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Bookkeeping for Crafters

Lesson 25 of 33

Budgeting Forecast and Goals

Lauren Venell

Bookkeeping for Crafters

Lauren Venell

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Lesson Info

25. Budgeting Forecast and Goals


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2 Why Bother Bookkeeping? Duration:17:51
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5 Lesson 5- Chart of Accounts Duration:13:12
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Lesson Info

Budgeting Forecast and Goals

Now we're going to start looking at budgeting were to start turning our eyes toward the future um this segment is also pretty exciting for me because this is where you can start to put those goals into practice um you can start to look at how you've been doing up until this point um based on that information you can set yourself realistic achievable goals I mean I'm not saying you shouldn't strive um but maybe keep things a little more manageable you know, one of those you can either do like a shoot for the stars land on the moon kind of thing or um you know really keep things uh in hand um you'll be able to see how you're tracking against those goals as you go you'll be able to adjust for those maybe you made a little bit more money this month and you thought um so maybe you either want teo um make a purchase there if your cash flow matches or maybe you want to bump up your goal for next month a little bit because maybe things are trending in a better upward direction um so we're goin...

g to do this on the budget forecast sheet and the way that we're going to do this is we're going to start with last year's numbers as your actuals you're going to have your, um projections and then you're going to have your actual numbers um and the way that we start like I mentioned issues last year's numbers for your projection so when we start uh you'll have how much money you're making let's say in january started the beginning of the year and that will start to fill up as you are entering income into your spreadsheet you'll see how much money you're making in january you'll see you get closer and closer and closer to last year's january income that's your projection um of course we want our business is to be growing so presumably your projection you'll either exceed your projection or you'll be able to, um bump that up a little bit higher especially if you know that you're going to be getting income from some particular source this year that you didn't last year um so if you uh I don't know uh todd any course for example and you anticipate that that's going to bring in, uh x amount of revenue this year or x amount per month if it's a subscription based thing um that you didn't have last year, you'll be able to add that in um you can also do this on the expense side of things if you know that you are going to be hiring a designer or you're going to be investing in capital equipment, you can put that in there um if you get hired to write a book and you get a big advance you could put that in as part of your income projection um and then we're going to be looking at the difference between those projections and what our actual numbers are and seeing you know first of all the big difference is a small difference are their patterns that we can identify overtime are you consistently under projecting the holiday season but over projecting around valentine's day um do you always exceed projections in uh the summer time and you didn't think you'd be selling a lot why is that maybe it's because unknowingly your products are used a lot in the wedding industry and you just didn't really realize that and then we'll make some decisions about what to change if anything ah and then it's a lather rinse repeat right we're gonna look at this often um you're gonna do your bookkeeping every week or every month and this is part of that so um let's bring up the ledger we're going to look at the actual spreadsheet and let's take a look at the um let's put this away hopefully we're done with the product profit calculator we brought that up a few more times than I had originally anticipated which is great I'm glad that we were able to answer some questions with that uh but towards the end of your spreadsheet here all the way to the end please okay uh is your budget forecast and here we have for the whole year your projections in every income and expense category you've got your actuals will just be whatever you're making right that'll feed in there um and then you've got the difference and then we've got it listed out by month so january projected an actual plus the difference you're february projected an actual plus the difference uh and we'll take a look at that ok so let's look at our let's start with income and we'll look att uh twenty fourteen whoops going too far here and we could just use the summary for this this is inventory not income income summary well we haven't put anything in there for that yet well you'll be able to use the summary when you've entered stuff in there um you see it made my columns to small again I can't read anything all right so we'll use the profit and loss for now instead of the summary that's fine so in twenty fourteen let's assume that this is the month of january instead uh we've had one hundred and forty seven dollars in sales uh four thousand dollars in consulting and dollar twenty four in other so those would become our actuals just copying that and let's put this into our budget forecast I left out uh I'm sorry this is our projected yes he normally this would pull from the income summary but we haven't put it in there yet. Maybe we should do that just for the sake of consistent all right, so let's make up some numbers here we'll say we had thirty, six hundred and sales shipping and handling we made eight fifty consulting another twenty, four hundred other income two dollars so now for january in our budget forecast we've got these numbers in here and then we have to put in our actuals so maybe so far in january um we've made eighteen hundred dollars uh we've paid we've made for twenty five in shipping and handling twelve hundred and consulting okay, so if we're halfway through january and our difference is the same as our actuals that's fine we're on track right? We're halfway through the month we've made half uh half the amount of money as long as we're happy with being at this in the same place as last year this is great. This is fine. Uh if we're not happy with where we are here, then we need to look like we did in the profit and loss statement at where are issues are coming in right um so if the issue is that and this is separated out this is not quite like the profit and loss sheet where we were looking at the prophet um we were looking at the difference really between the income and the expenses I mean we will look at the profit um as well between from month to month and from year to year uh but we're looking mostly at the income and expenses separately uh so when we look at the difference between our actual and our projected income we're looking just at the income right um so if we have a problem in here it's not because our expenses are too high it's literally because we're not making enough money and we can look at the areas where that's happening um if your product sales or totally on track um and you're shipping and handling is totally on track but you're consulting is uh really low then you need to take a look at that um and see is it typical for me to have, um a bunch of consulting at the beginning of the year um or was last year justin anomaly? Um should I wait and see what the difference is from quarter to quarter or from year to year or is this truly something on a month to month basis that I need to be keeping an eye on? Um with product sales and seasonality it's a lot easier to follow this kind of stuff for a month to month because you will I have a pretty good idea of how well you tend to do in november in december during wedding season during valentine's day um so if your numbers are trending down then it might be time to take some actions uh maybe it's time to do a really concerted marketing push around that um maybe it's time to explore new wholesale accounts maybe the holiday season is over you haven't booked any new stores in awhile and so their customers have already seen your stuff over and over again maybe you need to get your product into new outlets and new venues um in order to keep those product sales up um because clearly the seasonality is not a factor right here because you're comparing january of this year to january of last year so it should still be roughly the same um and obviously there will be little fluctuation and that's perfectly fine you don't have to you know, I'm five dollars down this month from last month I really better send out a newsletter about this um but if you're finding big differences one way or another that's a flag for you to look into, um and it either is a problem with your sales or your marketing or um, it's an issue with, um well, if we're looking at income it's usually a product uh excuse me it's usually a problem for looking at income it's usually a problem with the sales or the marketing? Um it's not in enough stores people don't know enough about it because the seasonality tends to stay the same from day to day or it's a problem like I had with the bacons right with the meets, where the bacon trend blew up, and then people were starting to buy less and less so if it's not a problem with, you know, sort of things that you can control within your business, and you need to start looking outside of external factors because something is bringing the numbers up or down. And if it's not tied to your efforts specifically, um then there's something else more global going on that you need to look at and even if it's not within your control, it's still something that you need to account for, right? Because those things have a very real and material effect on your business, whether or not they're within your control, and there will always be factors that are out of your control. Um, maybe you didn't get accepted to a cz many craft fairs this year is you normally dio so you have fewer outlets for that. Um, that wasn't necessarily something you could control, but it's still up to you, then to make up for that, to have a plan in place for how to sell more product when you don't have a cz many of those outlets. So maybe you take that time that you would have travelled er, that you would have made the product for those craft fairs and you turn it into, um approaching buyers at stores and trying to get more wholesale accounts. Or maybe you put that time into direct to consumer marketing so more people buy from you online, and you make up the difference that way. Um, jackie, did you have a question? I saw your hand up and I just talked right through it. No worries, it's all good. So my questions specifically with the the twenty fifteen like actuals like, would you want to check it, like mid month to see where you are to go? Or is this something you're doing at the end of the month to see, like, hot? Like when would you check in with the budget forecast? So I like that's a good question I'd like to check in with the budget forecast every time I do my bookkeeping. So whether it's monthly or weekly or however you know bi monthly or semi monthly, um, that's, when I like to check in and see how I'm tracking, um, if you have the kind of business where things change very quickly, you may want to check in more frequently. Um, you know, if there's a lot of volatility in your industry among crafters that's not generally the case, so I think if you look at it monthly or more frequently than that, then that's fine um as far as looking at the your budget for the whole year and tracking against that again if you're looking at it at least monthly you'll be able to get a pretty good idea of where your tracking for the year um and I will tell you that looking at this budget forecast is a really good motivator right? Um sometimes you know I don't want to do like I told you earlier I hate social media I don't like doing it I'm not good it doesn't feel natural to me I need to hire somebody else to take that over um and uh you know if it if it turns out that I really am behind um it's much easier for me to then say okay in order to get up tio my projected sales I need to sell um let's pretend sales is the problem not my consulting let's say it's the end of the month and I've only got half of my sales in place if I need to make eighteen hundred dollars in sales, I need to sell on average one hundred products you know, um out of you know, from my last newsletter I can see that I converted twenty sales from that um from each tweet I can maybe get one sail out of that so then I can sit down and tell myself, well, at minimum you're going to need to write like one newsletter ten twitter post and again I'm not a social media person so someone out there right now is being like that's way too much marketing to your consumer base don't ever do that and probably don't um but it's a lot easier to motivate myself to sit down and do those things uh if I know ahead of time sort of what my expected return is on each of those and how much I need to do to get to my goals um you know and because it's you can't just like fire off newsletters and tweets maybe it means that I need to hook up with another crafter and we need to like trade sponsored posts on each other's blogged um maybe it means that I actually need to sell out a little money and do some advertising you know um either online or in print or um elsewhere and um if you haven't done advertising online like, say, through google or through etc um I think it's always worth trying those things have really small minimum budgets you khun just set a budget for like five bucks ten bucks and see what happens um how many people are actually looking at that ad um how many people are actually clicking on it and then how many people actually buy something um and so if you spend whatever it is five, ten, twenty dollars to figure out if it's right then it might totally be worth it um it might not mean it obviously is for some people or it wouldn't exist as like the business model for all of the technology industry right now um so there are a lot I mean it's sort of up to me how I want to meet that goal but nothing makes you hustle more than having a number that you know you need to reach right like okay, it's two weeks to the end of the year I'm twelve hundred dollars down like that will really motivate me to make those phone calls to those store buyers toe like, you know put together ah, that special promotion for my newsletter followers where if they buy more than one thing they get a special discount um and we'll talk about that a little bit more later when we talk about pricing will talk about discounts and coupons and alternatives to that and how you account for that um nothing really like makes you hit the pavement like like that number that you're down um you know, having your projected having your actuals exceed your projected um you know, on the opposite end of things is is great and I can make you feel really excited and make you feel a real boost and that can be a really good motivator for taking the next step when you feel like you've accomplished that goal um you know, that is not the time to, like, rest on your laurels and be like, okay, great, I'm in business like, all right, so you're doing slightly better than last year. What? That dusky view is wiggle room both in terms of time and maybe in terms of money, that you can invest somewhere in your business to take that to the next level, or to get more in line with how you want to spend your time in the things you want to make, um, that's a really good opportunity to start building and growing your business, as opposed to just sort of catching up in keeping up. If you find that you're, um, that your actual income is very often below your projected if you're constantly falling short of last year or you're just not hitting those goals, um, then you really need to take a hard look at your profitability in general, you need to go back to that profit and loss sheet that we saw there really go down that list and see let's just go back and look at that for a second since we're talking about it, uh, really go down that list. And figure out where it is that the problem is coming from if it's on the income side and it's you know a problem with sales then okay, you know you need to hire the rep you need to pound the pavement you need to get stuff in new stores as opposed to just the ones that they're already in. Um you need to be incentivizing your retail sales a little bit more um if your products themselves are not profitable of course like we mentioned this this can be a problem um and in terms of, uh, expenses similar thing um if you are in the let's go back to our budget forecast and let's put in some materials and supplies well, we'd have to put that into the put that into the expense summary. Okay. So let's say for materials and supplies I spend twenty six hundred dollars packaging a hundred bucks inventory purchases thirteen hundred production labor five hundred other expenses I don't know sixty bucks uh and let's just put some numbers in these other places to merchant service fees. Mmm mmm mmm. Advertising and promotion other expenses uh okay and so on and so forth we didn't look at all of these for right now, okay? Here's what we did last year ah let's say we're a little more efficient with our materials this year cut down a product packaging costs um production labor less of that too okay so in here for example our expenses are now up twelve hundred dollars uh for the month of january in this inventory purchases section so this is presumably an issue right? Your expenses are way way up what do you do to cut those back? Well, maybe in this case you don't do anything maybe this is just because you happen to make a big inventory purchase this month and last year you didn't you know you make big inventory purchases when you run out um and that happens whenever it happens and it's very difficult to predict on uh an annual or a monthly basis and that's totally fine sometimes you will see anomalies come up that are not something that you need to fix and then instead of like flipping out and feeling like you need to sell, sell, sell twelve hundred dollars more in order to keep up with the inventory because presumably as long as you're selling fine and your products or profitable this extra inventory is good you would just revise your projection so I wanted this to be uh you know, thirteen hundred dollars because that's what it was last year but I have to account for this big inventory purchased that I made so maybe I'll just revise that that particular point up and then I'm right on track I don't need to pay attention to that line item for that month anymore and that's totally fine to do. I don't encourage people to just revise their projected to whatever their actual numbers are, because that defeats the entire purpose of this sheep. Um, but in instances where there's a perfectly good reason for your actual number to be what it is, you go ahead and you revise that, um, and so I also want to point out other places where you can put in income or expenses that you expect to have to revise so in the income detail, and I haven't shown this yet because we weren't talking about it yet if you scroll over to the right, you've got new projected income over here, so let's say, you got that book advance in january or, you know, you're getting a book advance, you wrote a wonderful craft book. Um oh, this should say income, not expense apologies, we will correct that, um, and it was a five thousand dollars income. Um, this is an advance against sales, so I'm going to put it in sales even though it's a lump sum, a book advance you could presumably think of as consulting but it's actually an advance against sales, and so you'll get royalties beyond that once you exceed that five thousand dollars, right? Once you've, um sold more than five thousand dollars worth of your cut of the book then they'll pay you royalties on top of that advance so this is an advance against sale so we're gonna put it under sales uh it's five thousand dollars um and then your january total five thousand dollars and you can do the same thing for your expenses if you know you're going to be participating in a new craft show this year that you um to january oh, I already put it in here uh um if you know that you're already going to be participating in a new craft fair this year that you haven't done the previous year um then this won't show up in last year's numbers right but you know you're gonna have that expense come january you know that payments going come d'oh you're gonna have to submit it so it's good to make that part of your budget forecast and the way that um this fancy spreadsheet is set up is that it already um pulls in uh into your projections last year's numbers plus any new uh, income that you project. So um your projected income total will include last year's income plus any new projected income that you know is coming your way and the same thing with expenses um this will include anything that you had last year plus anything that you know is coming in or anything that you know you're going to have to shell out for uh later in the year so you can put those in whenever you have them you don't have to do a one month at a time if you know you're going to be doing this craft show in april, go ahead and put it in april and then it will appear, you know, down here in april even though you haven't gotten to that yet are there any questions about this so far? Yes, general for that uh let's say that april craft show that you're going to I don't know if that's like the right month or not, whatever what it's like, if you know you're going april, you know, the craft show is four hundred dollars like, usually you register in advance, so would you post that for the month you encourage and then the expenses around it you would budget for, um, for april? Or how would that look in there? Good question, okay, so, um, if you know you're gonna have the expense, but you haven't paid it yet, um, you would enter it in as soon as you know when you're going to have to pay it. Um usually when you apply for a craft show, as in this example, they tell you, you know, you're going to have a fee of x that is dubai, whatever that counts is an invoice that counts as a bill. And since we're doing a cruel accounting here, um, in this budget forecast, uh, we'll be looking at cash. When we look at the cash flow forecast, specifically, um, and that's, when we'll track the actual payment that you've made to it. But for now, we're assuming that we've gotten the bill for it already. Okay? So we're gonna enter that. It is an expense, even though we haven't paid that expense yet. So, yeah.

Class Description

It is common to be intimidated by math and money, but managing your business’s finances doesn’t have to feel overwhelming. Bookkeeping for Crafters with Lauren Venell will give you the confidence and skills you need to start and maintain your own small business ledger.

Lauren is an artist and educator committed to making financial solvency accessible to independent entrepreneurs. In Bookkeeping for Crafters you’ll learn the basics of managing your money and how doing it yourself can reveal important opportunities for your business.

You’ll learn about managing different types of income and expense accounts and how to painlessly prepare for tax time. Lauren will make predicting fluctuations in your cash flow straightforward and easy while helping you develop a system that is right for you – even if you prefer pen and paper over spreadsheets.

If you are ready to change your relationship to money and manage a ledger that is customized to the way you do business – this is the class for you.

Be sure to check out Lauren's other course Bookkeeping for Etsy Sellers.


Bekah Kitterman

Months after watching the live broadcast of this course, I am still so glad I bought it. I find myself coming back to it over and over again just to refresh my brain on how to manage all of my numbers. I'm new at having a business and doing my own bookkeeping, and this course has been extremely helpful as a tool to help me set things up well and keep me on track. Highly recommend especially for those new to business and bookkeeping or intimidated by taking care of your numbers!


There is so much fantastic information in this course that I had to purchase it even though I watched the free broadcast. It's real hands-on stuff, not a general description of what bookkeeping might be, but an actual guide to manage your business' finances. Thank you for all the insights and workbooks! I highly recommend this class.

Carla Sam

Wow, this course was jam packed full of insightful information (not just about book keeping!). Lauren was great at simplifying the process! Even though I watched most of the 2 days free broadcast, it was a wise investment to purchase the course and now I can re-watch at my leisure and fully take it all in. Thanks Lauren! :D