Budgeting Small Business Information Systems Professor Barry Floyd

Objectives Understand the notion of a ‘budget’ Understand the notion of a ‘budget’ Identify activities and documents in the standard budgeting process Identify activities and documents in the standard budgeting process Know how to setup a budget in QuickBooks Know how to setup a budget in QuickBooks Identify key reports to organizational performance in comparison to specified budget. Identify key reports to organizational performance in comparison to specified budget.

References

Agenda Understand notion of budgets Understand notion of budgets Setup a budget in QuickBooks Setup a budget in QuickBooks Identify and understand key performance reports compared to budgeted activity Identify and understand key performance reports compared to budgeted activity

Accounting Information Systems Two of the more important information outputs of an AIS are: Two of the more important information outputs of an AIS are: Financial Statements Financial Statements Externally used by lenders and investors Externally used by lenders and investors Internally used to assess financial performance Internally used to assess financial performance Managerial reports Managerial reports Detailed operational information to plan, manage, control and evaluate company performance Detailed operational information to plan, manage, control and evaluate company performance

Budgets A budget is a formal expression of a goal in financial terms … A budget is a formal expression of a goal in financial terms … Cash budget Cash budget Shows projected cash inflows and outflows Shows projected cash inflows and outflows Can provide advance warning of cash flow problems in order to take action. Can provide advance warning of cash flow problems in order to take action. Capital budget Capital budget A plan to finance long-term outlays, such as for fixed assets like facilities and equipment. A plan to finance long-term outlays, such as for fixed assets like facilities and equipment. Budgets work with the reporting activity … a performance report can compare budgeted (projected performance) with actual performance. Note that we can budget for $$$ in QuickBooks. In Great Plains we’ll see that we can create budgets for non-$$$ accounts.

Reporting Management by exception looks at variation between proposed and actual performance Management by exception looks at variation between proposed and actual performance Want to see where there are variations and then deal with those variations Want to see where there are variations and then deal with those variations Comparisons between projected and actual performance can be created for: Comparisons between projected and actual performance can be created for: Standard and actual production rates, materials used, labor efficiency, profitability, sales. Standard and actual production rates, materials used, labor efficiency, profitability, sales. Employees focus their efforts on tasks that are measured and evaluated! Employees focus their efforts on tasks that are measured and evaluated!

Budgets in QuickBooks Use the budgeting to estimate future income and expenses. Use the budgeting to estimate future income and expenses. Compare to actual income and expenses Compare to actual income and expenses How categorized? How categorized? Row for each income/expense account, column for each month Row for each income/expense account, column for each month Can subdivide the budget to reflect class, location, or customer Can subdivide the budget to reflect class, location, or customer

QuickBooks Budget

QuickBooks Activity Modify the current budget for shipping income and for office expenses Modify the current budget for shipping income and for office expenses Create a new budget using the budget wizard Create a new budget using the budget wizard View reports based on the budgeting activity View reports based on the budgeting activity

Summary A budget is an important tool for identifying concrete goals and, using the reporting features, identify when those goals have not been met in order to take corrective action A budget is an important tool for identifying concrete goals and, using the reporting features, identify when those goals have not been met in order to take corrective action We’ll look at other reports, including cash flow analysis later in the quarter. We’ll look at other reports, including cash flow analysis later in the quarter.