Using the Budgeting Tools in QuickBooks Online

Intuit QuickBooks Online

Entering a budget into an organization’s accounting software is a very important step in the accounting process. Many nonprofits analyze their Statement of Activities but ignore their budget and forecast. Without creating a budget and doing some comparisons with your actual financial statements, it may be unclear if your organization is meeting its missions, goals, and program objectives.

Developing Your Nonprofit's Budget

Your first task is to develop a budget. When a budget is entered into QuickBooks it should be for the entire fiscal year, broken down by month. A great way to start developing a budget is by running a Statement of Activities by month for the year prior to the budgeting period. To format the report correctly, run the Statement of Activities and then select the month in the columns drop-down box. Export this report to Excel to help you develop your current budget.

As each month is evaluated, ask yourself where you’d like to see your organization’s numbers for each department or program. You may need to do some percentage comparisons to see what a normal growth rate is in revenue and support categories. Then determine where your organization wants these areas to be. Initially, many people want to simply cut expenses; however, make sure you’re being logical and realistic. Some expenses, such as development, may actually demand higher budgets to help meet goals. When it comes to creating a budget, be realistic - but also be aggressive. Remember, the purpose of a budget is to aid in developing goals and provide a benchmark to measure actual performance.

Entering a Budget in QuickBooks Online

Now that you’ve developed your budget, it needs to be entered into QuickBooks. In QuickBooks Online, click the gear icon next to the company name. Under the “Tools” section of the gear menu, click “Budgeting.” Some options are available at this point, including the option to create a budget from scratch or to use the prior year's actual data. If “From Scratch” is selected, this will pull up a blank form that lists your accounts in the first column and then has subsequent columns for each month. Use your Excel report to fill in the budget amounts. This budget can always be modified and should be revised a few times before finalizing.

Analyze Your Budget

Run a Budget vs. Actual report in QuickBooks by selecting “Reports/Recommended/Budgets vs. Actuals.” The next screen will ask you for a layout option - select “Account by Month.” To avoid having to walk through these steps each time a Budget vs. Actual report is needed, memorize the QuickBooks report in this format. Next time, the memorized Budget vs. Actual comparison report can be selected and the dates simply changed as needed.

Now that you have gone through all of the trouble to create a budget and enter it into QuickBooks, be sure to take the time to analyze it! Optimally, the Budget vs. Actual should be reviewed approximately 2-3 times per month. Consider both the positive and negative aspects of this report. What are the areas to improve upon? Are there any opportunities that need to be taken advantage of? Communicate budget findings to the board of directors and finance committee, and hold them accountable to make the necessary adjustments. Simple analysis of Budget vs. Actual financials and communication of findings will keep your organization moving in the direction of obtaining goals and fulfilling missions.