Xero Tip of the Month – Budgets & Reporting

Budgets are one of the most important business financial statements. If planned and monitored well, a budget allows you to monitor the financial impact of your business decisions and operational plans. Xero accounting software can quickly prepare comprehensive budgets and compare against actual performance on selected periods. Xero can create one overall budget as well as other budgets against different tracking categories that the business might be using. Budgets can be created for any period of time. Simple formulas can be used to fill out the data across each month for both income and expenditure items. The budget can apply a fixed amount per month, or an increase by amount or percentage per month. It is common to want to apply the budget figures as a percentage of income for example revenue to wages. Therefore Xero provides the ability for more complex calculations to be imported to the budget. For example it is possible to alter the budget to show that wages should be no more than 20% of the sales and superannuation should be 9.5% of the adjusted figure.

The budget summary report is useful to give you an idea of the effectiveness of the budget and make sure that everything is running on track.

To compare to actuals the Profit and Loss report can be modified to show the actuals, the budgeted amounts and also the variance in both totals and a percentage.

Click image for a brief video overview…

If you would like more information on how to properly prepare a budget in Xero please contact the office to book an appointment.

Kyla Dalton – Accountant