Budgets – why you need them now more than ever and how to set them up in Sage 50, Xero and QuickBooks

Posted on 4th August 2020 by Streets What's trending?

Image to represent Budgets – why you need them now more than ever and how to set them up in Sage 50, Xero and QuickBooks

We have always promoted the importance of setting budgets, but in the current economic climate they are now more important than ever.

If you have applied for a COVID loan you will no doubt have been asked for a budget or forecast, but budget setting should be something you look at on a regular basis.

Budgets help you keep your eye on the results, create accountability and ensure you know how your business is doing. Budgets can also help you question why things didn’t turn out as planned or what unexpected successes occurred. Budgets can also be used to set targets for sales or restrictions for expenditure.

Budgets or Forecasts?

These words often get used interchangeably, but the main difference is that a budget is a plan for what you hope will happen and a forecast is what you think will happen. A budget is normally set for the year ahead and is fixed, whereas a forecast is amended as the year progresses and you have a better idea of what is happening. Consider a budget set January 2020 and how different this will look, for most businesses, compared to a forecast prepared in April 2020 as the impact of COVID-19 becomes apparent.

Budgets (and forecasting) in Accounting Software

The three software packages we deal with most frequently (Xero, Sage 50 and QuickBooks) all have in built budgeting options to allow you to build and track budgets, either at top level (by nominal codes) or more detailed (by departments/tracking/classes). These are designed to be used for Profit and Loss budgets which can then be compared to actuals.

Some businesses like to compare their actual results to the original budget. Others like to amend the budget periodically and treat it more like a forecast of what they expect the year end results will look like.

Cashflow forecasting

Cashflow forecasting takes the profit and loss forecasts of a business and turns them into a projection of cashflow. This can be a complicated exercise as this requires the factoring of timing differences such as the delay between billing customers and being paid, the delay between vat on sales and bills and the actual VAT return payments to HMRC, planning for capital expenditure and future payments of corporation tax.

The preparation of strong cashflow models require either dedicated cashflow software or complex excel modelling. As such, a lot of our clients turn to us to support the preparation of cashflow forecasts, which we can then update periodically as required. However, the starting position is always the same – what is your budget for the up-coming year?

Software Budgeting

We have written additional articles which cover setting up budgets in Sage, QuickBooks and Xero. Should you require assistance with this or want to talk with us about building cashflow forecasts please get in touch by emailing info@streetsweb.co.uk

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The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.


The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.

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