How to Create a Small Business Budget: A Simple Step-by-Step Guide

You’ve probably heard of a P&L statement, and it’s probably giving you a headache just thinking about it. That’s because you’ve already done the heavy lifting by collecting all the data points. All that’s left is to sum up your revenue streams and subtract the total of all your expenses for the month. This paints a clear picture of how they fluctuate depending on business performance so you can make accurate predictions.

Setting a budget is part of becoming financially literate, and it’s a vital skill. The better you can ‘read’ the figures relating to your business, the more successful you’ll be. You should also adjust your budget to reflect business priorities. You may consider increasing your marketing budget if your goal is to bring in new customers. If you’re making a net profit, you may consider investing that back into your business with needed upgrades. Variable costs are expenses that you may or may not expect, but are not consistent each month.

MoneyManagerEX

We’re collaborative, explaining what the numbers mean, rather than just emailing reports. 6 templates to manage your business, personal, and program spend on an annual, quarterly, and monthly basis. This free template from Template.net works in either document or spreadsheet formats.

• But there’s one element that you want to stay on top of from the very beginning—and that’s your business budget.
• Then, like magic, the spreadsheet uses the data in the income and expense tabs to summarize the information.
• Income is based on projections and estimates for the periods they cover, as are expenses.
• While organizing the numbers may sound difficult, using a business budget template makes the process simple.

You have the freedom to export, import, or synchronize data with the software for smooth working and reporting. Buddi can be used for personal budgeting, small business budgeting, and the budgeting of large corporations. There is an assortment of 15 small business budget planners by PDFConverter.com that you can use as well. You can choose a template according to your business type, needs, etc. Either you’re looking for a marketing budget or budget planner to apply for a loan, you can get a template for it.

Printable business budget template

This budget template can help different departments keep track of their income and spending. 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.

However, you may choose to handle it yourself or restrict input to senior management. Master budgets are usually presented in an either monthly or quarterly format, displaying expenses over the fiscal year. You want to lower your variable costs in lean months, starting with discretionary expenses.

Business owners don’t get into entrepreneurship for the spreadsheets. Budgeting is definitely not the most exciting part of running a business, but it is absolutely critical for running a healthy operation. Though it can seem overwhelming, creating a business budget is actually just a series of simple steps that anyone can manage. You can copy budget details from actuals for the prior year, copy data from an existing budget, or create a new budget from scratch. Adjustments can be made for each budget period, so you can adjust the amount each month to increase budgeted totals by a set amount or by percentage.

How to create a small business budget

Make sure this is factored into your budget and pricing, and that the volume ordered isn’t greater than actual product demand. If your business has a busy season and a slow season, budgeting is doubly important. Murphy’s law states, “Anything that can go wrong will go wrong.” That’s why you should set aside a contingency fund for your business. We also allow you to split your payment across 2 separate credit card transactions or send a payment link email to another person on your behalf.

Sure, a Post-it note or scrap piece of paper may work for your personal budget. But when creating your business budget, you need to format it. You might consider consulting a professional, like your accountant or small business lawyer, to help you create your budget. They have the experience and know-how to keep your budget realistic and help you make effective decisions. To get started, you can use historical data (e.g., accounting records) and research industry averages, vendor prices, and local utility costs.

This is because operating expenses are day to day costs and generally arise again each day or month. Ideally, your business will not incur one-time expenses regularly. Given that a one-time expense is something like an office relocation, you ideally don’t want to be doing this on a monthly basis. One-time expenses are not generally included in the calculation of operating income.

Free Budget Templates to Use for Your Business

Your marketing budget can vary depending on unique needs and return on investment. Besides the web-based version, Divvy has an impressive small business budget app offering convenient drafting and tracking of the budget on the go. This example can be treated as a small business budget sample when you’re preparing your business budget. At the end of the financial year, compare the actual values with estimates and take corrective actions for the future.

If we follow the percentage method, the marketing budget will be allocated as 7.5% of the revenue. After having your own estimation of variable costs, start getting quotes from the suppliers. Compare the quotes of different suppliers and then try to negotiate with ones you consider fit for your business. Take an example of a small business that prepared a business budget and found the income can support the investment of $20,000 in marketing. The marketing person thinks that a new media campaign worth $30,000 is a fantastic growth accelerator. The concept of budgeting is all about identifying your available resources, estimating your expenses, and planning ahead.

There are always ways to improve your budgeting and financial awareness to increase the health of your company, and we’re passionate about helping you get there. Create the following month’s budget based on what you learn and where you want to go. Over time you should develop a complete picture of your annual budget and be able to accurately predict and plan for seasons and growth. Whether in our personal lives or in business, we need to factor in variable expenses.

These issues can be prevented by having a realistic budget in place. As time goes on, regularly compare your actual numbers to your budget to determine whether your business is meeting those goals, and course correct if necessary. Are the resulting profits enough to work with, or is your business overspending? This is your opportunity to set spending and earning goals for each month, quarter and year. If they don’t line up with your projections, make sure to establish a strategy for making up the difference.

How to make a budget for your small business

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. Capterra’s small business budget template is easy to use and employs all of the components we defined above, like fixed costs, variable costs, revenue, and profit. A contingency fund for emergencies will safeguard your business when these unexpected costs arise.

For example, if you notice you spent more than you brought in last month you may cut back on your spending and work on bringing in new business in the next month. How to create a business budget Your budget should never be set in stone, but instead a living plan that can be adapted. Usually large expenses, a one-time expense is a non-operating expense.

Step 4: Create a Profit and Loss Statement

Divvy wants to provide you with budgeting options that work for your business. Download our free Strategic Budgets Field Guide here for more budgeting information or demo Divvy today. A budget isn’t just a line of numbers with categories listed at the top.

Now that you have all your general numbers in front of you, it’s time to do the math to analyze your cash flow and create a smarter budget. You can find this by subtracting all expenses from your total revenue to determine profit. Emergencies and opportunities may come when you least expect them, so smart budgeting accounts for one-time and unpredictable spend. After analyzing your variable costs for several months to a year, you may be able to identify upcoming extra spend.

In addition to your fixed costs, you might anticipate monthly operating expenses that may not always be the same amount. These variable expenses may be harder to predict, but you can refer to old receipts and invoices to estimate them. Here is a small business budget template for excel that you can play around with. The template has everything sorted with automatic calculations of variances for expenses and income. You can also perform different analyzes on your financial data. To use with Google Sheets, download the template, send it to your Google Drive and open it with Google Sheets.