How to Use Budgets in QuickBooks Online

Creating and tracking budgets is essential for small businesses to manage expenses, forecast revenue, and achieve financial goals. QuickBooks Online (QBO) offers built-in budgeting tools that help you compare actual performance against financial targets, ensuring better control over cash flow.

In this post, we’ll cover how to create, use, and track budgets in QBO, as well as common mistakes to avoid.

Why Use Budgets in QuickBooks Online?

• Better Financial Planning – Helps set realistic revenue and expense goals.

• Cash Flow Management – Identifies potential shortfalls before they happen.

• Performance Tracking – Compares actual income and expenses against projections.

• Informed Decision-Making – Helps business owners adjust spending and investments based on financial data.

How to Enable and Access Budgets in QuickBooks Online

Before creating a budget, ensure that your accounting data is accurate and up to date in QBO.

To access the budgeting tool:

1. Click Gear Icon (⚙️) > Budgeting.

2. Click Add Budget to create a new budget.

Step-by-Step Guide to Creating a Budget in QuickBooks Online

Step 1: Select the Budget Type

QBO allows you to create budgets in different ways:

• By Year: A general annual budget.

• By Class: Tracks budgeted revenue and expenses for specific business segments.

• By Location: Tracks budgets for multiple stores, offices, or divisions.

• By Customer: Helps track project or contract-based budgets.

Choose the option that best fits your business needs.

Step 2: Set the Budget Time Period

• Select the Fiscal Year for your budget.

• Decide if you want to pre-fill data using last year’s actuals for easier forecasting.

Step 3: Enter Budgeted Revenue and Expenses

• Manually enter estimated income and expenses for each month.

• Use historical data from prior years for realistic projections.

• Adjust for expected changes like new contracts, cost increases, or seasonal trends.

Step 4: Save and Finalize the Budget

• Once all income and expenses are entered, click Save.

• You can create multiple budgets (e.g., separate budgets for departments or projects).

How to Track Your Budget in QBO

Once your budget is set, you can track your progress by running budget reports in QuickBooks Online.

Key Budget Reports in QBO:

• Budget Overview Report – Shows your budgeted amounts by account.

• Budget vs. Actual Report – Compares actual financial performance against your budget.

To access these reports:

1. Click Reports in the left menu.

2. Search for Budget Overview or Budget vs. Actual.

3. Select the budget and time period to review.

Regularly reviewing these reports helps identify overspending, missed revenue targets, or areas where adjustments are needed.

Common Budgeting Mistakes and How to Avoid Them

• Not Using Historical Data – Guessing instead of analyzing past trends leads to inaccurate budgets. Use last year’s data to make informed estimates.

• Setting an Unrealistic Budget – Overestimating revenue or underestimating expenses creates financial stress. Be conservative and realistic with your estimates.

• Not Reviewing the Budget Regularly – A budget is only useful if it’s monitored. Review budget vs. actual reports monthly to stay on track.

• Ignoring Cash Flow Considerations – A budget should include timing of cash inflows and outflows. Plan for seasonality and unexpected expenses to avoid cash shortages.

How We Can Help

A well-structured budget helps businesses stay profitable and prepared for financial challenges. Our team can help you – set up and organize budgets in QuickBooks Online, analyze past financial data to create accurate forecasts, monitor budget performance and adjust as needed. Need help managing your budget? Contact us today!