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QuickBooks CPA discusses Budgeting | Small Business Cash Flow Management

QuickBooks CPA Wilmington NC Budgeting

Gary Bode, CPA: QuickBooks hones the budget into a powerful managerial tool. For a free phone consult, please call 399-2705.

Cash flow management is problematic in any small business, especially during a recession. Where do you start? A QuickBooks CPA mines the wealth of data your company creates through the routine bookkeeping and accounting. How? Through budgeting, which predicts the expected cash coming in, the expected cash flowing out, and, their timing.

“Creating the first budget forces the owner to think about the business in new ways, revealing un-tapped managerial potential.”
– Gary Bode, QuickBooks CPA and tax accountant

A QuickBooks CPA uses the past financial parameters, and company statistics, to make educated estimates for the company’s future cash inflows, cash outflows and when they will occur. QuickBooks can export reports into Excel for further tweaking. While the QuickBooks budgeting process is good by itself, I generally use the following four steps to make it better. Better means the budget is easier to read, displays all relevant data, provides analysis, and allows input of known future cash flow events.

  • Step one is customizing relevant QuickBooks reports. Customization helps eliminate redundant information, insures use of the proper time periods and formats the report for easier interpretation. Income and expenses display vertically in the rows, on the left, with time frames using the columns horizontally.
  • Step two is “memorizing” these reports. This allows you to bring up the report in the future, with a single click, and have it display current data.
  • Step three exports the reports to Excel. Excel’s powerful features allow significant automation, too.
  • Step four adds graphs and Financial Ratios, tools the Fortune 500 companies use.

A QuickBooks CPA knows the budget isn’t just an annual task; it needs monthly or at least quarterly work, to keep it managerially useful. The estimated budget figures have to be tempered by the owner’s knowledge of the general industry and localized business conditions. For example, a widget manufacturing firm might have the following business conditions:

  • Collecting on accounts receivable is slower for the Widget industry in December and January. So even though annual cash inflow is readily predictable, simply dividing that figure by 12 doesn’t work.
  • The price of steel is going up in July which will increase the cost of widgets in mid-September, and begin to affect cash flow on October. So just using a rolling three-month average for predicting widget purchase expense, causes a cash flow deficit in October if the price increase isn’t factored in.
  • A major customer is re-tooling in August. The QuickBooks CPA concludes sales will decrease by $5,000 in July but then increase an additional $1,000 per month starting in August. Under an annual budget, the company “breaks even”; the $5000 lost in July equals the expected increase for the remainder of the year. But a monthly budget, and local business acumen, allows planning for the July shortfall.

Since the budget generally uses a monthly time frame, non-monthly figures, like purchase of new equipment, can cause complications in a small business budget. Sometimes a budget proactively “saves” for an expected future lump sum by creating a monthly amount to be sequestered and eventually pay it. Not a bad idea. But sometimes a pure cash flow budget works best.

Budgeting is sometimes unsuccessful in small businesses because:

  • The budget’s format is not structured as cash flow. Accounting conventions like depreciation are sometimes used, making it clumsy for a non-accountant. A good QuickBooks CPA helps mold the program’s flexibility to how the owner thinks about the company.
  • Handling non-monthly payments, like say an annual insurance premium, can be problematic.
  • Calculations for cash flow estimates are multifactorial and their interdependence is not completely understood by the owner.
  • It takes time to learn any new financial tool and the owner may be too busy to do so.
  • Beginning to run a company by the numbers can be disconcerting to an owner used to running things “off the cuff”.
  • The budget is not continuously refined and becomes obsolete.
  • The underlying bookkeeping is sloppy which diminishes budgeting accuracy.

A QuickBooks CPA knows it is the owner’s hard work and expertise that make a company successful in a down economy. But brilliant business minds have developed financial tools and refined them over centuries. You don’t have to be an accountant to build an accurate budget. Sometimes the wheel doesn’t have to be re-invented, just modified for a particular use.

We’re a Wilmington NC CPA firm that wants to help you keep more of what you earn. Our virtual office provides great service to long distance clients. And, of course, we’re intimately familiar with QuickBooks; Gary has even taught it on a college level. Please read any of the hundreds of posting to help evaluate our expertise and proactive attitude. Budgeting is just one small business accounting service we offer. For a free phone consult, call at (910) 399-2705.

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