Welcome to your custom Xero homepage! Today, we’ll guide you through the process of inputting your budgeted income statement data into Xero for the year 2023. By doing this, you’ll be able to make informed financial decisions and run comparative reports as the year progresses.
Step 1: Duplicate the Tab for Reports To start, duplicate the tab where you’ll be entering the budgeted income statement data. Right-click on the tab at the top and select “Duplicate” to create a new tab for your budgeted income statement.
Step 2: Prepare the Comparative Balance Sheet Open the “Balance Sheet” under the accounting drop-down menu. Ensure it is a comparative balance sheet to compare budgeted figures with actual figures later on. If you don’t have a comparative balance sheet, open the standard one and adjust it accordingly.
Step 3: Prepare the Comparative Income Statement Next, open the “Income Statement” under the accounting drop-down menu. Make sure it is a comparative income statement to compare budgeted and actual figures in the future. If you don’t have one, open the standard income statement and customize it for your needs.
Step 4: Import Data from Prior Presentation In a prior presentation, you downloaded information from Xero, which is essentially a trial balance. Format this data into an income statement in Excel to create your budgeted projected income statement. Make sure you have data for at least two months (e.g., January and February) to use as a baseline for budgeting.
Step 5: Access the Budget Manager in Xero Now, let’s go to the budget manager in Xero. Navigate to the accounting drop-down menu, then select “Reports” and scroll down to find the “Budget Manager.”
Step 6: Create a New Budget You can have multiple budgets in Xero, but for now, let’s use the default budget called “Overall Budget.” Start the budget on January and choose a duration of 12 months to project the entire year.
Step 7: Remove Actuals Data Since we are working with a budget, we want to remove actuals data from the budget manager. Select “None” for the actuals, and click “Update” to proceed with data input.
Step 8: Input Budgeted Data Now, you’ll see data input fields below. Enter the budgeted figures for each account (e.g., sales, expenses) for each month. You can use the percentages or fixed amounts you calculated in your Excel budget.
Step 9: Adjust by Percentage If you have values that change by a percentage each month, use the “Adjust by Percentage Each Month” option in Xero’s budget manager. Enter the appropriate percentage, and Xero will apply it to each subsequent month.
Step 10: Verify Totals Ensure that your total budgeted figures align with what you have calculated in Excel. If there are minor discrepancies, they are likely due to rounding and shouldn’t impact your analysis significantly.
Step 11: Save and Compare Once you’ve entered the budgeted income statement data for all 12 months, save your budget. As the year progresses and you enter actual data for each month, you can run reports in Xero to compare budgeted and actual figures, helping you make informed financial decisions and keep track of your business’s performance.
Reviewing the Budgeted Income Statement
Before we dive into the data input process, let’s take a moment to review our budgeted income statement that we prepared in Excel. We carefully projected revenues, expenses, and other financial aspects for each month of the year, ensuring a solid foundation for our budgeting exercise.
Data Input in Xero’s Budget Manager
Now that we have our budgeted income statement ready, it’s time to put it back into Xero using the Budget Manager. Follow these steps to ensure a seamless process:
- Access the Budget Manager To get started, go to the accounting drop-down menu and select “Reports.” From there, navigate to the “Budget Manager.”
- Create a New Budget In the Budget Manager, you can choose to have multiple budgets. For this exercise, we’ll work with the “Overall Budget.” Name the budget and set its start date to January. We’ll project for the entire year, so the duration will be 12 months.
- Remove Actuals Data Since we’re inputting a budget, we need to remove the actuals data. Select “None” for the actuals, and click “Update.”
- Begin Data Input Now, you’ll see data input fields below. Start by entering the budgeted figures for each account for January. You can reference your budgeted income statement in Excel to fill in the numbers accurately.
- Compounding Options Xero’s Budget Manager has a useful functionality that allows you to apply a fixed amount or adjust by a percentage each month. For accounts with consistent changes, such as sales and expenses, you can apply a percentage increase or decrease to easily populate the data for the remaining months.
- Double-Check Totals As you proceed with data input, take a moment to double-check the totals for each line item and make sure they match your Excel budgeted income statement.
- Continue Data Input for All Months Continue entering the budgeted figures for each account for all 12 months. Make sure to apply the appropriate compounding options where needed.
Save and Review
Once you’ve completed data input for all months, save your budget in Xero’s Budget Manager. At this point, you’ll have successfully put your budgeted income statement back into Xero, which will empower you to generate comparative reports and analyze budget-to-actual variances as time progresses.
Generating Comparative Reports
With your budget in place, Xero allows you to run comparative reports that will provide valuable insights into your business’s performance. As you enter actual data for each month, you can easily compare it with the budgeted figures, allowing you to make strategic decisions and fine-tune your financial plans.
Congratulations! You’ve now mastered the process of inputting your budgeted income statement data into Xero’s Budget Manager. By leveraging Xero’s powerful budgeting tool, you can gain a deeper understanding of your business’s financial health and make informed decisions for the year 2023.
In the next blog, we’ll explore how to generate comparative reports and analyze budget-to-actual variances to maximize your efficiency as an accounting hero with Xero. Stay tuned and keep excelling in your financial endeavors with Xero!