how to make a budget for a business

This step is where most people falter when they’re creating a budget, but it’s the most crucial step. Make or download a budget template and plug all of your information in. Following a small business budget is non-negotiable, just as many people believe should be the case with a personal budget.

However, not all accounting software, particularly those designed for small businesses, include a budgeting feature. In that case, you can use Microsoft Excel or similar spreadsheet software to prepare your budget. A cash flow budget is a means of projecting how and when cash comes in and flows out of a business within a specified time period. It can be useful in helping a company determine whether it’s managing its cash wisely. But getting them to nail down the details of running a business can be like trying to nail Jell-O to a tree.

Advantages & Disadvantages of a Line-Item Budget

Hopefully, you’ll get a positive figure in the end—in which case, congratulations because you’re making a profit. You now know where your money is going and can make the necessary adjustments to turn a profit. All programs require the completion of a brief application. The applications vary slightly from program to program, but all ask for some personal background information. If you are new to HBS Online, you will be required to set up an account before starting an application for the program of your choice. Before you compile your budget, it’s important to have a firm understanding of the goals your organization is working toward in the period covered by it.

What are the 5 steps of budget preparation?

  • Calculate your net income.
  • List monthly expenses.
  • Label fixed and variable expenses.
  • Determine average monthly costs for each expense.
  • Make adjustments.

This budget template can help different departments keep track of their income and spending. Without one, you could easily be drowning in expenses or unexpected costs. 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.

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For example, you might increase production costs to get more raw materials to match the increasing popularity of certain products. Or if you are running a SaaS business, you might need to invest more budget in certain seasons to get more clients. Most organizations also prepare what’s known as an “actual budget” or “actual report” to compare estimates against reality following the period covered by the budget. This allows an organization to understand where it went wrong in the budgeting process and adjust estimates moving forward.

One catastrophe can be disastrous for your business, particularly if you operate on limited cash flow. But be sure when you budget your revenue, you enter numbers that are as accurate as possible. For instance, you know you’ll be upgrading employee laptops in December. This allows you to plan for this expense in advance, ensuring that the funds should be available. For instance, many retailers earn a large part of their yearly revenue in the months of November and December, while January and February typically are very slow in sales.


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. Once these costs are determined, add them together to get your total fixed cost expenses for the month. 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. Let’s take a look at how to create a small business budget in five simple, straightforward steps.

  • Notice how your business’s monthly income changes over time and try to look for seasonal patterns.
  • Do you plan on increasing your customer base each year by 5%?
  • If they don’t line up with your projections, make sure to establish a strategy for making up the difference.
  • Therefore, analyze your industry and any seasonal requirements to maintain a contingency fund for unexpected events.
  • Depending on the type of business you have and the way customers pay, you might have a greater or smaller collections percentage.

And not only that, they seem to come when it’s least convenient. Whether your computer crashes, or you end up needing new equipment for your business, you need to be prepared for these unexpected costs. To do this, make sure you’ve got some padding in your budget. If you’ve found some unnecessary variable expenses you can cut back on, for example, you can free up some cash to set aside for an emergency fund.

Making a monthly budget can seem daunting, but it essentially involves writing down each and every expense you expect to have over the course of a month. It’s helpful to categorize these expenses to get a clear idea of where your budget is being spent. Hence, having a contingency budget in place might help you during these times, as withdrawing funds from other budgets will upset their planned functions. 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.

However, with every passing year, the budgeting techniques change. Therefore, it’s imperative for companies to know the upside of reworked budgeting methods and their easy implementation. Nurture and grow your business with customer relationship management software. With little planning and regular monitoring, you can plan for the future of your business. 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. There are a few key components to managing a healthy business budget.

Why you need a small business budget

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. The other holds money that can be spent on the business to drive growth.

how to make a budget for a business

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.

Creating your first small business budget

To ensure you can weather the ever-changing nature of business, use your budget to inform your strategy and decision-making. For example, if you’ve just had a great month of sales, it should mean that your budget for the next month (eg, your marketing budget) can increase. This way, you can continue to drive growth in your business – if that’s what you want. On the other hand, how to make a budget for a business if you’ve made less money this month than you were expecting, your budget for the next month will likely have to decrease. Keeping your budget flexible and adaptable will let you protect your business when times are tough and make the most of boom times. To streamline your business expenses and prevent unnecessary spending, Volopay brings you automated budgeting software.

how to make a budget for a business