Key No.

Name of the key

Explanation

Key No. 1:

Building a forecast and budget for the year.

Before imposing any budget, we need to first set one up in its most basic form. i.e., to figure out what the costs should look like based on expected revenue.  

Key No. 2:

To make sure accurate book keeping

Understanding actual spending is only doable if the transactional data behind the scenes is recorded correctly.

It becomes important to make sure that the bookkeeper is on the same page with regard to the transactions and the appropriate account charts they fall into. It can be accounts of costs that were incurred by a specific department or group.

Say, if you take a client out to lunch to close a deal, then this should be categorized as a sales expense. Similarly if you buy lunch for employees in the office, then this would fall under meals/entertainment in your operations budget.

The bookkeeper needs to classify these types of transactions differently and consistently. Otherwise, we will not be able to accurately track spending per department, resulting in inaccuracies and misinformed decisions.

Key No. 3:

Tracking of actuals Vs. Budgets

In order to enforce budgets, we need an easy way to track each department’s actual spending’s versus planned spending. It becomes important here to not complicate this process.

There are numerous amount of robust systems to help with this; however, those systems are usually not necessary for many small- or mid-sized companies because they are very process-intensive and expensive.

The requirement is to build a system that is easy to maintain, and simple to enforce such as Tally.ERP 9.

Key No. 4:

Setting up of time periods to set the Budgets

It is important to complete the financials before setting up the budget for any given time period.

We can’t hold departments accountable for their budgets when we haven’t completed the books for that time period. If the plan is to close out the books every quarter, then asking the departments to set a monthly budget is unfair: because their financials are not in place for them to make a proper estimate.

Step 1:

Gateway of Tally > Accounts Info. > Budgets

Step 2:

Select ‘Create’ > Press ‘Enter’

Step 3:

Enter budget name in the ‘Name’ field.

Step 4:

Select ‘Primary’ in ‘Under’

Step 5:

Specify the ‘Period of Budget’ in ‘From:’ and ‘To:’

Step 6:

For Group Budget: –

Let us that we want to track all expenses; we can create Financial Budget as shown below:

Step 1: Set ‘Yes’ under ‘Group’ in ‘Set/ Alter Budgets of’ > Press ‘Enter’

Step 2: In ‘Group Budgets’ screen, select the required Group in ‘Account Name’

Step 3: Select the appropriate ‘Type of Budget’

Step 4: Enter budget ‘Amount’

Step 5: Accept the screen.

For Ledger Budget:

Step 1: Set ‘Yes’ under ‘Ledger’ in ‘Set/ Alter Budgets of’ > Press ‘Enter’

Step 2: In ‘Ledger Budgets’ screen, select the required Group in ‘Account Name’

Step 3: Select the appropriate ‘Type of Budget’

Step 4: Enter budget ‘Amount’

Step 5: Accept the screen.

For Cost Centre:

Step 1: Set ‘Yes’ under ‘Cost Centers’ in ‘Set/ Alter Budgets of’ > Press ‘Enter’

Step 2: In ‘Cost Centre Budget’ screen, select the required Cost Centres and enter ‘Expenses’ for each Cost Centre (Income and Closing Balance can also be entered if required)