Question of the Week
How to Budget for 2024
Happy Friday, all!
Can you believe it’s the last weekend in September?! It blows my mind to think we are entering the last quarter of the year. That means it’s time to start thinking about sweater weather, the Holidays, and 2024!
Having completed three full quarters in your business means it’s the perfect time to start budgeting for 2024. Here are three simple steps to help you create your budget.
1. Clean Up Your Books for 2023
The first thing you need to do is make sure you have up-to-date and clean books for 2023. Hopefully, you or your bookkeeper have been keeping up with updating your transactions and the monthly reconciliations. If you haven’t been keeping up, there’s no time like the present!
If you’ve ever dealt with accounting software, you know that even the best systems are fertile ground for errors, duplications, or omissions. So, when you’re reviewing your 2023 books, you want to ensure that:
- You’ve accepted all of the transactions in the bank feed
- The transactions are in the proper account (or category)
- The final amounts in Your Bank register and Accounting Register match
Again, this is easier if you do it as you go, but I know that’s not always possible. Going through these checks and balances will help you find any errors.
2. Review Where You Are
Once you know your books are accurate, you can start to review where you are. You can run a Profit and Loss through the first three quarters. I like to see the numbers by month and export them to an Excel spreadsheet so you can dissect the information, notice patterns, and make changes directly in the spreadsheet.
You may be tempted to judge or tell stories around what you see. However, this step is just to create awareness, not shame you for what you haven’t accomplished yet.
When reviewing the information, ask yourself a few questions:
- Do you notice any patterns? Look for consistent patterns in your income and expenses for items you can count on in the coming year.
- Do you notice any anomalies? You may have a month where you incurred many expenses for one-time or periodic expenses like certifications, annual software purchases, or unusual trips. Although these expenses may not happen again, make sure to build some slack in your budget for the costs for the upcoming year.
- ·Is there anything coming in the fourth quarter that you need to consider? A lot of businesses tend to have peaks and valleys. Maybe the holidays are the busiest time for you, or perhaps they are the slowest. Whatever the scenario, you can adjust your spreadsheet to account for the differences.
3. Plan for the coming year
I like using Excel for budgeting because you can then copy and paste the information you have and use it as a foundation for next year. You can also play with whatever adjustments you need to make. Expect a big contract in February? Going to a conference mid-summer? Taking a sabbatical in the fall? It’s best to plan for everything now and adjust your expectations and buckets accordingly.
If you’re not as confident with Excel, you can create budgets in your accounting software. Here are step-by-step tutorials for QuickBooks. The cool thing about having it in your accounting software is comparing the budget to your actuals during the year.
Tricks of the Trade
And there you go! You’ve set up your budget for 2024. Here are a few additional tricks of the trade I’ve learned doing this year after year.
- No judgment: This is worth repeating. Getting lost in the story around your successes or failures misses the point of this exercise. It’s a tool for creating awareness around where you are, where you want to be, and the steps you need to get there.
- It won’t be perfect: Your budget won’t be able to 100% predict where you’ll be in 2024, nor does it need to. But it will give you guardrails you can use as a frame of reference when navigating the year to come.
- Don’t set it and forget it: Start with the numbers you have and make adjustments along the way. Everything is an experiment! Try this budget on, see how it fits, and feel free to make any necessary alterations.
Quote of the Week
“Budgeting is not just for people who do not have enough money. It is for everyone who wants to ensure that their money is enough.” – Rosette Mugidde Wamambe
Task of the Week
The task this week is a bit obvious – get on your budget! If it feels overwhelming, just start on the first step and see where it takes you. I’ve learned that momentum is way better than motivation. Sometimes, just getting started can take you a long way.
As always, I’d love to hear about your budget challenges and success. Was this guide helpful? Anything I miss? You can let me know at the links below!