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Accounting expert reveals: The secret to handling your income when it comes to your budget

by , 15 September 2014
The trick to an effective budget is to keep it simple. If you have a hundred different entries, it just becomes a confusing mess. This goes for your expenses and your income.

If you're in a business that generates income from several different areas, it can be difficult to know how to enter that income in a way that won't throw off your budget.

To help you with this, we're revealing a tip straight from the experts on how to handle your income when you enter it into your budget...

 

Here's how to handle your income when you enter it into your budget

 
The worst thing you can do is try entering separate amounts for income into your budget, say the experts behind the Practical Accountancy Loose Leaf Service. What you should do is group them together.
 
Let's say your business has different departments such as a business consulting department, a marketing department and a business strategy department. 
 
Each of these departments functions independently even though they're all part of your company. And each one generates a separate income.
 
When you create your budget, enter the income from each department as a single amount. 
 
Then total your company's income to create one amount. This way if your income fluctuates, you can see where the change started.
 
Just beware the one pitfall of this method...
 
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Beware this pitfall of this method of entering income

 
Beware of variable income. If you can, separate fixed amounts of income from variable. For example, if you have a contract with a client and you know they must pay you R2 500 a month for a year, it's fixed income.
 
Separating your fixed and variable incomes can help you see your stable income and ensure it doesn't decrease. This is the money you'll use to cover your expenses as you can rely on it.
 
When you create your budget, use this method to enter your income and it'll create a stronger and more effective budget. 
 

PS. Here is an amazingly simple way to manage your financials, with the Master Budget Series



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