Choosing tags for budgeting

A budget can only answer the questions its tags were set up to answer. This article helps you decide which tag groups and tags to create before you start budgeting. It offers options rather than one fixed layout, so you can pick what fits the way your organisation works. You do not need a finance background to follow it.

What a tag does for a budget

One tag group answers one question. The P&L by tags view of a budget breaks its income and costs down by one tag group at a time: you pick the group in Tag group, and every tag in that group becomes a row. A group called Clients answers "which client did this money come from or go to?". A group called Cost type answers "what kind of spending was this?".

Three rules follow from that:

A document counts in full in every group it carries a tag from. An invoice tagged Client A in Clients and Media buying in Cost type appears in full in both breakdowns. The groups are separate views of the same total, so you never add them together.
Inside one group, a document is split between its tags. An invoice tagged with two clients is shared between them, never counted twice, so the rows of a group always add up to the budget's total.
Whatever has no tag from the group lands on the Untagged row. A large Untagged row is the first sign that a group is not being used on every document.

When Flowtly looks for a cost's tag in a group, it starts with the most specific place and works outwards: the invoice lines, then the invoice as a whole, then the bank transaction that paid it, then the counterparty. Once any line of an invoice has a tag from the group, only the lines count: a line without one lands on Untagged instead of taking the invoice's tag. So tagging a supplier once can cover all of its invoices, and tagging an invoice or its lines overrides that. Income starts from the sales invoice rows, then the invoice as a whole. An unpaid sales invoice with no tag from the group counts as Untagged, whatever its counterparty carries, so tag sales invoices themselves.

How the figures are calculated and read is covered in Budget P&L & forecast.

The three questions most organisations start with

Most organisations need three tag groups: who the work is for, which piece of work it is, and what kind of money it is. Each has more than one sensible set-up.

Clients

Create one tag group, for example Clients, with one tag per client. Then choose how far to take it:

Option A: revenue per client. Tag only the sales invoices. The breakdown shows how much each client brings in. This is the lightest set-up and a good place to start.
Option B: margin per client. Also tag the costs you buy for a client, such as media or a freelancer working only on that account. The breakdown then shows income and cost per client, and so the margin each one leaves.

Two settings save typing:

Switch on Also apply to counterparties on the group, and you can put a client tag on the counterparty itself. The P&L uses that tag for the counterparty's cost documents that carry no tag from the group. It does not reach an unpaid sales invoice, so give sales invoices their own client tag.
On a supplier who works for one client only, fill in Default invoice tags. The tags are added to that supplier's incoming invoices when they are matched, or offered as suggestions if your organisation has turned automatic adding off. See Counterparties.

Flowtly does not link a client to a tag for you. Create the tag when you take on the client.

Projects

Create a group such as Projects. Then choose:

Option A: one tag per project. Best when projects are few and run for months.
Option B: one tag per type of project, such as Retainer, Campaign and One-off. Best when projects are many and short, and what you want to compare is the kind of work rather than each job.

For option A, set Linked project on each tag. On a purchase invoice, choosing the tag then fills in the project, and choosing the project fills in the tag. Both stay editable. The link is set by hand, tag by tag.

Cost and income type

This is the managerial view: what the money was spent on, and where income came from. Options:

Option A: a short starter list. For a services business, for example: media buying, freelancers and contractors, salaries, tools and subscriptions, office, travel, and your own marketing. For income, one tag per service line.
Option B: follow your accountant's chart of accounts. Use the account names your accountant already reports by, so the budget and the books speak the same language. Fill in Accounting code on each tag if you export to your accountant.
Option C: start with five and split later. Begin with five broad tags and split one when it grows too large to explain. It is easier to split a tag than to merge two that people have used differently.

If costs and income share one group, start each tag name with what it is, such as Costs · Office or Income · Retainers, and set Invoice direction to Incoming (purchase) invoices only or Outgoing (sales) invoices only. Each invoice then offers only the tags that fit it.

Tagging categories: one field per question

A tag group decides how the P&L is broken down. A category decides what people see when they code a cost invoice. Tagging categories, opened from the foot of Settings → Finance & Business → Invoice tag groups, turns one or more tag groups into one labelled field on the invoice, offering every tag of those groups.

Required marks the field as one to fill in. An empty required field lowers the invoice's completeness and highlights the section, but it never blocks saving, so an invoice can still be parked before it is coded.
Several values switched off makes the field a single choice. Switch it on when one cost may need to be split across several tags.
The order of the categories is the order of the fields on the invoice.

For a first set-up, create one category per tag group: Client, Project, Cost type. Switch Required on for the cost-type category from the start: it stops nothing, and it shows at a glance which invoices still need coding. The clicks are described in Invoice tag groups.

Mistakes to avoid

Nesting unrelated tags as levels. Levels do not add up in the P&L: every tag is its own row, whatever level it sits at. Putting Accounting under Administration under one group therefore gives you rows side by side, not a total and its parts. If two things answer different questions, give them different groups.
One group for two questions. A group holding both clients and cost types either forces people to choose one or the other on each invoice, or splits each invoice between the two tags, and both breakdowns end up wrong.
A group named after a team instead of a question. Management says who owns the list, not what it answers. Name the group after the question, such as Cost type, so everyone tags the same way.
Skipping categories. Without them, the people coding invoices have to know which groups exist and pick from each one themselves. One required field per question is easier to get right.

A worked example

A small agency with three clients, four projects and one person coding invoices sets up:

Clients: Client A, Client B, Client C, with Also apply to counterparties switched on, each client's tag on its counterparty and on every sales invoice raised for it.
Projects: one tag per project, each with Linked project set: Client A retainer, Client B spring campaign, Client B website, Client C launch.
Cost and income type: eight tags. Costs · Media buying, Costs · Freelancers, Costs · Tools and subscriptions, Costs · Office and Costs · Own marketing, set to incoming invoices only; Income · Retainers, Income · Campaigns and Income · Production, set to outgoing invoices only.
Three categories: Client, Project and Cost type, each over its own group, with Cost type required.

In the budget's P&L by tags, choosing Clients in Tag group shows income and cost per client. Shared costs such as the office rent carry no client tag, so they appear on the Untagged row and the agency sees how much overhead is not charged to any client. Choosing Projects shows the same money per project, and choosing Cost and income type shows what the money was spent on. Each view adds up to the same budget total.

Example use cases

An office manager setting up budgeting for the first time creates three tag groups, one per question, before anyone codes an invoice.
A founder wants to know which clients are profitable, so the team moves from tagging only sales invoices to also tagging the costs bought for each client.
A finance lead mirrors the accountant's chart of accounts in the cost-type group, so the budget and the monthly report use the same names.
An administrator sees a large Untagged row in the client breakdown and switches Required on for the Client category.