6 Steps to a Better Business Budget

It also has a convenient overview sheet, which gives users access to their performance at a glance. If you’re just getting started with budgeting for your business, these templates are a great medium for learning the process. We invite you to create copies, download, edit, and print these business budget templates.

It might sound obvious, but getting all the numbers in your budget in one easy-to-read summary is really helpful. These are startup costs like moving offices, equipment, furniture, and software, as well as other costs related to launch and research. This is the amount you expect to make from the sale of goods or services.

Look to Cut Costs

Profit is what you take home after deducting your expenses from your revenue. Here you’ll plan out how much profit you plan to make based on your projected revenue, expenses, and cost of goods Building business budget sold. If the difference between revenue and expenses (aka “profit margins”) aren’t where you’d like them to be, you need to rethink your cost of goods sold and consider raising prices.

With this goal, the company may need to trim expenses or growth initiatives elsewhere in its budget. One of the most amazing perks of running a profitable business isn’t getting but giving! Be generous with your products, services and profits along the way. Constantly live out a spirit of generosity and encourage it in your team. That’s the hallmark of people who live successful lives and who operate business with soul.

Streamline Small Business Budgeting Real-Time Work Management in Smartsheet

Expenses might be broken down into rent, employee salaries and marketing. After you tally your revenue and expenses, you can then calculate your profit and loss statement. The Capterra small-business budget template has been a fan favorite since it was published in 2015. In this one simple Excel workbook, you can create your monthly budget, your annual budget and then compare your actual numbers to your budgeted numbers.

• The second step for creating a business budget involves adding up all of your historic fixed costs and using them to reliably predict future ones.
• If you’re eager to get out of debt as fast as you can, you may decide your wants can wait until you have some savings or your debts are under control.
• You can access your profit and loss statement, track trends, monitor invoices, and more from your QuickBooks account.
• After identifying your variable expenses and estimating how much they cost each month, subtract the amount from your income.
• We are here to help ensure that each business we work with is posed to make the biggest positive impact possible for its owners, employees, and community.

For instance, some money might go toward bills or business growth. Others will help fund daily operational expenses and take-home pay for yourself and your staff. To use with Google Sheets, download the template, send it to your Google Drive and open it with Google Sheets.

Once you’ve tallied up your fixed expenses, you can subtract that number from the total income you calculated in step 1. 63% of small business owners contribute personal funds to their business at least once per year. This is a clear indication that business owners are not budgeting accurately or at all. There is no absolute value of how much a small business budget should be. It can differ based on the type of business you’re in, the business stage, your target market, sales, etc.

Tips for Creating a Small Business Budget

A great thing about many variable costs is that they can be negotiated with suppliers. As a result, you misspend and under-utilize the credit in unimportant activities — like paying the bills which has no return compared to money spent on marketing campaigns. If you have a budget, you can improve your credit utilization ratio as well as have impressive ROI on your credit investments. A business budget is a plan of action for how your business revenue will be spent.

Larger businesses tend to make budgets annually, but for a small business, especially at first, it is a good idea to break down your budget monthly. To get started and identify a realistic monthly budget for your business check out our small business monthly budget templates for Google Sheets. Creating a business budget from scratch can feel tedious, but you might already have access to tools that can help simplify the process. Your small-business accounting software is a good place to start, since it houses your business’s financial data and may offer basic budgeting reports. After you finish creating a budget, the next step is to stick to it. For starters, you can set reminders with your credit card and bank accounts when you reach a preset spending amount.

You should also try tracking all of your expenses into your spreadsheet or budgeting app right after you make a purchase. And if you share expenses with someone else, make sure you’re both on the same page with the budget and keep each other on track. After you separate fixed and variable expenses, list how much you spend on each expense per month. Louis DeNicola is the president of LD Money Media LLC and an experienced finance writer who specializes in credit, personal finance, and small business finance. Within the small business sphere, he helps business owners understand their financing options, cash flow management, business credit, and taxes.

What is included in a small-business budget?

Even if your necessities fall under the 50% cap, revisiting these fixed expenses occasionally is smart. You may find a better cell phone plan, an opportunity to refinance your mortgage or an opportunity for less expensive car insurance. If I have take-home pay of, say, $3,000 a month, how can I pay for housing, food, insurance, health care, debt repayment and fun without running out of money? That’s a lot to cover with a limited amount, and this is a zero-sum game.

In your spreadsheet, create a summary page with a row for each of the budget categories above. Then, next to each category, list the total amount you’ve budgeted. Finally, create another column to the right—when the time period ends, use it to record the actual amounts spent in each category. This gives you a snapshot of your budget that’s easy to find without diving into layers of crowded spreadsheets. Store your budget template on an accessible drive and update it regularly.

Big differences will raise red flags (or provide pleasant surprises!), empower you to act in a timely manner, and allow you to plan ahead for the rest of the year. Set Up an Easy-to-Access SpreadsheetSince you’re going to access, update, and review your business budget many times throughout the year, you need to keep your spreadsheet accessible. Once you’ve knocked off any toxic debt, the next task is to get yourself on track for retirement. Aim to save 15% of your gross income; that includes your company match, if there is one.

Do Small Businesses Need a Budget?

Make sure your budget is as realistic as possible, and update and revise it on a regular basis. Included on this page, you’ll learn why a budget is necessary for small businesses and how to create a budget using Excel. Plus, you’ll find a free, downloadable small business budget starter kit. As time goes on, regularly compare your actual numbers to your budget to determine whether your business is meeting those goals, and course correct if necessary. When you’re creating a business budget, make sure you put aside extra cash and plan for contingencies. Here’s a step-by-step guide for creating a business budget, along with why budgets are crucial to running a successful business.

Once you’ve got a handle on your income, it’s time to get a handle of your costs—starting with fixed costs. While many firms draft a budget yearly, small business owners should do so more often. Establishing a budget planning calendar can be an effective tool for business owners to ensure they have enough capital to meet their business needs. To allocate funds for business expenses, you first need to determine your income and cash flow for the period to the best of your ability.

• A business budget estimates future revenue and expenses in detail, so that you can see whether you’re on track to meet financial expectations for the month, quarter or year.
• Better to set aside money for an emergency that doesn’t happen than to be blindsided.
• However, many small-business owners skip this vital business management step.
• Note that the Widget Inc. budget has a line item for gain or loss on sale, other revenue.
• Depending on your business model, you may have several income sources, so be sure to include any and all revenue streams in this section.
• Creating a business budget is an excellent first step for any new business owner.

Creating a business budget is an excellent first step for any new business owner. By taking a closer look at your assets, expenses, and financial goals, you can craft a better plan for the future of your booming business. The variable costs of your business might vary from month to month or every year. Usage-based utilities, shipping costs of orders, etc., are common variable expenses most businesses incur.

For example, you’ll be able to track the trajectory of your business and determine whether or not you’re ready to hire your first employees. You’ve accounted for your income and fixed, variable, and emergency expenses. Now you can better understand your business finances by creating a profit and loss (P&L) statement. A P&L statement is a high-level overview that shows whether your organization is profitable or in the red. To find out how much money your business is bringing in, refer to your profit and loss statements. Depending on your business model, you may have several income sources, so be sure to include any and all revenue streams in this section.

When creating custom ordered goods, factor in labor time and cost of operations and materials. While every good budget has the same framework, you’ll need to think about the unique budgeting quirks of your industry and business type. This includes all income and expense information from previous years and any previous budget information you may have. Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page.

The applications vary slightly from program to program, but all ask for some personal background information. If you are new to HBS Online, you will be required to set up an account before starting an application for the program of your choice. Before you compile your budget, it’s important to have a firm understanding of the goals your organization is working toward in the period covered by it. By understanding those goals, you can prepare a budget that aligns with and facilitates them. Before preparing your first organizational budget, it’s important to understand what goes into a budget and the key steps involved in creating one.

You can think of a business budget as a snapshot of your future expenses and revenues that will help you make important strategic decisions about your business. For example, if you realize you’re in the red and spending more than you earn, you might cut your spending and focus on finding new clients. Variable costs don’t come with a fixed price tag—and will vary each month based on your business performance and activity. These can include things like usage-based utilities (like electricity or gas), shipping costs, sales commissions, or travel costs.