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How to Create a Basic Business Budget

8 Min Read | May 16, 2024

You’d never intentionally set your business up to fail, right? But if you don’t know your numbers and how to make a business budget, that’s exactly what you’re doing. Money problems and bad accounting are two reasons why many small businesses don’t make it past their first five years. 1

Talking about budgets can feel overwhelming. We get it. For a lot of business leaders, it’s a lot more comfortable dreaming up big ideas and getting stuff done than digging into numbers. But you can’t set yourself up for steady growth until you have a handle on the money flowing in and out of your company. You also can’t enjoy financial peace in your business.

Not a numbers person? That’s okay. Follow the simple steps below to learn how to create a budget for a business and manage your finances with confidence. We’ll even give you a link to an easy-to-use small-business budget template in the EntreLeader’s Guide to Business Finances .

But before we get to that, let’s unpack what a budget is and why you need one.

Don't Let Your Numbers Intimidate You

With the EntreLeader’s Guide to Business Finances, you can grow your profits without debt—even if numbers aren’t your thing. Plus, get a free business budget template as part of the guide!

What Is a Business Budget?

A business budget is a plan for how you’ll use the money your business generates every month, quarter and year. It’s like looking through a windshield to see the expenses, revenue and profit coming down the road. Your business budget helps you decide what to do with business profit, when and where to cut spending and grow revenue, and how to invest for growth when the time comes. Leadership expert John Maxwell sums it up: “A budget is telling your money where to go instead of wondering where it went.”

But here’s what a business budget is not: a profit and loss (P&L) report you read at the end of the month. Your P&L is like a rearview mirror—it lets you look backward at what’s already happened. Your P&L statement and budget are meant to work together so you can see your financial problems and opportunities and use those findings to forecast your future, set educated goals, and stay on track.

Why Do I Need to Budget for My Business?

Creating a budget should be your very first accounting task because your business won’t survive without it. Sound dramatic? Check this out: There are 33.2 million small businesses in the United States. Out of the small businesses that opened from 1994 to 2020, 67.7% survived at least two years. But less than half survived past five years. 2    The top reasons these businesses went under? They hit a wall with cash-flow problems, faced pricing and cost issues, and failed to plan strategically . 3

As a business owner, one of the worst feelings in the world is wondering whether you’ll be able to make payroll and keep your doors open. That’s why we can’t say it enough: Make a business budget to stay more in control and have more financial peace in running your business.

A budget won’t help you earn more money, but it will help you:

• Maximize the money you’ve got
• Manage your cash flow
• Spend less than your business earns
• Stay on top of tax payments and other bills
• Know if you’re hitting your numbers so you can move at the true speed of cash

How to Create a Budget for a Business

Your ultimate goal is to create a 12–18-month business budget—and you will get there! But start by building out your first month. Don’t even worry about using a fancy accounting program yet. Good ol’ pen and paper or a simple computer document is fine. Just start! Plus, setting up a monthly budget could become a  keystone habit  that helps kick-start other smart business habits.

Here’s how to create your first budget for business:

1. Write down your revenue streams.

Your revenue is the money you earn in exchange for your products or services. You’ll start your small- business budget by listing all the ways you make money. Look at last month’s P&L—or even just your checking account statement—to help you account for all your revenue streams. You’re not filling in numbers yet. Just list what brings in revenue.

For example, if you run an HVAC business, your revenue streams could be:

• Maintenance service calls
• Repair services and sales
• New unit installation
• Insulation installation
• Air duct cleaning

2. Write down the cost of goods sold (if you have them).

Cost of goods is also called inventory. These expenses are directly related to producing your product or service. In the HVAC example, your cost of goods would be the price you pay for each furnace and air conditioning unit you sell and install. It could also include the cost of thermostats, insulation and new ductwork.

3. List your expense categories.

It’s crazy how much money can slip through the cracks when we’re not careful about putting it in the budget. Think through  all  your business expenses—down to the last shoe cover your technicians wear to protect your customers’ flooring during house calls. Here’s a list of common business budget categories for expenses to get you started:

• Office supplies and equipment
• Technology services
• Training and education

Related articles : Product Launch: 10 Questions to Ask Before You Launch a New Product New Product Launch: Your 10-Step Checklist

4. Fill in your own numbers.

Now that you have a solid list of revenue and expense categories, plug in your real (or projected) numbers associated with them. It’s okay if you’re not sure how much you’ll sell just yet or exactly how much you’ll spend. Make an educated guess if you’re just starting out. If your business has been earning money for a while, use past P&L statements to guide what you expect to bring in. Your first budget is about combining thoughtful guesswork with history and then getting a more realistic picture month over month.

5. Calculate your expected profit (or loss). 

Now, number nerds and number haters alike—buckle in. We’re about to do some basic accounting so you know whether you have a profit or loss. This is your chance to figure out exactly how much you’re spending and making in your business.

Take your  gross revenue (the total amount of money you expect to make this month) and subtract your expenses and  cost of goods sold  to find your profit or loss. Here’s what that calculation looks like:

Revenue - Expenses - Cost of Goods Sold = Profit or Loss

Don’t freak out if your first budget shows a loss. That actually happens a lot with your first few monthly budgets. You’re learning and getting context on what’s coming in and going out so you can make adjustments. Keep doing your budget, and before you know it, you’ll be a rock star at telling your money where to go, planning for emergencies ,  investments and opportunities , and building momentum.  

6. Review your budget often. 

Whew! Once you get that first business budget under your belt, take a deep breath and celebrate. You’ve just done something huge for your business! (You’ll also be happy to know, budgeting gets easier from here since you can copy and paste your first one and tweak your income and expenses each month.)

But here’s the thing: Your budget can’t just sit in a drawer or on your computer. You’ve got to look at it consistently to make sure you’re actually following it.

Weekly Review

At least once a week, someone in your business (whether it’s you, a qualified team member or a bookkeeper) needs to track your transactions so you know what’s happening with your money all month. Then you can make adjustments before you have more month than money.

Every time you review your budget, ask yourself these three questions:

• Are we on target to hit our revenue goal this month?
• If not, what we can change to get there?
• Are there any expenses we can cut or minimize?

Monthly Review

You also need to review your business budget when you close your books every month to compare it to your actuals—your P&L. Otherwise, how can you know how you’re doing?

7. Work toward a 12–18-month budget.

Now that you’ve created your first month’s budget, move on to the next one. You’ve got this! The more budget-building reps you get in, the better you’ll be at looking forward and planning for growth. In no time, you’ll reach that ultimate goal of a 12–18-month budget. Just keep adjusting as you go based on all you’re learning about getting an accurate road map for your finances.

As you start owning your numbers, remember: It’s okay if you’re a little intimidated by the process of accounting and making a budget for business. But it’s not okay to avoid the financial details that will make or break you. So just keep applying the basics we covered and keep moving forward.

Follow the steps above to create your budget, and review it often to stay on track.

Want a tool to make budget building simpler? Check out the EntreLeader’s Guide to Business Finances. It includes an easy-to-use small-business budget template in the extra resources section.

What are the benefits of budgeting?

A business budget will help you:

• Make informed, strategic decisions
• Invest in under-resourced areas
• Trim over-resourced areas
• Plan for the future
• Set goals and track your progress

Does using a small-business budget template save time?

Yes! Using a small-business budget template helps you plug in the numbers you need to operate with more confidence and fewer wrong turns. Check out the small-business-budget template inside our EntreLeader’s Guide to Business Finances .

How do I budget if I own a seasonal business?

Just like farmers put extra hay in the barn to cover leaner months, if you’re a seasonal business owner, you need to set aside resources in times of plenty to cover months your business turns down. Use your P&L statements to go back in time and look at financial performance year over year. Then, create your business budget based on what you learn and on any changes you see coming. You can also go to trade conferences to get an idea of your industry’s seasonal benchmarks.

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About the author

EntreLeadership

EntreLeadership is the part of Ramsey Solutions that exists to help small-business owners thrive by mastering themselves, rallying their teams, and imposing their will on the marketplace. Thousands of leaders use our proven EntreLeadership System and resources to develop as leaders and grow their businesses. These resources include The EntreLeadership Podcast , EntreLeadership Elite digital membership , books, live events, coaching sessions and business workshops. Learn More.

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Accounting | How To

How To Create a Small Business Budget [+Free Template]

Published June 20, 2023

Published Jun 20, 2023

REVIEWED BY: Tim Yoder, Ph.D., CPA

WRITTEN BY: Eric Gerard Ruiz, CPA

This article is part of a larger series on Bookkeeping .

• 1. Create a Budget Process
• 2. Determine Key Assumptions in Budgeting
• 3. Create the Sales Budget
• 4. Create the Inventory and Purchases Budget
• 5. Create the COGS Budget
• 6. Create the Sales & Administrative Budget
• 7. Create the Capital Budget
• 8. Create the Cash Budget
• 9. Assemble Proforma Financial Statements

Common Problems in Budgeting

Bottom line.

Creating a business budget is an important step in planning. A small business budget starts with creating the budgeting process, the operating budgets, such as sales, inventory and purchases, cost of goods sold (COGS), and sales and administrative, and ends with the financial budgets, such as cash, capital, and proforma financial statements.

To help you get started, we’ve provided a very simplified version of a budget spreadsheet to illustrate how information from each area of your business is combined to form an annual budget. We’ll discuss how to use this spreadsheet throughout our article.

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Budgeting is an important subset of managerial accounting. Read our small business guide to managerial accounting and learn how managerial accounting concepts can be applied in a small business setup.

Step 1: Create a Budget Process

The budget process shows how the different departments of the business create a budget. Without a process, budgeting would be chaotic, and it would result in inefficiencies. In the budget process, you need to consider the following:

• Budget period: When are budgets created, reviewed, implemented, and evaluated against actual performance?
• Budgeting method: How are budgets created? Is it created from scratch (zero-based budgeting)? Is it based on actual results with adjustments (incremental budgeting)?
• Budget involvement: Who creates the budgets?
• Budget committee: Who oversees and approves the budgets?
• Budget manual: What are the guidelines for creating budgets?

Budget Period

The first thing to consider in the budget process is the budget period. How long should budgets be prepared? When will it be implemented? The budget period can be any time before the next business year begins. Hence, you can create next year’s budget three months prior to the end of the current year.

The crucial periods for budget planning are as follows:

• Budget preparation : The time at which managers and heads create a budget for their department.
• Budget review and approval : The time at which top management will review and approve all lower-level budgets.
• Budget implementation : The time at which all concerned parties will act upon planned activities stated in the budget. This phase runs until the effectiveness of the budget lasts.
• Budget accountability : The time at which top management will assess if the business is meeting its budgetary goals. This phase runs intermittently during the year, such as monthly, quarterly, or semiannually, especially during performance evaluation and review.

As a small business, you need not be particular about the phases. You can modify the phases depending on small business needs.

Budgeting Method

There are four different types of budgeting methods, but for small businesses, we picked only two, as they are the most appropriate for the setup:

• Zero-based budgeting : This is a budgeting technique that starts from scratch. It doesn’t use information from past budgets. Instead, departments and managers need to justify every dollar in the budget without referring to past performance or past budgeting practices.
• Incremental budgeting : This is a budgeting technique that uses actual figures from the past years and adjusts with a certain percentage. For example, if actual sales last year is $20,000, the incremental budgeted sales could be 10 percent more or $22,000.

Budget Involvement

Small businesses must consider what kind of involvement is needed during the budgeting process, given that budgets can be used to measure the performance of departments and managers. There are two kinds of budget involvement—for small businesses, authoritative budgeting is suitable if the small business owner is heavily involved in daily operations. Alternatively, participatory budgeting applies if the owner delegates decision-making to managers.

1. Authoritative budgeting

Also known as top-down budgeting, this budget involvement strategy only includes top management in the budgeting process, where operating personnel and lower-level employees have little to no say in the budget. It takes less time to create since there are fewer employees involved.

However, some operating personnel and lower-level employees may disagree with top management’s estimates in the budget. At the least, this strategy creates discord between top management and operating personnel due to conflicting views. But if prepared appropriately, authoritative budgeting reflects the business’ vision, mission, and goals better.

2. Participatory budgeting

This is also called bottom-up budgeting, and this budget involvement strategy includes operating personnel and lower-level employees in creating a budget. It is a budget co-created by everyone involved or affected by the budget being created.

It enhances the relationship between top management and operating personnel since everyone has a say in the budget. However, this strategy can take time since more employees are involved in the budgeting process. Also, some lower-level managers can use this opportunity to insert some budgetary slack so that they look good during performance.

Budget Committee

The budget committee is responsible for compiling all lower-level budgets and assembling them into one package called the master budget and reviewing and approving budgets from different departments. For small businesses, the composition of the budget committee can be the small business owners, chief executive officer (CEO), treasurer, budget coordinator, and chief accountant.

The role of the budget coordinator is to reach out to lower-level managers and communicate the wishes of the budget committee. If you’re a family-grown small business, family members, including the small business accountant or finance officer, can be committee members.

Budget Manual

The first order of business of the budget committee is to create a budget manual, which outlines the budgeting process. Lower-level managers and department heads will use the budget manual when creating lower-level budgets. The budget committee may also set specific budget formats and deadlines.

A budget manual standardizes the budgeting process—it ensures fairness and comparability among departments and managers. With this manual in place, you can prevent the instance of inserting unfamiliar line items in the budget or using different sources in forecasting budgeted figures.

The budget manual should include the following:

• Statements of budgetary purpose
• Budgetary activities, such as budget preparation, budget hearing and evaluation, budget approval, budget execution, and budget accountability
• Schedule of budgetary activities and deadlines
• Sample budgets
• Key assumptions used in budgeting

You can create a budget easily using QuickBooks Online. Its budgeting functions create budgets per account in the chart of accounts. Read our QuickBooks Online review for detailed information on our recommendation.

Step 2: Determine Key Assumptions in Budgeting

After performing the groundwork for budgeting, the next step is determining the key assumptions. These assumptions make it easy to prepare budgets since not all information is readily available until it happens. These assumptions are not arbitrary because they must be based on past experience and good business practices.

Examples of assumptions are:

• Sales forecast
• Selling price per unit
• Cost per unit
• Estimated discounts given to customers
• Estimated sales returns
• Desired ending inventory per month or quarter
• Number of raw materials used to produce one good unit
• Number of labor hours needed to produce one good unit
• Number of overhead hours (if any) needed to produce one good unit
• Inventory cost flow method used, such as first-in, first-out (FIFO), last-in, first-out (LIFO), or average cost
• Cash collection patterns
• Cash payments patterns
• Cash retention policies

Input your assumptions in the second tab of our downloadable spreadsheet. When done, all of the reports will automatically populate. It’s the quality of your assumptions that will determine if your budget is realistic. As you improve your budgeting process, you’ll come up with additional assumptions to include in the process.

Step 3: Create the Sales Budget

The sales budget is the first budget that should be prepared because almost all budgets will depend on the information in it. It is the responsibility of the sales department to forecast and create the sales budget of the company, and it is crucial that the department forecast sales reasonably using the appropriate forecasting method. Our article about sales forecasting discusses the method of sales forecasting and shows how CRM software can help.

Below is an example of the sales budget taken from our small business master budget template.

Sales budget

Step 4: Create the Inventory & Purchases Budget

There are two ways to call this budget: merchandising companies can call it inventory and purchases budget while manufacturing companies can call it production budget. However, the information shown in this budget remains the same. The inventory or production budget shows the number of units needed to meet the sales demand.

Inventory budget

The image above shows the sample inventory budget in our free template. One of our assumptions is that the business intends to keep 5% of next quarter’s sales forecast as current quarter’s ending inventory. In Q1, desired ending inventory is 500 units, which is 5% of 10,000 units of Q2’s sales forecast.

After determining the number of units needed, multiply them to the standard cost of inventory to get the total cost of inventory. The standard inventory cost is also the budgeted cost of inventory. Since some inventory prices fluctuate, setting standard costs makes it easy for us to budget.

When adding values in the total column, do not sum up the values in the beginning and desired ending inventory rows. Instead, the total beginning inventory in the total column should be the Q1 beginning inventory, while the total ending inventory should be the Q4 ending inventory.

Step 5: Create the COGS Budget

The next logical step after budgeting inventory and purchases is to determine the COGS. Through the COGS budget, we can estimate the level of COGS per quarter. This budget is necessary for preparing the proforma income statement.

Below is the COGS budget from our small business budget template:

COGS budget

Step 6: Create the Sales & Administrative Budget

The sales and administrative (S&A) budget presents the budgeted costs for sales expenses, office expenses, and administrative expenses. This is necessary for budgeting the salaries of employees and other fixed expenses. The image below shows the sales and administrative budget from our template:

S&A budget

Most expenses in this budget are fixed costs. That’s why the amounts are the same for every quarter. Manufacturing companies may also call this budget a “fixed overhead budget.”

Step 7: Create the Capital Budget

A capital budget shows all the planned capital expenditures during the year. In our capital budget example below, there are no figures because the sample company didn’t plan any capital decisions for 2024. However, we’ve included common capital decisions for you to fill out when you use our template. For instance, a bank loan is a capital inflow while the purchase of equipment is a capital outflow.

Capital budget

The capital budget in our downloadable spreadsheet does not auto-populate from the assumptions tab. Instead, enter your budgeted loans and purchases directly in the report.

Step 8: Create the Cash Budget

The last budget that you need to prepare is the cash budget, which shows all the cash inflows and outflows from all budgets. Almost all budgets above affect cash flow. For example, the sales budget can show all cash inflows from cash sales and subsequent cash collections from credit sales.

Cash budget

Accounts Receivable & Accounts Payable Schedule

Collections from accounts receivables (A/R) and payments of accounts payable (A/P) are integral parts of the cash budget. Creating the A/R and A/P schedules helps in computing the ending balance of A/R and A/P and the amount of cash collections and payments per quarter. Below are the supporting A/R and A/P schedules for our cash budget above:

A/R and A/P schedules

Step 9: Assemble the Proforma Financial Statements Based on Budgeted Figures

The ultimate result of the budgeting process is the proforma financial statements, which are the budgeted or projected results of planned activities. If the budget goes as planned, the actual financial statements should be near the proforma financial statements. Below are the proforma income statement and balance sheet in our small business budget template.

Proforma Income Statement

Proforma Owner’s Equity Statement

Proforma Balance Sheet

Budgeting helps businesses plan on future events and meet company goals. However, it is likely that you will experience difficulties and problems during the budgeting process. The four problems we’ll discuss are budgetary slack, goal incongruence, budget myopia, and standard setting.

Budgetary slack and goal incongruence occur when managers are not aligned with the business’s overall goals and objectives, while budget myopia happens when the business forgets to consider the impact of short-term decisions in the long run. Lastly, standard setting often poses a problem when standards are too high or ideal. Let’s discuss each of them in greater detail below.

Budgetary Slack

Sometimes, managers and heads can use budgets to preempt results to their favor. This unethical practice is called budgetary slack or budget padding. Budget slacks occur when managers underestimate revenue goals and overestimate expense goals and when the business follows the participatory budget involvement strategy.

When time for evaluation arrives, budget slacks will make the manager’s performance as exemplary. Managers tend to include budgetary slacks when top management is too strict and punitive whenever budgets aren’t met.

For example, the sales manager underestimates the sales forecast at $50,000 for the first quarter, knowing that they can achieve actual sales of $70,000. This example shows how budgetary slack can affect performance evaluation and create a false reflection of the company’s ability to generate revenue.

Goal Incongruence

Budgets are goals. When goals of management and employees don’t meet, the budget will not reflect the results that’s best for the business as a whole. Preventing goal incongruence enhances the quality of the budget. The goal of employees should be aligned with the business’s goals, and top management should provide opportunities for employees to pursue their career growth within the business.

Improper communication of business goals and ineffective leadership are the common causes of goal incongruence. As a small business owner or manager, you should show employees that you are committed to them with respect to their professional goals and that you expect them to align themselves with the business’s overall goals.

Budget Myopia

Budget myopia occurs when budgeting focuses only on short-term goals without considering how these goals will affect the company in the future. Managers become “myopic” in budgeting when they see budgets as measures for performance—they forget that the main objective of budgeting is to plan, organize, and manage the firm’s resources. As a result, budget realignments occur because there is a failure to plan future events.

Standard Setting

Another hurdle in budgeting is setting standards, which are tools for planning and controlling. If used inappropriately, they can cause problems in the budgeting process. It is important that you have to set your standards at a practical level.

Practical standards allow room for error or inefficiencies. It gives employees a chance to learn and improve their outputs without affecting performance. Unwise managers often impose ideal standards or standards that require optimum performance and perfection.

As a result, imposing ideal standards results in employee burnout, decreased productivity, and negative employee morale. Discouraged employees might also result in dysfunctional behavior that might be detrimental to the company.

Frequently Asked Questions (FAQs)

Why is budgeting important.

Budgets help in planning and managing business resources. Since plans and goals require an outflow of resources, budgets help the business determine the right amount of resources needed to achieve the goal.

Who should have an active participation in the budgeting process for small businesses?

The small business owner should have an active role in helping managers and supervisors craft their budgets. As the owner, you should guide your employees to align their goals with the business’ overall goals.

With our small business budget guide and template, you can create a small business master budget. We hope that the template will help you understand why budgeting is crucial to the planning, organizing, and controlling business operations.

About the Author

Find Eric Gerard On LinkedIn

Eric Gerard Ruiz, CPA

Eric is an accounting and bookkeeping expert for Fit Small Business. He has a CPA license in the Philippines and a BS in Accountancy graduate at Silliman University. Since joining FSB, Eric has used his expertise and authority in curating and writing content about small business accounting and bookkeeping, accounting software, financial accounting and reporting, managerial accounting, and financial management.

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A How-To Guide for Creating a Business Budget

Amanda Smith

Reviewed by

September 23, 2022

This article is Tax Professional approved

Most business owners know how important a business budget is when it comes to managing expenses and planning for the future—but in a challenging economic environment like the one we’ve been experiencing, your business budget takes on even greater significance.

With inflation running rampant and the possibility of a recession looming, business owners need to be able to forecast their cash flow, manage their expenses, and plan for the future. Creating a detailed business budget is the first step.

Whether you want to revamp your budgeting method, or you’ve never created a business budget before, this guide will walk you through the process.

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What is a business budget?

A budget is a detailed plan that outlines where you’ll spend your money monthly or annually.

You give every dollar a “job,” based on what you think is the best use of your business funds, and then go back and compare your plan with reality to see how you did.

A budget will help you:

• Forecast what money you expect to earn
• Plan where to spend that revenue
• See the difference between your plan and reality

What makes a good budget?

The best budgets are simple and flexible. If circumstances change (as they do), your budget can flex to give you a clear picture of where you stand at all times.

Every good budget should include seven components:

1. Your estimated revenue

This is the amount you expect to make from the sale of goods or services. It’s all of the cash you bring in the door, regardless of what you spent to get there. This is the first line on your budget. It can be based on last year’s numbers or (if you’re a startup ), based on industry averages.

2. Your fixed costs

These are all your regular, consistent costs that don’t change according to how much you make—things like rent, insurance, utilities, bank fees, accounting and legal services, and equipment leasing.

Further reading: Fixed Costs (Everything You Need to Know)

3. Your variable costs

These change according to production or sales volume and are closely related to “ costs of goods sold ,” i.e., anything related to the production or purchase of the product your business sells. Variable costs might include raw materials, inventory, production costs, packaging, or shipping. Other variable costs can include sales commission, credit card fees, and travel. A clear budget plan outlines what you expect to spend on all these costs.

The cost of salaries can fall under both fixed and variable costs. For example, your core in-house team is usually associated with fixed costs, while production or manufacturing teams—anything related to the production of goods—are treated as variable costs. Make sure you file your different salary costs in the correct area of your budget.

Further reading: Variable Costs (A Simple Guide)

4. Your one-off costs

One-off costs fall outside the usual work your business does. These are startup costs like moving offices, equipment, furniture, and software, as well as other costs related to launch and research.

5. Your cash flow

Cash flow is all money traveling into and out of a business. You have positive cash flow if there is more money coming into your business over a set period of time than going out. This is most easily calculated by subtracting the amount of money available at the beginning of a set period of time and at the end.

Since cash flow is the oxygen of every business, make sure you monitor this weekly, or at least monthly. You could be raking it in and still not have enough money on hand to pay your suppliers.

6. Your profit

Profit is what you take home after deducting your expenses from your revenue. Growing profits mean a growing business. Here you’ll plan out how much profit you plan to make based on your projected revenue, expenses, and cost of goods 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 .

Or, if you think you can’t squeeze any more profit margin out of your business, consider boosting the Advertising and Promotions line in your budget to increase total sales.

7. A budget calculator

A budget calculator can help you see exactly where you stand when it comes to your business budget planning. It might sound obvious, but getting all the numbers in your budget in one easy-to-read summary is really helpful.

In your spreadsheet, create a summary page with a row for each of the budget categories above. This is the framework of your basic budget. 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.

See the sample below.

Pro tip: link the totals on the summary page to the original sums in your other budget tabs . That way when you update any figures, your budget summary gets updated at the same time. The result: your very own budget calculator.

You can also check out this simple Startup Cost Calculator from CardConnect. It lays out some of the most common expenses that you might not have considered. From there, you can customize a rough budget for your own industry.

Small business budgets for different types of company

While every good budget has the same framework, you’ll need to think about the unique budgeting quirks of your industry and business type.

Seasonal businesses

If your business has a busy season and a slow season, budgeting is doubly important.

Because your business isn’t consistent each month, a budget gives you a good view of past and present data to predict future cash flow . Forecasting in this way helps you spot annual trends, see how much money you need to get you through the slow months, and look for opportunities to cut costs to offset the low season. You can use your slow season to plan for the next year, negotiate with vendors, and build customer loyalty through engagement.

Don’t assume the same thing will happen every year, though. Just like any budget, forecasting is a process that evolves. So start with what you know, and if you don’t know something—like what kind of unexpected costs might pop up next quarter— just give it your best guess . Better to set aside money for an emergency that doesn’t happen than to be blindsided.

Ecommerce businesses

The main budgeting factor for ecommerce is shipping. Shipping costs (and potential import duties) can have a huge impact.

Do you have space in your budget to cover shipping to customers? If not, do you have an alternative strategy that’s in line with your budget—like flat rate shipping or real-time shipping quotes for customers? Packaging can affect shipping rates, so factor that into your cost of goods sold too. While you’re at it, consider any international warehousing costs and duties.

You’ll also want to create the best online shopping experience for your customers, so make sure you include a good web hosting service, web design, product photography, advertising, blogging, and social media in your budget.

Inventory businesses

If you need to stock up on inventory to meet demand, factor this into your cost of goods sold. Use the previous year’s sales or industry benchmarks to take a best guess at the amount of inventory you need. A little upfront research will help ensure you’re getting the best prices from your vendors and shipping the right amount to satisfy need, mitigate shipping costs, and fit within your budget.

The volume of inventory might affect your pricing. For example, if you order more stock, your cost per unit will be lower, but your overall spend will be higher. Make sure this is factored into your budget and pricing, and that the volume ordered isn’t greater than actual product demand.

You may also need to include the cost of storage solutions or disposal of leftover stock.

Custom order businesses

When creating custom ordered goods, factor in labor time and cost of operations and materials. These vary from order to order, so make an average estimate.

Budgeting is tricky for startups—you rarely have an existing model to use. Do your due diligence by researching industry benchmarks for salaries, rent, and marketing costs. Ask your network what you can expect to pay for professional fees, benefits, and equipment. Set aside a portion of your budget for advisors—accountants, lawyers, that kind of thing. A few thousand dollars upfront could save you thousands more in legal fees and inefficiencies later on.

This is just scratching the surface, and there’s plenty more to consider when creating a budget for a startup. This business startup budget guide from The Balance is a great start.

Service businesses

If you don’t have a physical product, focus on projected sales, revenue, salaries, and consultant costs. Figures in these industries—whether accounting, legal services, creative, or insurance—can vary greatly, which means budgets need flexibility. These figures are reliant on the number of people required to provide the service, the cost of their time, and fluctuating customer demand.

Small business budgeting templates

A business budget template can be as simple as a table or as complex as a multi-page spreadsheet. Just make sure you’re creating something that you’ll actually use.

Create your budget yearly—a 12-month budget is standard fare—with quarterly or monthly updates and check-ins to ensure you’re on track.

Here are some of our favorite templates for you to plug into and get rolling.

• The Balance has a clear table template that lists every budget item, the budgeted amount, the actual amount, and the difference between the two. Use this one if you’re looking to keep it simple.
• Capterra has both monthly and annual breakdowns in their Excel download. It’s straightforward, thorough, and fairly foolproof.
• Google Sheets has plenty of budget templates hiding right under your nose. They’re easy to use, and they translate your figures into clear tables and charts on a concise, visual summary page.
• Smartsheet has multiple resources for small businesses, including 12-month budget spreadsheets, department budget templates, projection templates, project-by-project templates, and startup templates. These templates are ideal if you’re looking for a little more detail.
• Scott’s Marketplace is a blog for small businesses. Their budget template comes with step-by-step instructions that make it dead simple for anyone.
• Vertex42 focuses on Excel spreadsheets and offers templates for both product-based and service-based businesses, as well as a business startup costs template for anyone launching a new business.

Budgeting + bookkeeping = a match made in heaven

Making a budget is kind of like dreaming: it’s mostly pretend. But when you can start pulling on accurate historical financials to plan the upcoming year, and when you can check your budget against real numbers, that’s when budgets start to become useful.

The only way to get accurate financial data is through consistent bookkeeping.

Don’t have a regular bookkeeping process down pat? Check out our free guide, Bookkeeping Basics for Entrepreneurs . We’ll walk you through everything you need to know to get going yourself, for free.

If you need a bit more help, get in touch with us. Bookkeeping isn’t for everyone, especially when you’re also trying to stay on top of a growing business—but at Bench, bookkeeping is what we do best.

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How to Create a Small Business Budget in 5 Simple Steps

Want to protect the financial health of your small business? You need a business budget. Here's how to create one.

When you build a business, there are a lot of things to stay on top of, from marketing and finding new  clients  to building a website and establishing your digital presence. But there’s one element that you want to stay on top of from the very beginning—and that’s your business budget.

Having a detailed and accurate budget is a must if you want to build a thriving, sustainable business. But how, exactly, do you create one? What are the steps for business budget planning?

As a small business owner, let’s take a look at how to create a business budget in five simple, straightforward steps.

What’s a Business Budget—and Why Is It Important?

Before we jump into creating a business budget, let’s quickly cover what a business budget is—and why it’s so important for small businesses.

A business budget is an overview of your business funds. It outlines key information on both the current state of your finances (including income and expenses) and your long-term financial goals. Because your budget will play a key role in making sound financial decisions for your business, it should be one of the first tasks you tackle to improve business success.

And, as a  financially savvy owners, you’ll also want to have a budget in place to help you:

• Make sound financial decisions.  In many ways, your business budgets are like a financial road map. It helps you evaluate where your  business finances  currently stand—and what you need to do to hit your financial goals in the future for business growth.
• Identify where to cut spending or grow revenue.  Your business budgets can help you identify areas to decrease your spending or increase your revenue, which will increase your  profitability  in the process, outline unexpected costs, and help your sustain your business goals.
• Land funding to grow your business.  If you’re planning to apply for a business loan or raise funding from investors, you’ll need to provide a detailed budget that outlines your income and expenses.

Now that you understand why budget creation is so important to your business decisions, let’s jump into how to do it.

Business Budget Step 1: Tally Your Income Sources

First things first. When building a small business budget, you need to figure out how much money your business is bringing in each month and where that money is coming from – this will hep create an operating budget based on your business income.

Your sales figures (which you can access using the Profit & Loss report function in FreshBooks) are a great place to start. From there, you can add any other sources of income for your business throughout the month.

Your total number of income sources will depend on your business model.

For example, if you run a  freelance  writing business, you might have multiple sources of income from:

• Freelance writing projects
• A writing course you sell on your website
• Consulting with other writers who are starting small businesses

Or, if you run a brick-and-mortar retail business, you may only have one source of income from your store sales.

However many income sources you have, make sure to account for any and all income that’s flowing into your business—then tally all those sources to get a clear picture of your total monthly income to build your master business budget template.

Business Budget Step 2: Determine Fixed Costs

Once you’ve got a handle on your income, it’s time to get a handle of your costs—starting with fixed costs.

Your fixed costs are any expenses that stay the same from month to month. This can include expenses like rent, certain utilities (like internet or phone plans), website hosting, and payroll costs.

Review your expenses (either via your bank statements or through your FreshBooks reports) and see which costs have stayed the same from month to month. These are the expenses you’re going to categorize as fixed costs.

Once these costs are determined, add them together to get your total fixed and variable costs expense for the month.

TIP:   If you’re just starting your business and don’t have financial data to review, make sure to use projected costs. For example, if you’ve signed a lease for office space, use the monthly rent you will pay moving forward.

Business Budget Step 3: Include Variable Expenses

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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.

Variable expenses will, by definition, change from month to month. When your profits are higher than expected, you can spend more on the variables that will help your business scale faster. But when your profits are lower than expected, consider cutting these variable costs until you can get your profits up.

At the end of each month, tally these expenses. Over time, you’ll get a sense of how these expenses fluctuate with your business performance or during certain months, which can help you make more accurate financial projections and budget accordingly.

Business Budget Step 4: Predict One-Time Spends

Many of your business expenses will be regular expenses that you pay for each month, whether they’re fixed or variable costs. But there are also costs that will happen far less frequently. Just don’t forget to factor those expenses when you create a budget as well.

If you know you have one-time spends on the horizon (for example, an upcoming business course or a new laptop), adding them to your budget can help you set aside the financial resources necessary to cover those expenses—and protect your business from unexpected costs in the form of a sudden or large financial burden.

On top of adding planned one-time spends to your budget, you should also add a buffer to cover any unplanned purchases or expenses, like fixing a damaged cell phone or hiring an IT consultant to deal with a security breach. That way, when an unexpected expense pops up (and they always do), you’re prepared!

Business Budget Step 5: Pull It All Together

You’ve gathered all of your income sources and all of your revenue and expenses. What’s next? Pulling it all together to get a comprehensive view of your financial standing for the month.

On your businesses master budget, you’ll want to tally your total income and your total expenses (i.e., adding your total fixed costs, variable expenses, cost of goods, and one-time spends)—then compare cash flow in (income) to cash flow out (expenses) to determine your overall profitability.

Having a hard time visualizing what a business budget looks like in action? Here’s an operating budget example to give you an idea of what your new business budget might look like each month:

A Client Hourly Earnings: $5,000 B Client Hourly Earnings: $4,500 C Client Hourly Earnings: $6,000 Product Sales: $1,500 Loans: $1,000 Savings: $1,000 Investment Income: $500

Total Income: $19,500

Fixed Costs

Rent: $1,000 Internet: $50 Payroll costs: $5,000 Website hosting: $50 Insurance: $50 Government and bank fees: $25 Cell phone: $50 Accounting services : $100 Legal services: $100

Total Fixed Costs: $6,425

Variable Expenses

Sales commissions: $2,000 Contractor wages: $500 Electricity bill: $125 Gas bill: $75 Water bill: $125 Printing services: $300 Raw materials: $200 Digital advertising costs: $750 Travel and events: $0 Transportation: $50

Total Variable Expenses: $4,125

One-Time Spends

Office furniture: $450 Office supplies for new location: $300 December business retreat: $1,000 New time tracking software: $500 Client gifts : $100

One-Time Spends: $2,350

Expenses: $12,900

Total Income ($19,500) – Total Expenses ($12,900) = Total Net Income ($6,600)

Above all, once you have a clear sense of your profitability for the month, you can use it to make the right financial decisions for your small business moving forward.

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 . Alternatively, if your income is significantly higher than your expenses, you might consider investing your profits back into your business (like investing in new software or equipment).

Use Your Business Budget to Stay on Track

Putting in the work to create a budget for your small business may seem like a hassle. But while it takes a bit of time and energy, it’s worth the extra effort. Thorough business budgeting gives you the financial insights you need to make the right decisions for your business to grow, scale, and prosper in the future.

This post was updated in October 2023

Written by Deanna deBara , Freelance Contributor

Posted on June 20, 2017

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How to create a business budget

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Key takeaways

• A business budget is a financial plan that helps estimate a company's revenue and expenses, making it an essential tool for small businesses
• The steps to creating a business budget include choosing budget and accounting software, listing expenses and forecasting revenue
• If a business finds itself in a budget deficit, strategies such as cutting costs, negotiating with suppliers and diversifying revenue streams can help

As a small business owner, keeping your finances organized through a business budget is crucial to running a successful company.

Business budgeting involves creating a financial plan that estimates future revenue and expenses to make informed financial decisions, which can ultimately move the needle on your business’s financial goals and help it grow in profitability.

What is a business budget?

A business budget is a financial plan that outlines the company’s current revenue and expenses. The budget also forecasts expected revenue that can be used for future business activities, such as purchasing equipment. It sets targets for your business’s revenue, expenses and profit and helps you determine if you’ll have more money coming in than you pay out.

A business budget is an essential tool that helps you make wise business decisions. Without it, it’s difficult to gauge your business’s financial health.

What is the difference between a cash flow statement and a business budget?

A cash flow statement  (CFS) is a financial document that summarizes the movement of cash coming in and going out of a company. The CFS gauges how effectively a company manages its finances, including how it manages debt responsibilities and funds day-to-day operations.

It’s similar to a business budget in that you can see expenses and revenue. But while a budget gives a moment-in-time snapshot of your business’s financial performance compared to forecasts, the cash flow statement focuses on the actual inflows and outflows of money through your business.

Follow these steps to ensure a well-developed budget, from understanding your expenses to generating revenue and adjusting expenses to balance the budget.

1. Choose a budget and accounting software

First, you’ll want to store your expense and revenue information with accounting software to help you track your numbers and generate reports. Some software may also help you assign categories to the transactions, identify tax deductions and file taxes. Quickbooks is an example of accounting software.

Some business bank accounts also have accounting software built in, helping you stay organized by keeping your accounting and banking in one place.

2. List your business expenses

The next step in creating a small business budget is to list all your business expenses. Here are the types of expenses you want to include in your budget:

• Fixed expenses: Fixed expenses cost a fixed amount monthly or within the assessed period. Those costs include rent, insurance, salaries and loan payments.
• Variable expenses: Variable expenses can change monthly or over time, making them trickier to budget. This might include materials, direct labor, utility bills or marketing expenses.
• Annual or one-time costs: Some costs only occur a few times per year, while others you’ll only pay for as needed, such as buying new equipment. You still want to budget for these expenses by allocating a portion of your weekly or monthly budget toward one-time expenses.
• Contingency funds: Unexpected business costs can throw a wrench in your budget if not planned for. Such costs could include emergency repairs, necessary equipment purchases, sudden tax increases or unforeseen legal fees. To plan for these costs, you can create a contingency or emergency fund that’s separate from your operational budget.
• Maintenance costs: To allocate funds for maintenance costs, begin by including regular inspections and maintenance in your budget. Then, make sure to leave room for changes and unexpected maintenance costs.

3. Forecast your revenue

To estimate your future revenue, start by deciding on a timeline for your forecast. A good place to start is the previous 12 months. Your accounting software may also include revenue forecasting as one of its features, which can automate this step for you.

The timeline and your recent past growth can help you understand how much revenue you’ll generate in the future. Consider external factors that could drive revenue growth, such as planned business activities like expansion, marketing campaigns or new product launches.

You’ll also want to think about anything that might slow your growth. Many businesses experience seasonal fluctuations, which can impact your budget if you don’t plan for it. To account for these changes, list the minimum expenses required to keep your business running. Use your financial statements to understand these costs, and consider averaging out irregular expenses over the year to avoid surprises.

Ideally, your business should build a cash reserve during profitable periods to cover expenses during slower seasons. If necessary, consider various financing options, such as a business credit card or line of credit, that you can draw from to manage cash flow during peak or off times.

4. Calculate your profits

The next step in creating a business budget is to calculate your business profits. You can look at your total profits by calculating revenue minus expenses. That way, you see how much money you have to work with, called your working capital .

You should also understand your profit margins for each of your products and services, which can help you set prices or decide whether to offer a new product or service.

How to calculate your profit margins

To find out your gross profit margin, you’ll first need to calculate the gross profit. To calculate your business’s gross profit, subtract the cost of goods sold (COGS) from your total revenue. COGS includes all the expenses related to producing your products and services.

Once you have the gross profit, use the gross profit margin formula: (Revenue – COGS) / Revenue x 100. This will give you a percentage that shows how much profit you gain from that particular product after accounting for the product’s costs.

5. Make a strategy for your working capital

Knowing what to do with extra revenue, which is your working capital, is crucial for managing your business finances and growth. Here’s how to get started with a financial strategy that propels your business goals forward:

• Set spending limits for different categories in your budget. When listing your expenses, you should have set a dollar amount for each category. You can estimate this by a monthly average or a general forecasted amount.
• Set realistic short- and long-term goals. These goals will motivate you to stick to your budget and guide your spending decisions.
• Compare your actual spending with your net income and priorities. Look at the areas you’re spending and consider whether you need to reallocate money to different categories. Consider separating expenses into business needs and extras.
• Adjust your budget and actual spending. Adjust your spending to ensure you do not overspend and can allocate money towards your goals. If you need to cut spending, consider the categories that are extras, such as types of marketing that you don’t know will generate a return on investment.

6. Review your budget and forecasts regularly

Finally, review your budget regularly. By frequently checking in on your budget, you can identify any discrepancies between your planned and actual expenses and adjust accordingly. This allows you to proactively handle any financial issues that may arise rather than reacting to them after they’ve become a problem.

Regular reviews also allow you to refine your budgeting process and improve its accuracy over time. Keep in mind that your budget is not set in stone but rather a tool to guide your financial decisions and help you achieve your business goals.

What to do if you have a deficit in your business budget

Finding a deficit in your small business budget can be alarming, but there are several strategies you can employ to handle this situation.

• Do a cash flow analysis. Begin by doing a cash flow analysis to review what your business is earning and spending money on. Identify potential problems and adjust the budget as needed to prevent overspending.
• Cut nonessential business costs. Cutting spending may involve eliminating nonessential costs and transferring funds from other categories to overspent categories. Your goal is a balanced or profitable budget.
• Negotiate with suppliers. Be transparent in your communications with suppliers and explain your quality standards and why you’re seeking cost reduction. Explore options for cost reduction that do not compromise quality, such as process improvements or ordering in larger quantities.
• Create a lean business model. By removing anything that doesn’t benefit your customer, your business can potentially save time and resources. Lean business models focus on continually improving processes and customer experience without adding additional resources, time or funds.
• Add revenue and diversify revenue streams. Raising revenue requires a realistic plan with measurable goals to increase sales and overall business income. You can also consider other products and services you could offer that would make your business profitable.
• Use financing to cover temporary gaps. Applying for a small business loan can help pay bills during an unplanned shortfall. Since this will add an expense to your budget, make sure you can handle the loan repayments and your regular expenses.
• Plan for a deficit. In some cases, a planned budget deficit might be a strategic decision, such as investing in new opportunities that promise long-term benefits.

Bottom line

Having a well-developed business budget is crucial for making informed decisions. You can effectively manage your small business’s finances by tracking and analyzing your business’s inflows and outflows, forecasting your expected revenue and adjusting your budget to stay balanced.

Even in the face of a budget deficit, there are various strategies you can use to keep your business profitable, including negotiating costs with your suppliers, assessing your business operations and offering new products and services.

With a solid business budget in place, you can confidently navigate financial challenges and drive long-term success for your small business.

Frequently asked questions

What are the benefits of a business budget, what are the components of a business budget, how do you calculate fixed and variable costs in a business budget.

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6 Steps to a Better Business Budget

A top-notch budget can help propel your business success

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

You've just purchased or opened a small business and you know your trade. But when it comes to bookkeeping—and more specifically, budgeting —your skill set is lacking. The good news is that it is possible to come up with a budget (or at least a good estimation of what will be needed in terms of dollars and cents) fairly easily.

Estimating and matching expenses to revenue (real or anticipated) is important because it helps small business owners to determine whether they have enough money to fund operations, expand the business, and generate income for themselves. Without a budget or a plan, a business runs the risk of spending more money than it is taking in, or conversely, not spending enough money to grow the business and compete.

Key Takeaways

• A business budget helps owners determine if they have enough money to fund operations, expand, and generate income.
• Without a budget, a company runs the risk of spending money it doesn't have, not spending enough to compete, or failing to build a solid emergency fund.
• To create a budget, check industry standards to determine the average costs of doing business and create a spreadsheet estimating the amount of money you'll need to allocate toward your costs.
• Factor in some slack in your budget to cover unexpected costs and review areas where you could cut costs if times get tough.
• Review your budget every few months and shop around for new suppliers to save money on products or services for your business.

Getting Started With a Business Budget

Every small business owner tends to have a slightly different process, situation, or way of budgeting. However, there are some parameters found in nearly every budget that you can employ.

For example, many business owners must make rent or mortgage payments. They also have utility bills, payroll expenses, cost of goods sold (COGS) expenses (raw materials), interest, and tax payments. The point is every business owner should consider these items and any other costs specifically associated with the business when setting up shop or taking over an existing business.

With a business that is already up and running, you can make assumptions about future revenue based on recent trends in the business. If the business is a startup , you'll have to make assumptions based on your geographic area, hours of operation, and by researching other local businesses. Small business owners can often get a sense of what to expect by visiting other businesses that are for sale and asking questions about weekly revenue and traffic patterns.

After you've researched this information, you should then match the business's revenue with expenses. The goal is to figure out what an average weekly expense for overhead, utilities, labor, raw materials, etc. would look like. Based on this information, you may then be able to estimate or forecast whether you'll have enough extra money to expand the business or to tuck away some money into savings. On the flip side, owners may realize that in order to have three employees instead of two, the business will have to generate more in revenue each week.

These six simple tips will help you put together a top-notch small business budget:

1. Check Industry Standards

Not all businesses are alike, but there are similarities. Therefore, do some homework and peruse the internet for information about the industry , speak with local business owners, stop into the local library, and check the Internal Revenue Service (IRS) website to get an idea of what percentage of the revenue coming in will likely be allocated toward cost groupings.

Small businesses can be extremely volatile as they are more susceptible to industry downturns than larger, more diversified competitors. So, you only need to look for an average here, not specifics.

2. Make a Spreadsheet

Prior to buying or opening a business, construct a spreadsheet to estimate what total dollar amount and percentage of your revenue will need to be allocated toward raw materials and other costs. It's a good idea to contact any suppliers you'd have to work with before you continue on. Do the same thing for rent, taxes, insurance(s), etc. It's also important you understand the different types of budgets you'll need to set up for your small business and how to implement them.

3. Factor in Some Slack

Remember that although you may estimate that the business will generate a certain rate of revenue growth going forward or that certain expenses will be fixed or can be controlled, these are estimates and not set in stone. Because of this, it's wise to factor in some slack and make sure that you have more than enough money socked away (or coming in) before expanding the business or taking on new employees.

4. Look to Cut Costs

If times are tight and money must be found somewhere in order to pay a crucial bill, advertise, or otherwise capitalize on an opportunity, consider cost-cutting . Specifically, take a look at items that can be controlled to a large degree. Another tip is to wait to make purchases until the start of a new billing cycle or to take full advantage of payment terms offered by suppliers and any creditors. Some thoughtful maneuvering here could provide the business owner with much-needed breathing and expansion room.

5. Review the Business Periodically

While many firms draft a budget yearly, small business owners should do so more often. In fact, many small business owners find themselves planning just a month or two ahead because business can be quite volatile, and unexpected expenses can throw off revenue assumptions. Establishing a budget planning calendar can be an effective tool for business owners to ensure they have enough capital to meet their business needs.

6. Shop Around for Services/Suppliers

Don't be afraid to shop around for new suppliers or to save money on other services being performed for your business. This can and should be done at various stages, including when purchasing or starting up a business, when setting annual or monthly budgets, and during periodic business reviews.

The Bottom Line

Budgeting is an easy, but essential process that business owners use to forecast (and then match) current and future revenue to expenses. The goal is to make sure that enough money is available to keep the business up and running, to grow the business, to compete, and to ensure a solid emergency fund.

University of California, Irvine, Accounting & Fiscal Services. " Understanding Fiscal Years and Fiscal Periods ."

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How to Create a Business Budget for Your Small Business

According to a study done by CBinsights, a few of the top reasons why small businesses fail include include pricing and cost issues, losing focus and running out of cash. These issues can be prevented by having a realistic budget in place.

Before you can focus on the budget, however, you need to identify what aspects of your business you’d like to improve. This will allow you to decide what can be done with your funds. Based on that list, you can set up short-term and long-term goals.

These goals will be directly affected by your incoming and outgoing cash. A short-term goal can be paying off a debt or purchasing new equipment. Long-term goals, like keeping aside marketing expenses, are crucial because they are connected to the overall growth of your business.

You should be practical about the goals you set. They should be purely based on your business’ capacity to spend and save. Once you have your goals in place, you can create an effective, foolproof budget by following these steps.

1. Analyze costs

Before you start drafting a budget, you must research the operating costs involved in your business. Knowing your costs inside and out gives you the baseline knowledge needed to craft an effective spending plan.

If you create a rough budget and later discover that you need more money for your business activities, this will jeopardize your goals. Your budget should be such that you can increase your revenue and profit enough as your business expands to handle your growing expenses. Your budget should factor in fixed, variable, one-time, and unexpected costs. Some examples of a fixed expense are rent, mortgages, salaries, internet, accounting services, and insurance. Examples of variable costs include cost of goods sold and commissions for labor.

There is not much harm in overestimating the costs involved since you will need enough cash to handle your future expenditures. If your business is new, then you must include start-up costs as well. Planning the budget this way will help you make informed decisions and tackle any unwanted financial surprises.

2. Negotiate costs with suppliers

This step will be useful for those businesses which have been functional for more than a year and are dependent on suppliers to sell products. Before you get started on your yearly budget, have a chat with your suppliers and try getting discounted rates for the materials, products, or services you need before you make your payments.

Negotiations allow you to create trustworthy relationships with your suppliers. This will be helpful when incoming cash is thin. For example, you might have a seasonal business. When you have enough cash saved, you can pay advance amounts to your suppliers as compensation for the times when you are unable to make payments. The main goal here is to find efficient ways to reduce cost of doing business.

3. Estimate your revenue

Many businesses have failed in the past by overestimating revenue and borrowing more cash to meet operational needs. This defeats the very purpose of creating a budget. To keep things realistic, it’s a good idea to analyze previously recorded revenue. Businesses must track revenue periodically on a monthly, quarterly and annual basis.

Your previous year’s revenue figures can act as a reference point for the upcoming year. It’s important to rely solely on this empirical data. This will help you set realistic goals for your team, leading to the eventual growth of your business.

4. Know your gross profit margin

The gross profit margin is the cash you are left with after your business has dealt with all the expenses at the end of the year. It gives insight into the financial health of your business. Here’s an example of why you need to understand this parameter while creating a budget.

Suppose your business made a revenue $5,000,000 and yet there are debts to be paid. At the end of the year, your expenses are more than your revenue, which is not a good sign for a growing business. This tells you that you must identify the expenses that are not benefiting the business in any way and eliminate them. The best way to do this would be to list out the cost of goods sold for all materials and deduct them from the overall sales revenue. This information is needed to get a real picture on how your business is faring, allowing you to increase profit and reduce costs.

5. Project cash flow

There are two components to cash flow : customer payments and vendor payments. You need to balance these two components to keep the cash flowing in your organization.

To do your best to ensure timely customer payments, it’s important to have flexible payment terms and the ability to receive payments through common payment channels. Unfortunately you will need to deal with customers who might not comply to the stated terms. This might affect your cash flow forecast due to missing payments.

You can encourage payment by giving customers a grace period and creating strict business policies for paying late. Beyond this, you must have some money allocated in your budget for ‘bad debt,’ in case the customer never pays.

When you know your incoming cash flow, you can fix an amount for your employee salaries and travel expenses. You can also allocate some money to pay off your fixed vendor expenses. If you are still left with cash, you can then spend on business initiatives such as professional development or new equipment.

6. Factor in seasonal and industry trends

It’s unrealistic to expect that you will achieve every business goal and reach your estimates every month. In an annual cycle, there will be months where your business will be booming, and there may be a few months where sales are slow. Due to seasonal inconsistency and industry trends, you will have to spend cash effectively so that the business isn’t at risk of shutting down during slower periods.

To overcome this challenge while creating a budget, gather insights as to when your business performs better. The aim should be to generate enough revenue during peak months to sustain the business during off seasons.

For example, let’s assume that you are a business owner of a winter clothing company. Your products are on demand only during that season, so most of your revenue comes during that period. For the rest of the year, you can use the earnings to keep the business going and market to specific target groups, like hikers or travelers. This will help you gauge how successful your products are during off seasons, what revenue to expect, and how much to save during your peak periods.

7. Set spending goals

Making a budget is more than just adding your costs and subtracting them from your earnings. How wisely you spend your money determines how well your business will fare. Goals provide a system to check if your money is being spent on the right areas to avoid unwanted expenses.

For example, if you are spending money on stationary that is going unused for operational or marketing efforts, it may be time to cut those costs. This money can be better applied to your marketing campaigns, bringing in more leads and revenue. Gauge and invest in those expenses that would benefit your business in the long run.

8. Bring it all together

Once you have gathered all the information from the previous steps, it’s time to create your budget. After you have subtracted your fixed and variable expenses from your income, you will get an idea of the amount that you can work with. Be prepared to tackle the unexpected one-time expenses that come your way. You can then find ways to use the money effectively to achieve your short-term and long-term goals.

Role of accounting software in budgeting

Budgeting for a business is a large task, which is why you might need assistance. Creating a budget will involve analyzing costs, estimating revenue, and projecting cash flow. Having an accounting system in place will give you real-time information about your finances, helping you to create a feasible budget.

The key to creating a good budget is to evaluate the previous years’ data and draw realistic projections. An accounting system can give you access to all this information in one place, no matter when you need it.

The effectiveness of a budget also depends on how well any projected goals have been achieved by your business. To check this, an accounting system generates financial reports that record your actuals, and those can then be compared with the budget. Comparing your budget with your actuals is an important step to gauge the effectiveness of a budget.

Budgeting is an essential process, especially for small businesses, as it allows business owners to estimate and allocate money for different business activities. Preparing a budget also gives you a clear idea of the money that can be used to achieve business goals and ensure that there is enough in hand to handle a crisis. For small businesses, it might get a bit difficult to make estimations for the whole year as the initial stages of growing an organization are often volatile. In such cases, you can create smaller budget estimates for a duration of two or three months and keep reviewing it for better results. When an accounting system is introduced, the process becomes even more manageable. You can easily handle tasks like projecting cash flow or estimating costs, and you can set realistic goals for your business.

Related Posts

• Business Budget: What is it & Why is it important?
• How Is Cash Flow Calculated?

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Great article, Easy to read, straight to the point, very informative.

Wonderful article! Just what I needed

a valuable information for person like me who doesn’t has finance background.

wonderful said,

I really like this article, it is very easy to read, gives an idea and try to make the budget process a much easier task

Simple and precise article

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How to create a business budget: 8 simple steps.

No matter the size of your business, a business budget is vital to planning and guiding your business’s growth. By understanding the fixed expenses of a company and accounting for the ebb and flow of work, a proper business budget can help your business maintain itself through the year and create protection around unplanned expenses through well allocated funds. In this guide, we'll walk you through the process of creating a business budget, outlining essential steps to help you manage your finances effectively.

What Is a Business Budget?

A business budget is a financial plan outlining projected revenues and expenses for a business during a specific period of time (most typically a year, though there are often monthly or quarterly reexaminations). Although there are variables throughout the year, a complete and accurate budget will serve as a blueprint for businesses in managing income and expenditures, guiding decision-making processes, and ensuring financial stability. 

What Should a Business Budget Include?

A comprehensive business budget’s purpose is to provide a business a holistic view of their financial health. When looking through bank statements, take note of those expenses that reoccur throughout the year and note those—as well as those unexpected expenses your company should instead anticipate. Key components to include are:

• Revenue Forecast: Anticipated income from sales, services, or other sources after deducting costs, taxes, and other fees.
• Fixed Operating Expenses: Costs associated with running the business, such as rent, utilities, salaries, and supplies.
• Capital Expenditures: Investments in assets like equipment, machinery, or property.
• Debt Service: Payments towards loans, credit lines, or other forms of debt.
• Taxes: Estimated tax liabilities, including income tax, sales tax, and payroll taxes.
• Contingency Funds: Reserves set aside for unexpected expenses or emergencies.
• Profit Targets: Desired levels of profitability, indicating the financial performance you aim to achieve.

Why Is Budgeting Important to a Business?

Budgeting plays a crucial role in the financial management of a business for several reasons:

• Resource Allocation: Helps allocate resources efficiently to prioritize essential activities and investments.
• Financial Control: Provides a framework for monitoring and controlling expenses to prevent overspending.
• Performance Evaluation: Facilitates performance measurement against predetermined targets, enabling timely corrective actions.
• Decision Making: Guides decision-making processes by providing insights into the financial implications of various options.
• Risk Management: Identifies potential risks and allows for proactive mitigation strategies to safeguard financial stability.

How Does Budgeting Help a Business?

Effective budgeting contributes to the success and sustainability of a business in numerous ways:

• Improved Cash Flow Management: Helps maintain adequate cash reserves to meet financial obligations and fund growth initiatives.
• Enhanced Profitability: Enables businesses to identify opportunities for revenue growth and cost optimization, leading to higher profitability.
• Better Resource Utilization: Ensures optimal utilization of resources by aligning expenditures with strategic priorities and operational needs.
• Increased Financial Transparency: Provides stakeholders with a clear understanding of the company's financial health and performance.
• Long-term Planning: Facilitates long-term planning by forecasting future financial requirements and setting achievable goals.

How to Create a Business Budget

Now that we’ve gone over the importance of a business budget, it’s time to understand the steps you need to take in order to create a comprehensive plan.

Gather Financial Information

Start by compiling relevant financial data, including past income statements, balance sheets, and cash flow statements. Analyze historical trends to identify patterns and make informed projections for the upcoming period.

Determine Your Financial Goals

Define clear, measurable financial goals aligned with your business objectives. Whether it's increasing revenue, reducing costs, or improving profitability, setting specific targets will provide a roadmap for your budgeting process.

Identify Revenue Sources

Identify all potential sources of revenue, including sales, services, investments, and other income streams. Estimate the expected revenue for each source based on market trends, historical data, and sales forecasts.

Estimate Expenses

Next, list all anticipated expenses, categorizing them into fixed and variable costs. Fixed expenses, such as rent and salaries, remain constant regardless of business activity, while variable expenses, like supplies and utilities, fluctuate based on demand.

Factor in Contingencies & Emergency Funds

Allocate a portion of your budget for contingencies and emergency funds to cover unforeseen expenses or revenue shortfalls. Building a financial cushion will provide stability and resilience during challenging times.

Balance Your Budget

Balance your budget by ensuring that projected revenues exceed estimated expenses. If there's a deficit, identify areas where you can reduce costs or increase revenue to achieve equilibrium.

Monitor & Track Your Budget

Regularly monitor and track your budget against actual financial performance to identify variances and deviations. Use accounting software or spreadsheets to update your budget and make adjustments as needed to stay on course.

Review & Adjust Budget Regularly

Review your budget periodically, ideally on a quarterly or annual basis, to assess its effectiveness and relevance. Adjust your budget as necessary based on changing market conditions, business priorities, and performance trends.

Contact Mowery & Schoenfeld for Help with Business Budgeting

Creating and managing a business budget requires expertise and strategic planning. At Mowery & Schoenfeld, we specialize in helping businesses develop robust financial strategies to achieve their financial goals. Contact us today to learn how our team of experienced professionals can assist you with business budgeting and financial management. 

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7 free small business budget templates for future-proofing your finances

As a small business owner, you're likely balling with a lot more than your personal checking account. If you don't properly manage your business finances, there's more on the line than an overdraft fee—you now have an entire organization to account for.

Small business budgets are necessary to balance revenue, estimate how much you'll spend, and project financial forecasts, so you can stay out of the red and keep your business afloat.

But creating a small business budget template isn't a small task. Since I don't have a business to run, I did the heavy lifting for you—check out these free, downloadable templates for your small business budgeting.

Table of contents:

1. Static budget template

Best for: Multiple departments or revenue streams; Industries with complex operations

A static budget combines all the function-specific budgets a business uses into one. Typically, a static budget includes the following items (plus any other budgets your business might use):

Cash flow projections: Estimations of how much money will flow into and out of your business. They also help you decide when, how, and what you should spend money on.

Total expected spending: All estimated expenses, including labor and administrative costs. 

By integrating all of your budgets and projections, the static budget provides a full picture of your business's estimated expenses and financial strategy for the upcoming fiscal year. 

2. Overhead budget template

Best for: Service-based businesses

It's easy to forget about expenses that aren't directly tied to production, like delivery charges or utilities. But these costs exist (and can add up quickly), so you need an overhead budget. A detailed overhead budget template will include:

Administration expenses

It compares your budgeted amount to actual figures (warning: it may be a rude awakening) and can help improve accuracy for future financial planning. 

Predicting overhead spending helps you plan how to use other funds more practically too—if you know how much you'll spend on overhead, you can make better business decisions. For example, you'd know whether you can afford to invest money into other initiatives like adding a delivery service or upgrading equipment.

3. Multiple-project budget template

Best for: Project-based industries

Product-by-product COGS (cost of goods sold)

Labor costs

Equipment and resource costs

Indirect project expenses like travel

A multiple-projects budget establishes estimates for everything you need to get projects across the finish line. It also lets you track costs to ensure you're not spending more than you accounted for in the budget.

4. Startup budget template

Best for: New small businesses and startups

But unlike established small businesses, you don't have past financial data to base expenses on. That's why you need a startup budget to focus on expenses for your first year of business, including items like:

Funding from investors and loans

Licensing and permits

Logo and website design

Website domain

Business software

Security installation 

Overhead expenses

Capital expenses

5. Labor budget template

Best for: Larger businesses with lots of employees

Unless you're a one-person show, you'll need a labor budget. And even if you are a one-person show, it's good to know if you can afford to pay yourself. A labor budget breaks down all employee-related costs like: 

Payroll taxes

Contract labor

Break down employee costs into direct, indirect, fixed, and variable categories to clarify how your company allocates its resources. You can also consider different scenarios more easily when you understand the breakdown of labor costs.

For example, you can simulate the impact of adding or reducing staff in specific departments or assess the effects of different compensation structures on different teams.

An accurate forecast of labor costs ensures you can sustainably meet your staffing needs and can help you make informed hiring decisions. Down the road, it can also help you determine if you can afford to give your staff raises, bonuses, or additional benefits.

6. Cash flow budget template

Best for: Businesses with fluctuating income and expenses; Seasonal businesses; Retail

As important as it is to be mindful of how much money you're spending, you should also track how much money you're making . A cash flow budget helps estimate how money is flowing in and out of your business. It includes:

Starting balance (set at the beginning of the month, quarter, or year)

Projected cash inflow from all revenue streams

Estimated cash expenditures

Ending balance (calculated at the end of the month, quarter, or year)

This type of budget lets you proactively manage your resources, anticipate potential cash shortages, and strategize for growth. For instance, if you know you're only going to break even this year, you may wait on expanding or making a large investment. 

7. Administrative budget template

Best for: Businesses focused on streamlining operations

An administrative budget includes all those general expenses that the company as a whole needs to function. This type of budget accounts for: 

Depreciation expenses

Training and development

Communication expenses

Accounting fees

While you could technically include administrative expenses in an overhead budget and call it a day, a separate administrative budget gives more of an eagle-eye view of how well your business is operating. 

Without an eye on administrative costs, you may be spending unnecessarily or lose focus on areas where it'd be wiser to invest your money. In other words, you could be spending way too much on fancy pens when you should be saving up to upgrade your cash register. 

Periodic budget reviews

A budget isn't a "set it and forget it" deal. Regular budget reviews can help you stay on track with your financial goals and respond proactively to changing market conditions. 

You should compare your estimated budget to actual spending. Then you can see where you went over and where you can splurge more. Try to review your budget monthly, quarterly, and yearly.

Monthly: Compare actual performance against your budgeted figures for the month. Identify any deviations and look for insights into cash flow, sales trends, and expense management.

Quarterly: Dive deeper into performance over the last three months. Use trends to project revenue and expenses for the upcoming quarter and identify areas for improvement.

Yearly: Reflect on your long-term financial objectives for the fiscal year. Assess the effectiveness of your budgeting strategies, and set new budget targets for the upcoming year. 

How to design your small business budget plan

It's cliched but true: you gotta spend money to make money. But that's no excuse to start throwing cash at your business willy-nilly.

Budgeting forces you to prioritize your objectives, so you spend money on the things that matter most. Here's how to create a small business budget in four steps:

Identify your working capital for the budgeting period. Add up your current assets like cash, accounts receivable, and inventory. Then subtract current liabilities like accounts payable and short-term debt. The remaining amount is what you have left to cover your operational expenses during the budgeting period.

Separate business and personal expenses. If you haven't already, open a dedicated business bank account. This makes it easier to track, categorize, and analyze your finances.

Determine your fixed and variable costs. Make a list of costs that stay the same every month (fixed costs) and what changes (variable costs). These will change based on the purpose of the budget. For instance, a labor budget will only consider employee-related costs.

Calculate your total expenses. Add up all the costs for your business, including fixed costs, variable costs, labor, and any other applicable expenses. This total is how much your business needs to run. Any leftover money from your working capital can be allocated toward other business investments. 

Budgeting methods

If you've budgeted before and hated it, you may just have been using an ineffective budgeting method for your preferences. Here are a few budgeting methods to try instead: 

Traditional: This budget is set for a determined amount of time and uses last year's numbers as a benchmark. Once you set your budget, you don't change it unless you get approval for an adjustment.

Rolling: This dynamic approach spans a continuous time frame instead of a fixed time period. As each month or quarter passes, you add a new budget period and drop the oldest period. This lets businesses adjust projections based on real-time performance and market conditions.

Flexible: This budget changes along with your sales forecast. As real-time sales activity deviates from budgeted amounts, you recalculate the budget to reflect the new data. 

Small business budget FAQ

Still don't know where to start with your small business budget? Check out the answers to these common questions before you open a new Google Sheet.

What should a business budget include?

A business budget should include all income sources and expenses. Income sources could include projected revenue from sales, loans, or potential investor funding. Expenses may include items like office space rent, employee salaries, insurance, and marketing. Add anything that helps paint a full picture of your finances.

How much does the average small business startup cost?

What is the best free business budgeting software.

The best free budgeting business software will depend on what your business needs, but you can try apps like Mint or Wave. Or you can use a spreadsheet—scroll up for some free small business budget templates.

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Cecilia Gillen

Cecilia is a content marketer with a degree in Media and Journalism from the University of South Dakota. After graduating, Cecilia moved to Omaha, Nebraska where she enjoys reading (almost as much as book buying), decor hunting at garage sales, and spending time with her two cats.

• Small business
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The Best Free Business Budget Templates

Published: October 12, 2023

Business budgets are a source of truth for your income and expenses. That includes all the money you spend — from A/B testing your marketing campaigns to your monthly office rent.

While organizing the numbers may sound difficult, using a business budget template makes the process simple. Plus, there are thousands of business budget templates for you to choose from.

We’ll share seven budget templates that can help organize your finances. But first, you’ll learn about different types of business budgets and how to create one.

What is a Business Budget?

A business budget is a spending plan that estimates the revenue and expenses of a business for a period of time, typically monthly, quarterly, or yearly.

The business budget follows a set template, which you can fill in with estimated revenues, plus any recurring or expected business expenses.

For example, say your business is planning a website redesign. You'd need to break down the costs by category: software, content and design, testing, and more.

Having a clear breakdown will help you estimate how much each category will cost and compare it with the actual costs.

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Types of Budgets for a Business

Master budget, operating budget, cash budget, static budget, departmental budget, capital budget, labor budget, project budget.

Business budgets aren’t one size fits all. In fact, there are many different types of budgets that serve various purposes. Let’s dive into some commonly used budgets:

Think of a master budget as the superhero of budgets — it brings together all the individual budgets from different parts of your company into one big, consolidated plan. It covers everything from sales and production to marketing and finances.

It includes details like projected revenues, expenses, and profitability for each department or business unit. It also considers important financial aspects like cash flow, capital expenditures, and even creates a budgeted balance sheet to show the organization's financial position.

The master budget acts as a guide for decision-making, helps with strategic planning, and gives a clear picture of the overall financial health and performance of your company. It's like the master plan that ties everything together and helps the organization move in the right direction.

Your operating budget helps your company figure out how much money it expects to make and spend during a specific period, usually a year. It not only predicts the revenue your business will bring in, but also outlines expenses it will need to cover, like salaries, rent, bills, and other operational costs.

By comparing your actual expenses and revenue to the budgeted amounts, your company can see how it's performing and make adjustments if needed. It helps keep things in check, allowing your business to make wise financial decisions and stay on track with its goals.

Free Business Budget Templates

Manage your business, personal, and program spend on an annual, quarterly, and monthly basis.

• Personal Budget Template
• Annual Budget Template
• Program Budget Template

You're all set!

Click this link to access this resource at any time.

A cash budget estimates the cash inflows and outflows of your business over a specific period, typically a month, quarter, or year. It provides a detailed projection of cash sources and uses, including revenue, expenses, and financing activities.

The cash budget helps you effectively manage your cash flow, plan for cash shortages or surpluses, evaluate the need for external financing, and make informed decisions about resource allocation.

By utilizing a cash budget, your business can ensure it has enough cash on hand to meet its financial obligations, navigate fluctuations, and seize growth opportunities.

A static budget is a financial plan that remains unchanged, regardless of actual sales or production volumes.

It’s typically created at the beginning of a budget period and doesn’t account for any fluctuations or changes in business conditions. It also assumes that all variables, such as sales, expenses, and production levels, will remain the same throughout the budget period.

While a static budget provides a baseline for comparison, it may not be realistic for businesses with fluctuating sales volumes or variable expenses.

A departmental budget focuses on the financial aspects of a specific department within your company, such as sales, marketing or human resources.

When creating a departmental budget, you may look at revenue sources like departmental sales, grants, and other sources of income. On the expense side, you consider costs such as salaries, supplies, equipment, and any other expenses unique to that department.

The goal of a departmental budget is to help the department manage its finances wisely. It acts as a guide for making decisions and allocating resources effectively. By comparing the actual numbers to the budgeted amounts, department heads can see if they're on track or if adjustments need to be made.

A capital budget is all about planning for big investments in the long term. It focuses on deciding where to spend money on things like upgrading equipment, maintaining facilities, developing new products, and hiring new employees.

The budget looks at the costs of buying new stuff, upgrading existing things, and even considers depreciation, which is when something loses value over time. It also considers the return on investment, like how much money these investments might bring in or how they could save costs in the future.

The budget also looks at different ways to finance these investments, whether it's through loans, leases, or other options. It's all about making smart decisions for the future, evaluating cash flow, and choosing investments that will help the company grow and succeed.

A labor budget helps you plan and manage the costs related to your employees. It involves figuring out how much your business will spend on wages, salaries, benefits, and other labor-related expenses.

To create a labor budget, you'll need to consider factors like how much work needs to be done, how many folks you'll need to get it done, and how much it'll all cost. This can help your business forecast and control labor-related expenses and ensure adequate staffing levels.

By having a labor budget in place, your business can monitor and analyze your labor costs to make informed decisions and optimize your resources effectively.

A project budget is the financial plan for a specific project.

Let's say you have an exciting new project you want to tackle. A project budget helps you figure out how much money you'll need and how it will be allocated. It covers everything from personnel to equipment and materials — basically, anything you'll need to make the project happen.

By creating a project budget, you can make sure the project is doable from a financial standpoint. It helps you keep track of how much you planned to spend versus how much you actually spend as you go along. That way, you have a clear idea of whether you're staying on track or if there are any financial challenges that need attention.

How to Create a Business Budget

While creating a business budget can be straightforward, the process may be more complex for larger companies with multiple revenue streams and expenses.

No matter the size of your business, here are the basic steps to creating a business budget.

1. Gather financial data.

Before you create a business budget, it’s important to gather insights from your past financial data. By looking at things like income statements, expense reports, and sales data, you can spot trends, learn from past experiences, and see where you can make improvements.

Going through your financial history helps you paint a true picture of your income and expenses. So, when you start creating your budget, you can set achievable targets and make sure your estimates match what's actually been happening in your business.

2. Find a template, or make a spreadsheet.

There are many free or paid budget templates online. You can start with an already existing budget template. We list a few helpful templates below.

You may also opt to make a spreadsheet with custom rows and columns based on your business.

3. Fill in revenues.

Once you have your template, start by listing all the sources of your business’ income. With a budget, you’re planning for the future, so you’ll also need to forecast revenue streams based on previous months or years. For a new small business budget, you’ll rely on your market research to estimate early revenue for your company.

When you estimate your revenue , you're essentially figuring out how much money you have to work with. This helps you decide where to allocate your resources and which expenses you can fund.

4. Subtract fixed costs for the time period.

Fixed costs are the recurring costs you have during each month, quarter, or year. Examples include insurance, rent for office space, website hosting, and internet.

The key thing to remember about fixed costs is that they stay relatively stable, regardless of changes in business activity. Even if your sales decrease or production slows down, these costs remain the same.

However, it's important to note that fixed costs can still change over the long term, such as when renegotiating lease agreements or adjusting employee salaries.

5. Consider variable costs.

Variable costs will change from time to time. Unlike fixed costs, variable costs increase or decrease as the level of production or sales changes.

Examples include raw materials needed to manufacture your products, packaging and shipping costs, utility bills, advertising costs, office supplies, and new software or technology.

You may always need to pay some variable costs, like utility bills. However, you can shift how much you spend toward other expenses, like advertising costs, when you have a lower-than-average estimated income.

6. Set aside time for business budget planning.

Unexpected expenses might come up, or you might want to save to expand your business. Either way, review your budget after including all expenses, fixed costs, and variable costs. Once completed, you can determine how much money you can save. It’s wise to create multiple savings accounts. One should be used for emergencies. The other holds money that can be spent on the business to drive growth.

Fill out the form to get the free templates.

How to manage a business budget.

There are a few key components to managing a healthy business budget.

Budget Preparation

The process all starts with properly preparing and planning the budget at the beginning of each month, quarter, or year. You can also create multiple budgets, some short-term and some long-term. During this stage, you will also set spending limits and create a system to regularly monitor the budget.

Budget Monitoring

In larger businesses, you might delegate budget tracking to multiple supervisors. But even if you’re a one-person show, keep a close eye on your budget. That means setting a time in your schedule each day or week to review the budget and track actual income and expenses. Be sure to compare the actual numbers to the estimates.

Budget Forecasting

With regular budget tracking, you always know how your business is doing. Check in regularly to determine how you are doing in terms of revenue and where you have losses. Find where you can minimize expenses and how you can move more money into savings.

Why is a Budget Important for a Business?

A budget is crucial for businesses. Without one, you could easily be drowning in expenses or unexpected costs.

The business budget helps with several operations. You can use a business budget to keep track of your finances, save money to help you grow the business or pay bonuses in the future, and prepare for unexpected expenses or emergencies.

You can also review your budget to determine when to take the next leap for your business. For example, you might be dreaming of a larger office building or the latest software, but you want to make sure you have a healthy net revenue before you make the purchase.

Best Free Business Budget Templates

1. marketing budget template.

Knowing how to manage a marketing budget can be a challenge, but with helpful free templates like this marketing budget template bundle , you can track everything from advertising expenses to events and more.

This free bundle includes eight different templates, so you can create multiple budgets to help you determine how much money to put toward marketing, plus the return on your investment.

2. Small Business Budget Template

For small businesses, it can be hard to find the time to draw up a budget, but it’s crucial to help keep the business in good health.

Capterra offers a budget template specifically for small businesses. Plus, this template works with Excel. Start by inputting projections for the year. Then, the spreadsheet will project the month-to-month budget. You can input your actual revenue and expenses to compare, making profits and losses easy to spot.

3. Startup Budget Template

What if you don’t have any previous numbers to rely on to create profit and expense estimates? If you are a startup, this Gusto budget template will help you draw up a budget before your business is officially in the market. This will help you track all the expenses you need to get your business up and running, estimate your first revenues, and determine where to pinch pennies.

4. Free Business Budget Template

You might be familiar with Intuit. Many companies, big and small, rely on Intuit’s services like Quickbooks and TurboTax. Even if you don’t use the company’s paid financial services, you can take advantage of Intuit’s free budget template , which works in Google Sheets or Excel.

It features multiple spreadsheet tabs and simple instructions. You enter your revenue in one specific tab and expenses in another. You can also add additional tabs as needed. Then, like magic, the spreadsheet uses the data in the income and expense tabs to summarize the information. This template can even determine net savings and the ending balance.

5. Department Budget Sheet

A mid- to large-size company will have multiple departments, all with different budgetary needs. These budgets will all be consolidated into a massive, company-wide budget sheet. Having a specific template for each department can help teams keep track of spending and plan for growth.

This free template from Template.net works in either document or spreadsheet formats. This budget template can help different departments keep track of their income and spending.

6. Project Budget Template

Every new project comes with expenses. This free budget template from Monday will help your team estimate costs before undertaking a project. You can easily spot if you're going over budget midway through a project so you can adjust.

This template is especially useful for small companies that are reporting budgets to clients and for in-house teams getting buy-in for complex projects.

7. Company Budget Template

Want to keep track of every penny? Use this template from TemplateLab to draw up a detailed budget. The list of expenses includes fixed costs, employee costs, and variable costs. This business template can be especially useful for small businesses that want to keep track of expenses in one, comprehensive document.

Create a Business Budget to Help Your Company Grow

Making your first business budget can be daunting, especially if you have several revenue streams and expenses. Using a budget template can make getting started easy. And, once you get it set up, these templates are simple to replicate.

With little planning and regular monitoring, you can plan for the future of your business.

Editor's note: This post was originally published in September 2021 and has been updated for comprehensiveness.

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Step-by-Step Guide to Creating a Business Budget Plan

A well-structured business budget plan is crucial for success. It serves as a financial stability and growth roadmap, allowing companies to allocate resources wisely and make informed decisions. Understanding the basics of business budgeting is essential for any entrepreneur or business owner looking to create a solid financial plan to help them achieve their goals.

The Importance of Business Budget Planning

Business budget planning is not just about crunching numbers; it's about setting clear financial goals and outlining strategies to achieve them. It provides a framework for managing expenses, maximizing revenue , and ensuring the long-term sustainability of a company. Without a well-thought-out budget plan, businesses may struggle to stay afloat in today's competitive market.

Understanding the Basics of Business Budget

At its core, a business budget is an estimate of future income and expenses based on historical data and current trends. It involves identifying all sources of revenue and categorizing various types of expenses, including fixed costs (rent, salaries) and variable costs (utilities, marketing). Understanding these fundamental concepts is essential for creating an effective budget plan.

Benefits of Creating a Business Budget Plan

The benefits of creating a business budget plan are manifold. It clarifies where money is being spent and helps identify areas where costs can be reduced or investments can be made to drive growth. Additionally, having a well-structured budget plan can instill confidence in stakeholders, such as investors or lenders who want to see evidence of sound financial management .

Now that we've laid the groundwork for understanding the importance of business budget planning and its basics, let's delve deeper into the process by assessing your financial situation and setting achievable goals.

Assessing Your Financial Situation

Sarah Horsman Template from Strikingly

Now that you understand the importance of business budget planning, it's time to assess your financial situation. This involves analyzing your current revenue and expenses, identifying fixed and variable costs, and projecting future income and expenses.

Analyzing Current Revenue and Expenses

You must clearly understand your current revenue and expenses to create a business budget plan that works for your company . This involves looking at your sales figures, incoming cash flow, and all the money going out of your business. By analyzing these numbers, you can gain valuable insights into where your money is coming from and where it's going.

Identifying Fixed and Variable Costs

When creating a business budget plan, it's crucial to distinguish between fixed and variable costs. Fixed costs, such as rent or salaries, remain constant regardless of your level of production or sales. Variable costs, like raw materials or shipping expenses, fluctuate with production levels or sales volume. Identifying these costs will help you make more accurate financial projections.

Projecting Future Income and Expenses

Looking ahead is an essential part of business budget planning. You can anticipate potential financial challenges or opportunities by projecting future income and expenses based on historical data and market trends. This will enable you to make informed decisions about resource allocation and strategic investments.

Remember that creating a business budget plan is not just about crunching numbers; it's about setting the stage for sustainable growth and success in the long run.

Setting Financial Goals

Now that you understand the basics of business budget planning, it's time to set your financial goals . Establishing short-term and long-term objectives can create a roadmap for your business's financial success. Whether increasing revenue or reducing expenses, having clear goals will guide your budgeting decisions.

Establishing Short-term and Long-term Objectives

To effectively create a business budget plan, it's crucial to establish both short-term and long-term financial objectives. Short-term goals could include reducing overhead costs by a certain percentage within six months, while long-term goals might involve doubling your annual revenue within three years. These objectives provide direction for allocating funds and making strategic financial decisions.

Allocating Funds for Growth and Expansion

One of the key benefits of creating a business budget plan is the ability to allocate funds for growth and expansion. Whether you're looking to invest in new equipment, expand your product line, or open additional locations, setting aside funds in your budget allows you to pursue these opportunities without compromising your financial stability .

Planning for Contingencies and Emergencies

In business, unexpected events can have a significant impact on your finances. Planning for contingencies and emergencies is essential when creating a business budget plan. You can protect your business from potential financial hardships by setting aside a portion of your budget for unforeseen circumstances, such as economic downturns or equipment breakdowns.

Creating the Budget Plan

Now that you understand the importance of business budget planning, it's time to create a solid business budget plan. When choosing the right budgeting method, consider your company's size, industry, and financial goals. Whether it's zero- or activity-based budgeting, select a method that aligns with your business objectives and ensures accurate financial management .

Choosing the Right Budgeting Method

Selecting the right budgeting method is crucial for effective business budget planning. Zero-based budgeting involves justifying every expense from scratch, while activity-based budgeting focuses on cost allocation based on activities. Whichever method you choose, ensure it aligns with your company's financial objectives and provides a clear resource allocation roadmap.

Allocating Funds to Different Departments

When creating a business budget plan, allocating funds to different departments is essential based on their specific needs and priorities. Consider departmental goals, operational requirements, and revenue generation potential when distributing financial resources. This approach ensures each department has the necessary funds to function effectively within the business framework.

Monitoring and Adjusting the Budget as Needed

Once you've allocated funds to different departments in your business budget plan, monitoring and adjusting the budget as needed is essential. Regularly review your financial performance against the set targets and adjust based on changing market conditions or internal dynamics. Flexibility ensures that your business remains agile and responsive to evolving economic landscapes.

By carefully choosing the right budgeting method, allocating funds to different departments thoughtfully, and monitoring and adjusting the budget as needed, you can create a robust business budget plan that sets your company up for long-term success in managing its finances effectively.

Implementing the Budget Plan

Quantum Template from Strikingly

Now that you have created a solid business budget plan, it's time to implement it. This step involves communicating the budget to key stakeholders, training employees on budgetary guidelines, and integrating the budget into daily operations.

Communicating the Budget to Key Stakeholders

It is crucial to inform all relevant stakeholders about the business budget plan. This includes shareholders, managers, and other decision-makers who must know the financial goals and constraints. Clear communication will ensure everyone is on the same page and can work towards common objectives.

Training Employees on Budgetary Guidelines

Employees play a vital role in adhering to the budget plan. Providing them with comprehensive training on budgetary guidelines will help them understand their responsibilities in managing costs and staying within allocated funds. This will empower them to make informed decisions that align with the company's financial objectives.

Integrating the Budget into Daily Operations

Incorporating the business budget plan into daily operations requires a strategic approach. It involves aligning all activities with the financial goals outlined in the budget, ensuring that resources are utilized efficiently, and making adjustments as needed to stay within budgetary limits. This integration fosters a culture of financial responsibility throughout the organization.

By effectively implementing your business budget plan through clear communication, employee training, and seamless integration into daily operations, you can set your company up for financial success while achieving your long-term objectives.

Tracking and Evaluating Performance

Monitoring Budget Variance and Deviations

Once you have implemented your business budget plan, it's crucial to regularly monitor the budget variance and identify any deviations from the projected expenses and revenue. This will help you understand where adjustments need to be made and where you may exceed or fall short of your financial goals.

Conducting Regular Financial Reviews

Regular financial reviews are essential for evaluating the performance of your business budget plan. By conducting these reviews, you can assess whether your actual income and expenses align with what was projected in the budget. This will allow you to make informed decisions on where to allocate funds or where to cut back to stay on track with your financial objectives.

Making Informed Decisions Based on Budget Analysis

Analyzing the data from your business budget plan is key to making informed decisions for your company's future. By understanding how well your budget is performing, you can strategically plan for growth, expansion, and any potential contingencies or emergencies that may arise.

Continuously tracking and evaluating the performance of your business budget plan is vital for maintaining financial stability and achieving long-term success. By closely monitoring variance, conducting regular reviews, and making informed decisions based on budget analysis, you can ensure that your business stays on track toward its financial goals.

Tips for Successfully Implementing Your Business Budget Plan: Striking a Balance Between Dreams and Dollars

Every business owner knows the importance of a budget—it's the roadmap to financial stability and growth. But crafting a brilliant budget is only half the battle. The real test lies in implementation. How do you translate those meticulously planned numbers into tangible results? Here are some key tips to ensure your business budget plan becomes a reality, not just a document gathering dust on a shelf:

1. Set SMART Goals

Your budget shouldn't exist in a vacuum. It should be tightly woven into your business goals. But instead of vague aspirations, set SMART goals: Specific, Measurable, Achievable, Relevant, and Time-bound . This clarity provides a clear direction for allocating resources and tracking progress.

2. Foster Collaboration

Budgeting isn't a solo act. Involve key stakeholders in the process, from department heads to team members. This collaborative approach fosters buy-in, ensures everyone understands their role in achieving financial goals, and harnesses diverse perspectives for smarter decision-making.

3. Embrace Transparency

Open communication is crucial. Share the budget with relevant team members, not just financial experts. This transparency builds trust, empowers employees to make informed decisions, and encourages a culture of financial responsibility.

4. Track and Monitor

Don't let your budget become a static document. Regularly track actual spending against the planned figures. Identify any discrepancies, analyze the causes, and make adjustments as needed. This active monitoring allows you to course-correct before small deviations snowball into major issues.

5. Leverage Technology

Strikingly Landing Page

• Easy to use. Strikingly is a user-friendly platform that is easy to use, even for those without experience in website design .
• Affordable. Strikingly offers a variety of affordable plans to fit any budget.
• Mobile-friendly. Strikingly's websites are mobile-friendly, so you can reach your customers wherever they are.

Strikingly Website on a Mobile Device

• SEO-friendly. Strikingly's websites are SEO-friendly so that you can improve your website's ranking in search results.

Strikingly is a valuable tool to help businesses create and manage their online presence . Strikingly's features can also be helpful for businesses when creating a business budget plan.

6. Review and Adapt

The business landscape is dynamic. Be prepared to adapt your budget as circumstances change. Regularly review your plan, considering market shifts, new opportunities, and unforeseen challenges. A flexible approach ensures your budget remains relevant and responsive to the ever-evolving environment.

7. Celebrate Successes

Don't forget to celebrate your wins! Recognizing positive financial milestones and acknowledging the collective effort motivates everyone and reinforces the importance of adhering to the budget plan.

8. Build a Culture of Accountability

Create a culture where all share financial responsibility. Hold yourself and your team accountable for staying within budget limits. This fosters a sense of ownership and promotes responsible financial behavior across the organization.

9. Communicate Effectively

Regularly communicate budget updates, performance metrics, and any necessary adjustments to the team. This transparency keeps everyone informed, engaged, and empowered to contribute to the business's financial success.

10. Continuously Improve

Never stop learning and evolving. Regularly evaluate your budgeting process, identify areas for improvement, and implement new strategies to optimize your financial management. Remember, a successful budget is a living document, constantly adapting and growing alongside your business.

By following these tips and embracing tools like Strikingly , you can transform your business budget plan from a theoretical framework into a powerful tool for driving growth and achieving your financial aspirations. Remember, successful budgeting is a journey, not a destination. It requires ongoing commitment, collaboration, and a continuous focus on improvement. So, embark on your financial journey confidently and watch your business reach new heights of success.

A well-structured business budget plan can lead to long-term financial stability and growth. It helps identify areas for cost savings, allocate funds for expansion, and plan for contingencies, ultimately leading to improved profitability and sustainability for your business.

Remember that creating a well-structured business budget plan is crucial for the success and sustainability of your business. By following these steps and incorporating these tips into your planning process, you can ensure that your business is on the path to financial success and growth.

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How to Create a Business Budget

Last Updated: November 18, 2021 Approved

This article was co-authored by Samantha Gorelick, CFP® . Samantha Gorelick is a Lead Financial Planner at Brunch & Budget, a financial planning and coaching organization. Samantha has over 6 years of experience in the financial services industry, and has held the Certified Financial Planner™ designation since 2017. Samantha specializes in personal finance, working with clients to understand their money personality while teaching them how to build their credit, manage cash flow, and accomplish their goals. wikiHow marks an article as reader-approved once it receives enough positive feedback. In this case, several readers have written to tell us that this article was helpful to them, earning it our reader-approved status. This article has been viewed 181,357 times.

Building a realistic budget is an effective way to help keep your business profitable. To create your budget, you'll need to make a revenue forecast, estimate your costs, and leave enough room for a reasonable profit margin. Don't worry though—it's easier than it sounds. Our how-to guide will walk you through the simple steps of creating your own financial plan, even if you're a total beginner to budgeting!

Understand the Basics of Budgeting

• For example, assume your business is planning for next year. A budget will outline your estimated revenues, and then include a plan for expenses that is less than those revenues, so that you can earn a profit.
• A balanced budget means your revenues are equal to your expenses. A surplus means your revenues exceed expenses, and a deficit means expenses exceed revenues. As a business, your budget should always strive to be in a surplus state.

• A budget should guide every single business expenditure. For example, if you realize midway through a year that your business desperately needs updated computers, you can consult your budget to see how much estimated surplus revenue you will generate for the remainder of the year. You can then explore costs for computer upgrades and see if that fits within the surplus figure while allowing you to earn a profit, or alternatively, if you have the additional revenue to support taking out a loan for the computers.

• Sales: Sales refer to how much total money your business brings in from all sources. A budget will involve an estimate or forecast of your future sales.
• Total costs: Total costs are what it costs your business to generate your sales. These include fixed costs (like rent), variable costs (like materials used to make your products), and semi-variable costs (like salaries).
• Profits: Profits are equal to revenues minus total costs. Since profit is the goal of business, your budget should include expenses that are low enough to earn you a decent return on your investment.

Forecasting Revenue

• Remember that revenue forecasts are rarely accurate. The point is to provide the best possible estimate using the knowledge you have. [6] X Research source
• Always be conservative. This means assume you will receive sales volumes and pricing on the low end of the possible range.

• For example, assume you are opening a therapy practice. Therapists in your region may charge $100 to $200 per hour. Compare your qualifications, experience, and service offerings to your competition, and estimate your price. You may decide $100 is wise.
• If you offer multiple products and services, make sure to research prices for those too.

• Do you have any customers or contracts lined up? If so, include these. You can then assume referrals from customers and advertising will add to these volumes over the year.
• Compare to existing businesses. If you have colleagues who have established businesses, ask them what their volumes were like early on. For a therapy practice, your colleagues may tell you during their first year they averaged about 10 client hours a week.
• Look at what drives sales volumes. If you are opening a therapy practice, for example, your reputation, referrals, and advertising will bring in people. You could decide that based on these resources, one new client every two weeks is reasonable. You could then go further and make an estimate that each client will pay for one hour a week, and last for an average of six months.
• Once again, remember that revenue forecasts are purely estimates.

• Look at pricing. Do you have reason to believe your prices will increase or decrease?
• Look at volume. Are more people going to be purchasing your product or service? If your business has been growing by 2% annually, you can assume the same for the following year if no significant changes have occurred. If you plan on aggressively advertising, you could bump that up to 3%.
• Look at the market. Is your market growing? For example, imagine that you run a coffee shop in a downtown neighborhood. You may be aware that the neighborhood is rapidly growing due to new people moving in. This could be reason to add to your growth forecast.

Creating the Budget

• Contact an accountant if you are having difficulties. Chartered Professional Accountants in the UK and Certified Public Accountants (CPAs) in the US are trained to advise businesses in the area of budgeting, and for a fee they can assist you in any aspect of the budget creation process.
• A simple online search of "business budget template" can yield thousands of results. You can even find custom templates for your particular type of business.

• Research online or ask a financial adviser what the typical margins for your kind of business should be.
• If 10% is typical for your business, you know that if you are forecasting $100,000 of revenues, your expenses should equal no more than $90,000.

• Add up all these costs to get an idea of your fixed costs for the next year.
• If you have past financial data, use these fixed costs and adjust them for any rent increases, bill increases, or new costs.

• This will vary depending on how much you sell, which is why it is known as a variable cost. You can use your revenue forecast to determine this. For example, if you estimate you will sell 12 cars in your first year, your inventory costs will be the cost to purchase 12 cars.

• Add up all your estimated semi-variable costs.

• Are your total costs less than your revenues?
• Do your total costs provide a profit margin greater than or equal to your target?
• If the answer to either of these questions are no, you will need to look into making cuts. To do this, look at all your costs, and examine what you can do without. Labor costs are one of the most flexible areas to find savings (though you risk upsetting your employees when you cut hours). You can also look into finding a location with lower rents, or reducing utilities costs.

Expert Q&A

You Might Also Like

• ↑ Samantha Gorelick, CFP®. Financial Planner. Expert Interview. 6 May 2020.
• ↑ http://www.investopedia.com/terms/b/budget.asp
• ↑ http://www.inc.com/encyclopedia/businessbudget.html
• ↑ http://www.entrepreneur.com/article/76418
• ↑ http://articles.bplans.com/how-to-forecast-sales/
• ↑ http://www.investopedia.com/terms/s/semivariablecost.asp

About This Article

To create a business budget, start by forecasting your yearly expenditures. To do this, add together fixed costs like rent, insurance, and property taxes. Then, add variable costs like inventory purchases and semi-variable costs like internet packages or employee salaries. Compare this number to your forecasted yearly revenue, which you can determine by comparing to last year’s revenue, or if you’re a new business, by doing market research to figure out what similar businesses make in a year. If your revenue is lower than your expenditures, figure out places you can cut from your budget. To learn how market forecasting can help give you an accurate estimate, keep reading! Did this summary help you? Yes No

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Free Small Business Budget Templates

By Andy Marker | August 12, 2020

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We’ve compiled the most useful free small business budget templates in Microsoft Excel and Google Sheets formats, and also provided helpful details for filling out these templates. 

Included on this page, you’ll find many useful small business budget templates, including a simple small business budget template and a business budget template . Plus, discover why you need a small business budget template , and how to create a small business budget template .

Small Business Budget Template

Use this small business budget template to track and manage your business’s finances. This  easy-to-fill template includes a sheet for month-by-month income, another sheet for tallying monthly expenses, and a third sheet for recording cash flow balances that factors in credit and debit cashflow balances. Easily track and view monthly income and expenses to calculate total profits. The completed budget will help you gauge how close you are to reaching your financial goals. 

For more on small business templates, see “ Free Business Templates for Organizations of All Sizes .”

Download Free Small Business Budget Template - Excel

Business Budget Template

This detailed, all-in-one budgeting template is a perfect fit for small business owners who want  to keep tabs on the financial health of their company. The template includes columns for labor hours, rate, materials, unit costs, and budgeted and actual figures for tallied over/under figures. Use the template to easily compare budgeted amounts to actual expenses for greater insight into how well you’re meeting your budget. 

For more on business budget templates, see “ Free Business Budget Templates for Any Company .”

Download Business Budget Template - Excel

12-Month Business Budget Template

Track your small business’s month-by-month financials with this easily fillable 12-month business budget template. The template includes profit and loss category rows for cost of goods sold (GOGS), sales and marketing costs, labor costs, and earnings before interest and taxes (EBIT). You can also factor in cash, inventory, accounts receivable, net fixed assets, and long-term debt to gain month-by-month, quarterly, and annual insight into your business’s time-sensitive budget.

Download 12-Month Business Budget Template - Excel

Business Budget Template for Multiple Products

Use this customizable template to track single or multiple-project budgets to get a comprehensive picture of your company’s financials. This business budget template for multiple projects allows you to factor in business income (actual vs. budgeted), product-by-product COGS figures, and gross profit (non-operating income) so you can quickly tally your total adjusted income. Enter operating expenses to see your company’s financial position and how close you are to reaching your goals. 

Download Business Budget Template for Multiple Products - Excel

For more operating budget templates, refer to our collection in this article .

Annual Business Budget Template

Get a yearly checkup on your company’s financial health with this annual business budget template. Use the income sheet to enter your sales figures (fees billed, commission income, service income, etc.), and compare those numbers to individual entries on an expenses sheet (COGS, travel, insurance, etc.). Plus, use the summary sheet to see an overview of your spending, based on income vs. expenses. The completed template will show you how close you are adhering to your budget and can help you determine any clarifications or adjustments. 

Download Annual Business Budget Template - Excel For more annual business budget templates, see our article “ Free Annual Business Budget Templates ”.

Business Expense Budget Template

For an expense-by-expense, detailed drilldown of your small business’s expenditures — and how they affect your company’s budget — this template features a planned expenses sheet that totals your projected employee, office, marketing, training, and travel costs, and compares these against a sheet of your actual expenses. Use the third expense variance sheet to inspect the variance between the two (planned vs. actual), and the expense analysis sheet to gain a dashboard view, so you can analyze your organization’s overall financial health.

Download Business Expense Budget Template - Excel

Professional Business Budget Template

Use this professional business budget template to make informed decisions about how projected and actual expenses affect your company’s bottom line. Enter employee and operations expenses on one sheet, compare them to actual expenses on a business expense actual sheet, and then inspect the variances and any discrepancies. A professional business analysis sheet provides a comprehensive analytical overview so you can see where you need to make adjustments to help your company meet its financial goals. 

Download Professional Business Budget Template - Excel

If you are looking for budget templates for nonprofits, check out  this article  for a vast variety of budget templates suitable for any nonprofit organization. 

Startup Budget Template

Designed with simplicity in mind, this single-sheet, startup budget calculator features a single dashboard view on your business expenses. Use the template to easily compare projected and actual expenses, and use the first-year budget calculations section to gain immediate insight into projected average monthly costs, based on budgeted and actual income and expenses. Factor in small business expenses, such as office space, loans, and marketing costs, to ensure your company is financially successful from the get-go. 

Download Start-up Budget Template - Excel

For more startup budget templates, see “ Free Startup Budget Templates ”.

Why You Need a Small Business Budget Template

A small business budget template is a reliable tool that enables you to calculate expenses, revenue, and profits to see how close you are to reaching your organization’s financial goals. You can also use a template to factor in unexpected costs and revenue to determine which expenditures to trim in order to keep the company’s profitability on track. In short, a small business budget reveals additional opportunities and possible revenue streams. 

A small business budget template provides a clear, autotallied, factor-by-factor picture of a company’s estimated capital vs. the reality of expenditures. Simply enter the following details: 

• Planned Expenses: These include employee costs (wages and benefits), office costs (lease, utilities, etc.), and other known payments.
• Additional Costs: These costs might include marketing, legal fees, training, and travel. 
• Actual Costs: This refers to how much items actually cost (compared to planned expenses). 
• Planned Income: This includes anticipated income from sales, services, investors, etc. 
• Actual Income: This refers to the actual income (compared to planned income). 

Once you enter the above budget details, use the template to inspect the variances between the projected budget and the actual numbers to track your business’s finances and make any necessary adjustments.

How to Create a Small Business Budget Plan

A small business budget allows you to plan for expenses and analyze anticipated income against actual income. When creating a small business budget, consider the following factors: 

• Specify Fixed and Variable Costs: Determine all fixed and variable costs involved in running your small business, such as office space, equipment, employee wages, insurance, and training. 
• Factor in Cost of Goods: Enter the cost of goods (COGS), which includes beginning inventory, shipping charges, and related labor. 
• Estimate Your Income: Calculate the income you expect to earn, whether it is from existing capital, investors, or projected profits. 
• Analyze Your Profit Margin: Compare the variance between projected costs and actual costs — as well as projected income compared to actual income — to determine how close you are to meeting financial goals. 
• Adjust Your Budget: Update your budget as needed, once you see how estimates compare with actual income and expenses.

We’ve also compiled the most useful free budget proposal templates for organizations, project managers, grant writers, researchers, team members, and other stakeholders. 

Discover a Better Way to Manage a Small Business Budget and Finance Operations

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When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time.  Try Smartsheet for free, today.

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How To Create a Business Startup Budget

Questions to Ask Before You Begin Your Budget

• Step 1: Plan for "Day One" of Your Business Startup

Step 2: Estimate Monthly Fixed and Variable Expenses

Step 3: estimate monthly sales, step 4: create a cash-flow statement, tips for creating your business startup budget, frequently asked questions.

getty images / the balance

One of the most important tasks for building a start-up company is creating a budget . A proper budget allows you to view the business' expected revenue, expenses, and cash needs for current and future months, quarters, and calendar or fiscal years.

Since you have no past financial data to go on, you must create the budget using your best guess on income and expenses (otherwise known as a profit and loss statement) . Before you begin, consider why you need to spend the time to create a budget. Even if you don't need bank financing, creating a budget is still a valuable exercise for any new and continuing business.

Key Takeaways

• A budget is a key component of your  startup business plan .
• The most difficult part of creating a budget for a new business is estimating your sales.
• You should start by calculating your "day one" costs—the expenses needed to open your physical or virtual doors and begin accepting customers.
• Next up is calculating your fixed and variable costs and your estimated monthly sales.
• Creating a cash-flow statement is also an important part of creating your new business' budget.

Some questions to ask yourself before you begin creating your start-up business' budget:

• What do you need to open the doors of your business on the first day?
• What will your fixed and variable costs be on a continuing basis?
• What can you contribute to keep costs low?
• What can you get as donations from friends and relatives?
• What can you do without?

Keep your "must-haves" to the minimum. The less you need for your business startup, the sooner you can start making a profit.

Step 1: Plan for "Day One" of Your Business Startup

Begin by determining what you will need on "day one" of your business—costs necessary to open the doors (or to take your website live) and begin accepting customers.

A "day one" start-up budget can be broken down into four categories (depending on your situation, some of the categories may not apply to your business.) The categories are:

Facilities Costs

Facilities costs include all the costs of setting up a leased or purchased location for your store, office, warehouse, or other building. These costs may be called leasehold improvements or tenant improvements. For example, you may need walls or a bathroom or a special secure area in your office or building.

If you are working from home, you probably won't have location costs but you may have costs to fix up a room in your home for an office or a small production area in your garage.

Facilities costs also include lease security deposits and signage.

Fixed Assets

What are the fixed assets (sometimes called capital expenditures ) such as furniture, equipment, and vehicles needed to set up your location and start your business? Fixed assets also include computers and machinery, furniture, and anything for your office, store, or warehouse that is needed to set up your business.

Materials and Supplies

Different from assets, materials and supplies include office supplies and any advertising and promotion materials. You will need an initial supply of these to get started.

Other Miscellaneous Costs

Miscellaneous costs include the initial fees to an accountant to help you set up your accounting system, local licenses and permits , insurance deposits, and legal fees to register your business with government entities (like your state) and prepare operating documents. 

In your listing of these startup costs, include items you are contributing to the business, like a computer and office furniture. Note the cost of these items in your list so you can get credit for them as collateral for a business loan.

Fixed Expenses

Fixed expenses are costs that don't change and aren't dependent on the number of customers you have.   Gather information on your fixed expenses each month. Some of the most common monthly fixed expenses include:

• Phones (business phones and cell phones)
• Credit card processing—monthly fees (transaction fees are variable)
• Website service fees
• Equipment lease payments
• Office supplies
• Dues and subscriptions to professional publications
• Advertising, publicity, and promotion commitments, like social media or continuing online ads
• Business insurance
• Professional fees (legal and accounting)
• Employee pay/benefits. (This category is semi-fixed, because you may be able to lower your employee costs at times.)
• Miscellaneous expenses
• Business loan payment

Variable Expenses

Variable expenses are expenses that will change with the number of customers you work with every month.  These might include:

• Postage, mailing, packaging, and shipping costs
• Commissions on sales
• Production costs
• Raw materials
• The wholesale price of goods to be re-sold

If you have a service business, you may not need many variable expenses.

Estimating your profits and sales is probably the most difficult part of a budget because, for a new company, you don't have a track record on which to base your estimate. You might want to do three different sales projections:

• Best-case scenario, in which you show your most optimistic estimate for first-year sales.
• Worst-case scenario, in which you show your least optimistic scenario, with very little sales during the first six months to a year.
• Likely scenario, somewhere in between. The likely scenario would be the one to show your lender.

To be realistic in your budgeting, you must assume that not all sales will be collected. Depending on the type of business you have and the way customers pay, you might have a greater or smaller collections percentage.

Include a collections percentage along with your estimate of sales for each month. For example, if you estimate sales in month one to be $50,000 and your collection percentage is 85%, show your cash for the month to be $42,500.

Calculate the variable costs of sales for each month based on sales for the month. For example, if your estimated sales for a month are 2,500 units and your variable costs are $5.50 per unit, total variable costs for the month would be $13,750.

Add monthly variable costs to monthly fixed costs to get total monthly costs (expenses).

If you are selling products, you might want to calculate your break-even point  to include with your budget. The break-even point shows when you will start making a profit on each sale.

Cash flow is literally the amount of money going into and out of your business each month.

Begin your cash flow statement by combining total costs with total collections of money from all sales for each month. Remember that sales and collections might be different, unless you have a cash or credit business. For the cash flow statement, you'll need to use collections.

The monthly cash flow totals should look something like this:

• Monthly sales $50,000
• Collected $42,500
• Total fixed costs $26,900
• Total variable costs $13,750
• Total cash balance $2,150

The $2,150 represents your total cash balance for the month, not your profit.

By changing your sales figures using the three scenarios above, you can see the result in your cash balance at the end of each month. This cash balance can give you information about your cash needs and how much you might need to borrow for working capital.

Managing your cash flow is a key tool for keeping your new business afloat. And cash flow is more important than profits. You can be making a profit on paper, but if you don't have money in the bank, your business won't be able to pay its bills.

• Use youraccounting software program to create your budget, so you can use existing accounts and make changes more easily. If you don't have an accounting software program, you can use a spreadsheet program.
• Most lenders require three years of cash flow statements on a month-by-month basis, and three years of quarterly and annual income statements (P&Ls).
• Income taxes are a variable expense, and you don't know what taxes you will have to pay until you calculate your net income. Don't include taxes in fixed expenses or variable expenses but make these a separate category.

Estimate sales LOW and expenses HIGH. Everything always costs more and takes longer than you think it will, and it will take longer to get sales going than you think it will.

What are the four steps to creating a budget for your small business?

One: Calculating your "day one" costs: the expenses absolutely necessary to open your business and begin accepting customers. Two: Estimating your monthly fixed and variable expenses. Three: Estimating monthly revenue. Four: Create a cash-flow statement.

What are the most common expenses for small businesses?

Some of the most common monthly fixed expenses for small businesses and start-ups include rent, utilities, equipment, website service fees, insurance, and labor. Common variable expenses include packaging, production, and shipping costs, sales commissions, and raw materials.

Original text

Access our collection of user-friendly templates for business planning, finance, sales, marketing, and management, designed to assist you in developing strategies for either launching a new business venture or expanding an existing one.

You can use the templates below as a starting point to create your startup business plan or map out how you will expand your existing business. Then meet with a  SCORE mentor to get expert business planning advice and feedback on your business plan.

If writing a full business plan seems overwhelming, start with a one-page Business Model Canvas. Developed by Founder and CEO of Strategyzer, Alexander Osterwalder, it can be used to easily document your business concept.

Download this template to fill out the nine squares focusing on the different building blocks of any business:

• Value Proposition
• Customer Segments
• Customer Relationships
• Key Activities
• Key Resources
• Key Partners
• Cost Structure
• Revenue Streams

For help completing the Business Model Canvas Template, contact a SCORE business mentor for guidance

From creating a startup budget to managing cash flow for a growing business, keeping tabs on your business’s finances is essential to success. The templates below will help you monitor and manage your business’s financial situation, create financial projections and seek financing to start or grow your business.

This interactive calculator allows you to provide inputs and see a full estimated repayment schedule to plan your capital needs and cash flow.

A 12-month profit and loss projection, also known as an income statement or statement of earnings, provides a detailed overview of your financial performance over a one-year period. This projection helps you anticipate future financial outcomes by estimating monthly income and expenses, which facilitates informed decision-making and strategic planning. 

If you’re trying to get a loan from a bank, they may ask you for a personal financial statement. You can use this free, downloadable template to document your assets, liabilities and net worth. 

A Personal Financial Statement is a

Marketing helps your business build brand awareness, attract customers and create customer loyalty. Use these templates to forecast sales, develop your marketing strategy and map out your marketing budget and plan.

How healthy is your business? Are you missing out on potential growth opportunities or ignoring areas of weakness? Do you need to hire employees to reach your goals? The following templates will help you assess the state of your business and accomplish important management tasks.

Whether you are starting your business or established and looking to grow, our Business Healthcheck Tool will provide practical information and guidance.

Learn how having a SCORE mentor can be a valuable asset for your business. A SCORE mentor can provide guidance and support in various areas of business, including finance, marketing, and strategy. They can help you navigate challenges and make important decisions based on their expertise and experience. By seeking out a SCORE mentor, you can gain the guidance and support you need to help grow your business and achieve success.

SCORE offers free business mentoring to anyone that wants to start, currently owns, or is planning to close or sell a small business. To initiate the process, input your zip code in the designated area below. Then, complete the mentoring request form on the following page, including as much information as possible about your business. This information is used to match you with a mentor in your area. After submitting the request, you will receive an email from your mentor to arrange your first mentoring session.

Copyright © 2024 SCORE Association, SCORE.org

Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.

10 Tips for Efficiently Managing Your Small Business Finances from Day One

E arly in the pandemic, it was clear that the world was about to change. One thing that shifted was the number of people who began going into business for themselves. In 2023 alone, a record-breaking 5,481,437 new businesses were formed. Each new business owner may feel as though they have about a million things to get done, but when it comes to setting up business finances, there are only 10 they need to concentrate on.

1. Have a financial plan

It's nearly impossible to run a small business without a plan outlining how you plan to handle your finances. This includes everything from invoicing and taxes to purchasing and inventory.

Read more: we researched free tax software and put together a list of the best options here

Your business plan doesn't have to be set in stone. Just make sure you have an idea -- based on what you know now -- of how you would like to handle your business's finances. You can always refine your plan as you become more familiar with how it all works.

2. Come up with a budget

Just as you create a household budget, create a business budget you can stick with. Again, this plan is likely to change as you learn how much money your business takes in and pays out each month. But it's still important to have a general idea of what to expect.

3. Prioritize tax payments

No budget is complete until tax payments have been factored in. Most businesses submit estimated tax payments quarterly, based on their earnings for that quarter. Failing to make quarterly payments can lead to penalties at tax time. To keep it simple, you can set up regular tax payments and budget for it as a standard operating expense.

4. Plan how you're going to bill

Will customers need to pay as soon as they purchase a product or service, or will they have 30, 60, or 90 days to pay? Understanding your cash flow will help you develop a more accurate budget.

5. Track cash flow

Cash flow is what keeps your business afloat. Make sure you have enough money coming in to pay the bills going out. Proper cash flow is crucial to your business running smoothly.

6. Borrow carefully

If you don't currently have enough money in a personal savings account to get your business off the ground, you may need to borrow money. While there's nothing wrong with taking on debt to start a business, the less you borrow, the less stress you'll have to pay it back.

7. Automate whenever possible

As a business owner, you can expect to be busy. Automating tasks can save you time that can be better spent elsewhere in your business. For example, accounting software can save you hours every month.

As your business gets off the ground, take time to learn more about the kinds of automation services that you can use.

8. Be prepared to grow

Your business requires two things to thrive: determination and a willingness to invest. For example, rather than giving yourself a raise or allowing profits to build up, consider investing some of that money back into the operation to help it grow.

That may mean offering a greater number of goods and services or expanding your territory. It may also mean putting more employees on payroll or improving your business's infrastructure.

9. Continue to keep track

No matter how many business operations you've automated or how much you trust the people you've put in charge of accounts and finances, set time aside to go over the books in depth at least once a week. Sit down with your favorite drink and dive into the numbers. Doing so is the best way to spot waste or discrepancies. After all, it's your business, and you're ultimately responsible for whatever happens.

10. Keep your eyes on the future

Even if you're in the first few months of operation, consider what you want your business to look like several years down the road. Do you want the business to be larger and more diversified? Do you hope to operate from a new facility? Are you noticing any broader trends that may impact your business? Keeping one foot in the present and one in the future gives you a better chance of being ready for whatever comes your way.

Owning a business is not easy, but few things are more satisfying. The steps you take from day one can help determine your experiences as a business owner.

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IT Services

How to build a scalable IT budget

How much business could your business do without IT?

These days, “none” is far and away the most common answer.

Yet many organizations struggle with how to approach spending and budgeting related to IT. Information technology may be the backbone of a business, but it usually isn’t front and center in strategic discussions and high-level decision-making. And whatever spending is happening, the budgeting process underneath it often doesn’t scale well.

We know that IT budgets are growing: 57% of CIOs expected their IT budgets to increase last year. An effective IT budget is about more than just spending more money. It’s about spending that money wisely — and determining how much money should be spent on IT in the first place.

How often should an IT budget be evaluated?  

Many organizations with established IT budgeting procedures evaluate that budget yearly. 

Why yearly? Because the process can be lengthy, involving numerous stakeholders and significant amounts of documentation. And the larger your organization, the more complex this business process gets. It’s not uncommon for the evaluation process to take months, so it’s impractical to shorten the budget lifecycle.

For IT services firms supporting clients in the IT budget evaluation and creation process, a yearly cycle can prevent overburdening your team and allow you to stagger clients throughout the calendar year.

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Who should be involved in the process?   

Keeping the right stakeholders involved in the IT budgeting process helps ensure that the budget is holistic (covering everything necessary), realistic (within the company’s overall financial means), and well-managed (administered and allocated responsibly).

The personnel involved should include any of the following, where they exist:

Chief information officer (CIO)

Chief financial officer (CFO)

IT managers, IT directors, IT department heads

IT project managers and project leads

Representatives from major divisions/departments

If the organization has a project management office (PMO), that group should also play a role.

It’s worth noting that entities outside the CIO and IT domains play an increasing role in IT budgeting as the process gets democratized across lines of business. Teodora Siman, an IDC research manager , elaborates:

“We’re seeing more influence come from outside of IT, where the CIO orchestrates technology across the business, and [technology decisions] are a collaborative conversation with business leaders who are focused on outcomes and customer-centricity.”

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• Key items to include in an IT budget

Organizations differ in where certain expenses fall in the budget, but most IT budgets should include at least these five areas:

Physical employee equipment: IT money is used to purchase laptops, desktops, printers, phones, networking equipment, servers, and other hardware.

Staff salaries: Employees within the IT department or division are typically paid out of the IT budget

Cybersecurity, backup, and disaster recovery (DR): Preventive expenditures here help to hedge against disasters, natural or otherwise.

Infrastructure and maintenance: Money is allocated to repair and upgrade devices and infrastructure and to pay for ongoing IT infrastructure operational costs (internet access, cloud services, software licenses, etc.).

IT project management: IT project management costs that are not accounted for in your overall project management budget should appear here.

How to plan a budget that serves the future of the organization  

Planning an IT budget can be relatively simple for a startup or small professional services firm, a massive months-long process at an enterprise level, or anywhere in between.

Whatever the size and scope of your IT budget planning, we’ve boiled the process down to six key elements. Below, we’ll provide clear, concise planning tips to help you create an IT budget to propel your organization forward.

Assess the current landscape (internal and external)

One key strategy for planning is considering the context around your IT budget. Is business booming? Is your industry more broadly in flux? Are you growing (and if so, how quickly)? Or is this a year where it’s clear the purse strings need to tighten?

And what about the technology landscape? We aren’t necessarily seeing quantum leaps in computing power at the individual user or device level. But consider the capabilities of AI and machine learning to churn through data or for generative AI to enhance workflows and extend human capacity.

Any successful IT budget needs to be grounded in these realities. They inform how much is likely to be available and what sorts of changes that budget needs to accommodate.

Integrate business objectives and cross-department goals

Next, remember that your IT budget isn’t an island or a destination. It’s a way to achieve goals and objectives. So make sure your budget doesn’t live in a silo. Instead, it should be built atop existing business objectives and priorities. 

Including business objectives and cross-departmental goals in budget planning ensures that your IT division is growing with, not against, the broader organization. By building your IT budget around the business’s core objectives, you can avoid unnecessary spending on IT projects that don’t further the mission.

This improves the organization’s financial health, affects employee morale and effectiveness, and can even advance market competitiveness. 

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Set clear guidelines for expense categories

One principle is consistent for any kind of budgeting: the more clarity, the better.

It’d be preposterous to lump your entire IT budget into a single line item: you need to know where the money’s going more specifically than that. But true clarity requires more than a few vague expense categories. You’ll need to get as specific as possible and set clear guidelines with team members on what expenses go where.

With clearer and more numerous expense categories, it will be easier to understand IT spend after the fact, helping you create progressively more accurate IT budgets year after year.

Consider flexible purchase options

IT costs can be inconsistent and spiky: it’s easy enough to plan for an upgrade cycle on PCs for your workforce, but the cost of replacing a server is a different beast. Big technology investments are sometimes needed, and the larger your organization scales, the more unwieldy these IT expenditures can become.

So, as you plan your IT budget, consider flexible purchasing options for your IT investments, including fair market value leases, consumption-based billing, and installment payment agreements.

This is one reason so many organizations are turning to the cloud: procuring your computing and software needs from a cloud provider tends to flatten out these spikes. Managed IT service providers can provide a similar cost-leveling function, and in the right situations, this business model can deliver notable cost savings alongside better IT support and the broad expertise needed to meet diverse IT needs.

Use KPIs to monitor effectiveness

Next, make sure to track the effectiveness of your IT budget processes by tracking the right metrics. Key performance indicators (KPIs) can help here, but the trick is finding the KPIs that deliver the right information in the right way.

For example, IT project team efficiency , on-time project completion percentage, average hardware age, software utilization rate, and a few dozen other measures could all be helpful — but not all are helpful all the time. 

Which KPIs are right for monitoring budget effectiveness depends on what your business is trying to achieve. Cost savings, increased efficiency, greater accuracy, and better customer responsiveness are all fantastic priorities, but they may compete against one another in some ways. 

So first, you must establish which priorities take precedence. Only then can you select the KPIs to help you measure progress on those priorities. 

Educate stakeholders about IT spending

Last, make sure you continually educate stakeholders in the IT budget about how spending works in IT. You’ll be working with people across a spectrum of specialties and skill sets, and not everyone will be a financial or IT expert. 

It’s up to you to invest in these stakeholders. By teaching them about the mechanisms for IT spending (such as those flexible purchase options), your budgetary goals, and the tools you’ll use to measure success, you’ll garner better support and get more useful feedback.

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For a successful overall IT strategy, businesses and IT leaders must prioritize the IT initiatives that best fit a company’s business goals and strategic needs — while staying within appropriate levels of IT spending.

Because while digital transformation is key to continued growth, it’s neither easy nor inexpensive.

For most professional services firms, managing IT projects and budgets well requires understanding and adhering to the business’s strategic plan and creating a technology roadmap that supports the overall business strategy. It also demands the ability to plan, visualize, strategize, organize, and ultimately execute projects well.

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TABLE OF CONTENTS

• How often should an IT budget be evaluated?
• Who should be involved in the process?
• How to plan a budget that serves the future of the organization

Ben is a Senior Content Marketing Specialist at Teamwork.com. Having held content roles at agencies and SaaS companies for the past 8 years, Ben loves writing about the latest tech trends and work hacks in the agency space.

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How to Make a Budget Spreadsheet

• A budget spreadsheet simplifies tracking income and expenses, aligning daily spending with overall financial goals.
• Key steps include choosing a user-friendly tool like Excel ® or Google Sheets ® , setting up detailed budget categories, and deciding on a tracking period (monthly, quarterly, yearly).
• Effective budget management involves inputting actual financial data, utilizing formulas for automatic calculations, and comparing planned versus actual spending.
• Regular updates to the budget spreadsheet are crucial for adapting to financial changes and staying on track with goals.

A budget is a  powerful tool that helps you make informed spending and savings decisions. It provides the freedom to spend with confidence, knowing your actions align with bigger-picture financial goals.

Tracking income and expenses by hand may seem like a hassle, but a well-designed budget spreadsheet makes it easy.

Knowing how to make a budget spreadsheet that’s customized to your needs allows you to effectively track finances without the need for expensive software or specialized financial knowledge.

In the following guide, we’ll walk through the process, from selecting the right platform to categorizing expenses and monitoring your progress. It’s an easy solution you can implement right away.

What Is a Budget Spreadsheet and How Is It Used?

A budget spreadsheet is a simple tool for organizing and tracking income and expenses. It provides a clear view of money coming in and going out over a set period of time, typically weekly or monthly. Assigning categories to each income and expense makes it easy to identify trends and uncover potential savings opportunities. Pre-planning weekly or monthly spending also helps ensure there’s enough left over to allocate toward saving for short-term and longer-term financial goals.

Regularly updating and reviewing a budget spreadsheet turns it into an active financial management tool. It helps you spot patterns, such as seasonal increases in utility bills, and proactively adjust the spending and savings goals to reflect changes in income, expenses, or financial priorities.

Choosing the Right Tool for Your Budget Spreadsheet

There is a wide range of tools and software for creating and managing a budget, but how do you make a budget spreadsheet that works well over the long term? To choose a platform that suits your needs, consider the following factors:

• Ease of use : The best budgeting tool is one you use consistently. Look for an option that’s easy to set up and navigate. This will help ensure you’re comfortable making regular updates.
• Accessibility : Consider whether the tool is accessible across devices, such as your phone, tablet, or computer.
• Cost : Free options often work as well as paid tools, allowing for simple budget tracking without additional expense.
• Advanced features : Consider whether the tool offers advanced features such as customizable categories, automatic calculations, and charts and graphs to enhance the budgeting experience.

Popular Spreadsheet Tools: Microsoft Excel and Google Sheets

Microsoft Excel ® and Google Sheets ® are two of the most popular spreadsheet programs. Both are user-friendly and offer a range of budgeting features.

Microsoft Office Excel

Excel, the spreadsheet tool included in Microsoft Office Suite ® , is ideal for those who prefer a detailed budgeting approach and want customizable options. It comes with a range of budgeting templates, allowing for quick, easy setup without the need to manually create rows, columns, and formulas. You’ll find options available for everything from a standard household budget to budgets made specifically for planning events or tracking holiday spending .

Google Sheets

Google Sheets is a user-friendly option that is free to use with a Google account. It includes several pre-made budget templates, including monthly and annual budgets. Sheets are stored in Google Drive ® , a cloud-based platform that allows you to access the budget from wherever you are. This ensures the budget is available from your computer, tablet, or smartphone.

The Advantages Of Using a Premade Template

Microsoft Excel and Google Sheets both offer the ability to build a budget spreadsheet from scratch. However, choosing a pre-made budget template offers a ready-made structure, saving time and allowing you to focus on entering financial information right away.

The templates are designed with the user experience in mind, offering clear categories and useful formulas. While they provide a ready-to-use foundation, they’re often fully editable, allowing for small changes to better align the budget spreadsheet with your personal financial goals.

Setting Up Your Budget Categories and Time Frame

Organizing financial transactions into relevant categories helps you easily identify spending habits and make adjustments to help maintain a positive cash flow. The number of categories used depends on your situation, goals, and personal preferences. Begin with two primary categories: Income and Expenses. Then, break these down into relevant sub-categories.

Income Categories

When tracking your income, you may include categories such as:

• Rental income
• Investment income
• Freelance income

Expense Categories

There are several options for tracking budget categories. Depending on your goals and personal preferences, you may choose broad categories or track with greater detail.

General vs. Detailed

General expense categories may include items such as:

• Mortgage/rent
• Credit card payments
• Pet expenses

If you prefer more detail, consider tracking individual bills by creating another layer of sub-categories. For example, the utilities category may include:

• Electric bill
• Heating bill

While detailed categories take more time to set up initially, the additional information can help you identify areas where you could cut costs.

Fixed vs. Variable

You may also categorize expenses based on whether they are fixed or variable. For example, fixed expenses include rent or mortgage, insurance premiums, car payments, and other expenses that remain fairly consistent from month to month.

Variable expenses include items that change from month to month, such as dining out, hobbies, and shopping. Since variable expenses are typically easier to cut if necessary, adding this category can help with financial evaluations.

Savings and Investments

Finally, consider adding a budget category for savings and investments . This may include:

• Contributions to savings accounts
• Emergency fund savings
• Retirement account contributions
• Contributions to other investments

Budgeting for savings and investments helps prioritize these goals, ensuring you’ve set aside money for planned contributions rather than relying on leftover funds.

Determining Your Budget Period

Once you’ve determined key categories, decide how frequently to track, review, and update the budget. Many individuals use monthly or weekly tracking. However, depending on your needs, you may track more or less frequently. Quarterly, annual, or multi-year tracking can help with bigger-picture goals, while weekly or daily tracking helps you stay focused on short-term, specific goals.

You may find it helpful to combine several time periods, for example, using an annual budget to gain clarity on long-term trends and habits while tracking more frequently to allow for real-time adjustments.

Crafting Your Budget: Entering Income and Expenses

Now that the spreadsheet is ready, it’s time to input your financial information. While entering data and crunching numbers may not feel exciting, keep in mind that the spreadsheet will perform all of the calculations almost instantly — turning a potentially tedious task into a quick and satisfying experience. Here’s how to get started.

1. Input Your Data

Since you may not remember all income and expenses offhand, begin by pulling out your last few bank account and credit card statements. Enter each deposit and expense as a separate line item and choose the correct categories.

2. Utilize Formulas

Once you’ve entered all the data, use formulas to quickly perform key calculations, such as totaling expenses, calculating the difference between your income and expenses, or averaging spending to find monthly patterns.

If you’ve used a budget spreadsheet, the formulas are likely already included and will run automatically. Many spreadsheet tools also include pre-made formulas, which you can add for additional analysis.

3. Compare Planned vs. Actual Income and Expenses

Consider setting up separate columns for your projected and actual income and expenses, plus a column for the variance between these figures. This setup offers clear insights into how closely you’re meeting financial targets and areas that need attention. If this is not part of the premade template, add formulas to automatically complete the calculations.

Regularly Monitoring and Updating Your Budget  

Many situations can affect your budget, from a pay raise to a change in expenses or a shift in financial goals. It’s important to regularly review and update the spreadsheet to ensure it remains an effective financial tool. During the review process, make changes as needed so it continues to accurately reflect your financial situation.

Regularly reviewing your budget spreadsheet also helps highlight spending patterns, identify areas for savings, and ensure your finances remain in alignment with short-term and longer-term goals.

Generally, a monthly update is sufficient. However, if you’re actively working to reduce debt or meet a short-term savings goal, weekly updates may prove more beneficial.

Empower Your Personal Finance with a Custom Budget Spreadsheet

Creating a budget spreadsheet is an important step toward taking control of your finances. The key is to start simple, stay consistent, and make adjustments along the way.

Once you’re comfortable with the process of regularly reviewing and updating the spreadsheet, it becomes a powerful tool that guides spending and savings decisions, helping you achieve bigger-picture financial goals.

For more information and financial management tips, read PNC Bank’s Personal Finance Insights . Here, you’ll find various topics designed to help you gain financial knowledge and empower your financial future.

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Level Up Your Workout: How to Plan and Pay for a Home Gym

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As a former college athlete, John Bovard has always prioritized exercise. Building a home gym helped him balance health, career and family.

“To be able to walk right downstairs, get our workout in, be back upstairs without any travel time or any commute was something that was our best option,” says Bovard, a certified financial planner and owner of Incline Wealth Advisors in Cincinnati.

The cost to build a home gym ranges from $300 to $15,000, according to home improvement website HomeAdvisor, and depends on your equipment and renovation needs. It may seem daunting and expensive, but there are ways to manage the costs. Here are five tips to tackle a home gym so you gain muscle — not unmanageable debt.

Spot what you need

Before jumping into plans for a dream gym, reflect on your past and current exercise patterns.

“Know the equipment you like that keeps you motivated, so you're not wasting money,” says Megan Kopka, a certified financial planner at Apprise Wealth Management in Wilmington, North Carolina, “so [the equipment] doesn't become a clothes rack.”

For some, equipment can mean dumbbells and a strength training machine, which can range from $1,000 to $6,000 or more. For others, a yoga mat and a few light weights, which can total less than $100, may be sufficient. Consider gym add-ons like speakers, floor mats or app subscriptions, which can amplify your workout but increase your costs.

Kopka pays for a Peloton app subscription and says the workouts it provides are affordable and rewarding. “I'm a financial planner. I work all the time,” says Kopka, “I'm planning for everybody else, and it's just nice to have that online class where they tell you what to do.”

Let your budget do the heavy lifting

Once you have a firm idea of what’s needed for your home gym, create a budget by researching equipment, adding up the costs and factoring in any savings from, for example, canceling a gym membership. Identify equipment you may want to buy new versus secondhand.

Bovard found used equipment through Facebook Marketplace and Play It Again Sports. He says rubber-coated dumbbells or weights with low wear-and-tear can be good second-hand purchases.

It may be tempting to buy everything you want for your gym quickly, but it's best to build the space over time.

“You're not going to be able to go from zero to a fully decked-out gym,” says Bovard. Lead with your budget as you decide what to purchase and when, and stagger the purchases to give your bank account a rest.

Stretch your savings

The cheapest way to finance a home gym is to pay with cash. “Savings would be more of a slow and steady route,” says Bovard. “That's where it would make more sense to save over time and slowly start to accumulate what you need.”

Setting aside cash from your monthly income and building the gym in stages can help you avoid high-interest financing options like a credit card or personal loan. Bovard also suggests checking if you can use funds from a workplace health savings account (HSA) for qualified gym equipment. Your employer may also provide compensation for a gym membership that can go toward home gym costs instead.

Another consideration for how much to invest in the gym: How long do you intend to stay in the house? While a gym may increase your home’s value when you sell, the space should also be adaptable for a future homeowner.

Weigh your financing options

Financing is another way to pay for the home gym. Credit cards can be convenient for purchasing equipment and accessories, but interest rates can be high. To avoid interest, pay off the balance each month or get a credit card with a no-interest introductory period , which can be 15 to 18 months. Earning credit card rewards or points can also help offset other costs.

“ Buy now, pay later ” providers like Klarna and Afterpay allow borrowers to break up a major purchase into equal biweekly or monthly payments, often with zero- or low-interest plans. You can find buy now, pay later options during checkout at major retailers and fitness companies like Peloton and Tonal. Applying for a buy now, pay later plan typically only requires a soft credit check, so there’s no impact on your credit score, but the convenience can also make it easy to overspend.

Borrowing funds using your home equity or an unsecured home improvement loan is best suited for a gym that requires remodeling that may include electrical and plumbing work. A home equity loan or line of credit uses your home as collateral and has low interest rates relative to a credit card or personal loan, but it can take a few weeks for a credit decision. An unsecured home improvement loan will have a higher interest rate but won’t require your home to secure the loan, and some lenders offer same-day funding.

Stay on track to see results

A home gym pays off if it’s used regularly, so staying consistent with your workouts is important to get the most out of your money. “If you're not going to use it, it's expensive,” says Kopka.

Feel comfortable adapting the space as needed, like getting additional equipment or selling anything you’re not using.

After building their home gym, Bovard and his wife realized an added benefit: Their five young kids got involved. “They might watch us work out or they might hang out in there,” says Bovard. “I think that's a great part of it.”