Introduction
Creating and monitoring budgets in Xero allows you to plan your business finances, track performance, and make informed decisions. With Xero’s built-in budgeting tools, you can set financial goals, compare actual results against projections, and adjust plans as needed to stay on target.
How to Create a Budget in Xero?
Step 1: From the dashboard, go to Reporting, choose All reports.
Step 2: Under the Financial Performance section, select Budget Manager.
Step 3: In the Select Budget field, choose an existing budget or click + Add New Budget to create one.
Step 4: Enter a Budget Name, then click Save.
Step 5: Define your Budget Period:
Start Date: Choose when the budget will begin (e.g., January 2025).
Actuals: Select how many prior months of actual data you want Xero to display (e.g., 3 months showing October to December 2024).
Period: Choose the duration and frequency — monthly, quarterly, or annual (e.g., 12 months).
Step 6: Click Update.
Step 7: Enter your forecasted income and expense figures for each account. You can use the arrows beside each line to apply values across all periods using formulas:
Apply a fixed amount to each: Enters the same amount every month.
Adjust by amount each month: Increases each month by a set value.
Adjust by percentage each month: Grows each month by the selected percentage.
Step 8: Click Save once all figures are entered. Your budget is now created.
How to Track Performance Against Budget in Xero?
Step 1: From the dashboard, go to Reporting, choose All reports.
Step 2: Under the Financial Performance section, Budget Variance.
Step 3: Select the Budget Name and Date Range you want to review. Click Update.
Step 4: Review the variance — Xero displays Actual vs Budget figures for each account.
Step 5: Identify any differences and investigate large variances to better manage spending or income planning.
Step 6: Export the report to PDF or Excel if you want to share or analyse it further.
How to Edit or Update a Budget
Step 1: From the dashboard, go to Reporting, choose All reports.
Step 2: Under the Financial Performance section, select Budget Manager.
Step 3: Open the budget you want to edit.
Step 4: Adjust figures, rename the budget, or change the date range as required. Click update.
Step 5: Click Save to apply your changes.
Tips for Effective Budget Management in Xero
Review your budget regularly to stay aligned with business goals.
Use tracking categories to monitor performance by department, location, or project.
Compare multiple budgets to see how different strategies impact results.
Export reports to share insights with stakeholders.
Frequently Asked Questions (FAQs) about Xero Budget Manager and Xero Budget Variance Feature
Q: Can I create more than one budget in Xero?
A: Yes. You can create multiple budgets — for example, one for the overall business and others for specific projects or departments.
Q: Can I import a budget from Excel into Xero?
A: Yes, Xero allows you to download a template and upload completed budget data from Excel.
Q: How often should I update my budget?
A: It’s best to review and adjust your budget quarterly or whenever major business changes occur.
Q: Can I restrict who can view or edit budgets?
A: Yes. Only users with Advisor or Standard access (with reporting permissions) can create or edit budgets.
Q: What’s the difference between Budget Manager and Budget Variance Report?
A: Budget Manager is used to create or edit budgets, while the Budget Variance Report shows how actual performance compares to your set targets.
Conclusion
Using Xero’s budgeting tools helps you plan ahead, control spending, and measure business performance effectively. By creating, reviewing, and adjusting budgets regularly, you gain better visibility into your finances and make more confident decisions for sustainable growth.