Page 62 - Budgeting for Managers

Gathering Production Figures
Using Tax Returns
Past tax records will be the most accurate source for at least
one item: payroll. The IRS keeps close track of both salaried
(W-2) and contract (1099) workers and the payroll figures for
tax deposits. (We discuss this further in Chapter 10.) 45
There’s one exception to this rule. Certain industries, such
as restaurants and delivery services, allow tips from customers
and may also receive cash and use it to pay staff without
recording it. The IRS has rules for these companies and many
companies follow the rules. Those that don’t may be following
old customs, but they’re breaking the law and taking a big risk.
As our society becomes more computerized, the IRS finds these
transactions easier and easier to track. It is best if our internal
accounts, our actual income, and our payroll pay rates match
both what we really do and what we report to the IRS.

Working with Multiple Periods
When we’ve gathered all the past numbers, we need to put
them together and make sense of them. In doing this, we need
to pay attention to the organization of the past periods that
we’re using. There are two parts to this. The first is that the
records may be a mix of daily, weekly, monthly, quarterly, semi-
annual, or annual, and we need to bring these together. Second,
if we have records from multiple past periods, we have to know
how to use all of them for putting together our new estimates.
Converting Time Periods
We need to adjust our information into the best time periods for
our budget. We should always make our estimates for each item
in the time period that is easiest, as it will be most accurate. But
then we need to adjust so that everything fits together. For
example, some companies pay clerical staff every two weeks
and professional staff once a month. If so, we should make our
payroll estimate for clerical staff by the week and our estimate
for professional staff by the month. We can use the calculator in
Table 3-1 to adjust the differences.