When you think about creating a business budget, you may start thinking, “Oh my God, this is going to get complicated.” But it really doesn’t have to be that complicated at all! As a small business owner, the biggest things you want to track are your income and your expenses. Then determine each month whether your expenses exceed your income based on your actuals and why.
So how do you create a business budget?
I’d recommend you create your budget using a spreadsheet.
In it, list out all of your business expenses and what you expect them to be each month. Keep in mind you will have two types of expenses:
Your fixed expenses (expenses that stay the same each month) and your variable expenses (expenses that change from month to month).
It’s okay to estimate your variable expenses based on what you think they will be.
You also want to list out all the possible ways you will earn money and how much you expect that income to be each month.
Once you’ve listed out your expected expenses and expected income, you basically have your budget in place!
You then want to make sure you include room to track your actuals based on your budget for that month.
Keep in mind that it’s a really good idea to lay this all out so you fully understand your business financial picture.
The good news is, you can download my Excel spreadsheet tool to help you out.
How often do I need to create and track my business budget?
You should plan to create a budget for your business each month (or several months in advance). Then, track your actuals against the budget you’ve created, taking note of any variances or reasons why your budget came in over or under.
Tip: Your budget helps you plan what to expect in terms of your income and your expenses. In a sense, this is a way of doing simple, short-term financial forecasting. So let’s say you create a business budget for the next 3 months: you now have a 3-month money forecast in place for your business in terms of what your expenses and expected income will be.
Creating a business budget allows you to manage your business finances properly and stay on top of your expenses. It’s essential for making financial forecasts for your business and becoming profitable. A budget helps you lay out your income and expenses (budgeted and actuals) and helps you get a clear picture of how your business is doing financially.