Y$10K – Use QuickBooks to Plan Ahead the Easy Way
Karl Palachuk / Karl Palachuk
Those numbers are your money, your profits, your losses, your payroll, your cash flow. They are also your extravagances, your priorities, and your commitments. My motto is: Nothing happens by itself. That’s certainly the case with money. Money management doesn’t happen by itself. Retirement doesn’t happen by itself. Wealth doesn’t happen by itself.
Here’s one easy thing you can do in QuickBooks to begin looking at longer-term cash flow. QB has a function called memorized transactions. I encourage you to use memorized checks. Here’s all you have to do. When you write a check for a regularly occurring payment, such as rent or a software subscription, right-click on the check in the bank register and choose to “memorize” it.
Fill out the form as in the illustration here. Set the payment to enter automatically. And set it to do so 30 days in advance. In the note field on the check, enter two stars (**) so you know that these entries are automatically generated. Many dates move around a bit based on the weekend, so enter it for the earliest day it’s likely to occur.
|Illustration 1 – click to enlarge|
Enter these for all the recurring billing you can think of. And whenever you find yourself entering something that will recur in a month, memorize it.
When you look at your checkbook in QuickBooks, there’s a line separating “today” from the future. After you’ve entered your recurring payments, you’ll see all the double-starred entries for the next 30 days. It will look like the next illustration, although your future balance may change to red at some point.
|Illustration 2 – click to enlarge|
Don’t worry – that’s actually good. The two lines you have to be vigilant about are the today/tomorrow line and the point at which your balance does negative. Your motivation is to keep that balance in the black for the foreseeable (30 days) future.
This is extremely helpful with cash flow. You can literally see how much money you’ll need to make payroll and what the squeeze is going to look like when you pay rent. Use a simple cash flow procedure (see http://blog.smallbizthoughts.com/2011/12/sop-friday-cash-flow-weekly-procedure.html) to also look ahead and see when money will flow in from manage service payments.
Note: You need to set these payments to use debit cards and not credit cards. That’s a huge step toward moving away from credit cards and toward running your business on cash instead of credit. Set up the bill-pays on debit cards and then auto-schedule with with memorized transactions in QuickBooks.
Cash flow is king and this little technique will help you see it in real time.
All material Copyright (c) 2006-2016 Karl W. Palachuk unless otherwise noted.