Using the Budget Features

Transcription

1 Using the Budget Features Quicken budgets can be used to summarize expected income and expenses for planning purposes. The budget can later be used in comparisons to actual income and expenses to determine whether expectations are being met. If expenses are "over budget", measures can be taken to rein in costs before financial problems are out of control. In this "hands on" session we will use a previously developed file of records for the London farm to practice generating budgets. You will be able to practice many of the steps that you might use in summarizing your own records. While using these instructions, you will: Develop a whole farm budget for the current year based on last year s transactions Compare actual records to the budgeted amounts In Quicken, click File, Open Quicken File Double-click C:\Workshop Files LONDON 2016 OK To access the budget features in the file, click the tab Planning, then the Budgets button. Quicken automatically creates a budget based on transactions from the previous 12 full months. If you don't have 12 months of transactions yet, Quicken creates the budget based on as few as 3 months of transactions. Quicken creates the budget based on personal expense transactions in all of your accounts except Invoice and *Sales Tax* accounts (Quicken Home & Business only). Quicken excludes the following categories from a budget when it is first created: Income categories Special investment and paycheck categories (usually preceded by an underscore character), such as "_401Contrib" The Interest Exp, Misc, and Not Sure categories Categories with the following tax line item assignments: Schedule A: Home mortgage interest, W-2: Federal tax withheld, W-2:Medicare tax withheld, W-2:Medicare tax withheld, W-2:Local tax withheld, W-2:Soc. Sec. tax withheld, and W-2:State tax withheld. After the budget has been created you can add categories and further customize it, as necessary.

2 You can change the view to Annual: You can view the transactions history for each category individually and, by clicking on the gear, apply a monthly figure to each month or to the remainder of the year, etc. You can also right click on a cell and get a popup that allows for other modifications:

3 Choosing Calculate Average Budget generates this screen: Thus you can enter a budget amount for the year and have it applied to the current month plus the months that follow in the year or to each month of the year. Government payments aren t likely to be monthly, so click Cancel. The Londons expect a few items to be significantly different this year and want to edit those amounts: 1. They expect government payments in March and December. Adjust the budgeted amounts the new numbers: $1,100 in March and $2,000 in December and hit the Enter button on the keyboard. 2. Note that the totals are automatically updated. 3. Jack has taken a part-time job and expects to earn $1000 each month. The Select Categories to Budget link at the bottom left of the window allows you to select specific categories for a budget so if a new or different budget category not previously used is needed in the coming year, you can select it. Here we need to add a checkmark to Salary:

4 Click OK. In the Salary row, enter 1000 and click on the gear:.

5 Select Apply to Jan budget forward to the end of Continue to edit items in the budget to reflect planning assumptions for the year. Once you have created a customized monthly budget, actual year-to-date income and expenses are compared with the budget. Note: If you closed the Budget window, click Planning and Budget to open it. Click Reports Spending Current Budget Both the graph and report show whether expected income and expenses are being realized. Look at the graphical presentation of budget variances (if the graph is not showing, click on the Show Graph button to the right of the report). A purple bar above the zero line shows favorable variances, that is, cash inflows are above budgeted amounts and/or cash expenses are below budgeted amounts. Point at one of the bars and you ll see that a magnifying glass appears, meaning you can zoom in on the transactions that support the graph. Double click on the bar and you ll get a report listing the transactions for the month. To return to the original graph, click on the Back button. Click on the X in the upper right corner to exit. If you get a prompt, click on Don t Save. Scroll through the report to compare actual income (inflows) and expenses (outflows) to budgeted amounts by studying the Difference column. If income is below budget or expenses are above budget, changes in management may be needed to avoid financial problems. To save this report for future use, click on the Save Report icon at the top center. Click OK.

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