees. These purchases will cost the business an estimated $10,000. Ideally they would wait until they had the additional $10,000 in their retained earnings. Sometimes things happen and purchases are a must and a decision needs to be made quickly. If you have current and accurate data in QuickBooks you can play with your budget and or forecast reporting to help you make a right decision in a hurry.
After analyzing your reports you might come to a conclusion like this. The fruit trees and updated bedding, dining room table & curtains would be nice but they aren’t a must and can wait until 2016. There is a wedding next week and the current lawnmower is dead and the old stove has cooked its last meal after 30 years of service. They must be replaced right away. By playing with your budget\forecasting you will be able to see if you can spend the cash on these items now or finance. If financing is your only option what can you realistically pay monthly? You can determine this by playing with your budget in QuickBooks.
I hope this article has inspired you to utilize a very helpful tool in QuickBooks. To learn more about how to use these tools you can look up information in QuickBooks Help or give us a call at 916-224-5831.