Does financial planning and budgeting for your business seem daunting? You’re not alone. Many local businesses have difficulty creating and managing budgets, so setting yourself up for success is essential.
Financial control and planning play a significant role in business success, and are closely linked. But it is easier said than done. Business budget templates can come in handy in the beginning of your financial journey to get you started up on the right path.
This article explores business budgets and a step-by-step guide on creating one with a free business budget template.
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What is a business budget?
A business budget outlines your income and regular expenses like payroll, rent, and inventory. It also shows how much money you expect to bring in from sales or investments during that same period.
A well-crafted budget aids in resource allocation, investments, and future planning for your business.
Why is a business budget important?
Creating and maintaining your business budget is essential to stay in control of your finances. Understanding where your money comes from will help prevent costly errors that could have disastrous consequences.
Additionally, detailed financial projections make it simpler for business owners to seek funding from banks or investors by demonstrating their financial goals.
How to create a business budget?
A business expense spreadsheet can help you map your expenses, income, and other miscellaneous budget items. This, in turn, tightly controls your business’s financial health.
But how do you start with the budget? We recommend starting with collecting data on your current income, expenses, and future projections. This section details how to create a complete business budget for any occasion. Just follow these steps to create a working business budget easily.
Steps to create a business budget:
- The first step is to note down all current operational costs, such as employee wages, rent/lease payments, inventory purchases, etc. You can also account for any special expenses for the given period.
- Similarly, estimate your confirmed income from all sources for the budget period. You can choose the timeframe for this as per your needs. Common choices are a monthly, quarterly, or yearly budget.
- The next step is to estimate the expected sales volume across various product lines or services the company offers.
- You now have the estimate for costs (confirmed and expected) and income (confirmed and expected). Enter these figures into the business budget template. This will tell you how the current figures (income/expense) match with the future projections.
- Now, you can calculate the business’ projected profits, current liabilities, and growth rate and form a business plan to achieve your goals based on the numbers.
To guarantee business success and accomplish long-term financial objectives, it is crucial to have reliable financial data available and arrive at well-informed decisions based on trustworthy information.
Best practices to create a business budget
We have already seen the basic process of creating a business budget. But some things set some businesses apart. And that is what they do after a basic business budget is ready.
Do you also want to create a winning business budget?
• Set achievable goals: Make sure that your goals for your business are realistic and achievable within a given period.
• Stick to the plan: Once you have created your budget, stick to it as much as possible. It’s essential to stay on track with spending to reach intended targets.
• Monitor cash flow: Businesses should constantly monitor their cash flow, ensuring that income exceeds expenditure over a specific period.
• Update regularly: Businesses should regularly update their budgets based on changing circumstances or new developments within the business. This helps ensure that plans remain relevant and accurate.
Types of business budgets
Depending on the business’s nature and budget objectives, you can establish different budget types within a financial year. You can use various tools to create your budgets, from simple spreadsheets to intricate software programs explicitly aimed at business requirements. These budget types and templates are a helpful starting point for an organization to construct a custom budget.
Let’s explore some popular business budget types you can choose from.
A marketing budget focuses on advertising costs, organic content marketing costs, marketing event costs, and design costs, to name a few. Most of these costs directly relate to promoting the business’ goods & services.
These budgets help companies measure ROI accurately based on campaigns throughout each fiscal year, making them invaluable in deciding where to best allocate future marketing dollars.
A marketing budget template focuses on the overall spending in marketing campaigns against leads or businesses generated to understand its effectiveness.
As the name implies, annual budgets cover all high costs for the 12 months. They allow business owners to compare financial performance year after year easily. It enables companies to plan and prepare for potential issues or opportunities arising throughout the year.
Like annual budgets, monthly budgets concentrate on performance. However, monthly budgets precisely track and analyze expected sales figures and related expenses for each month. This provides companies with a closer observation of results and the ability to make necessary changes promptly.
It usually includes items that recur every month, such as rent, utilities, insurance payments, monthly sales, and salary expenses.
Breaking down expenses into smaller chunks for the monthly budget makes it easier to manage cash flow regularly.
Like a monthly budget, a quarterly budget handles the budget for the three months in a quarter. They are then matched with the overall annual budget to see if a business is on track to meet its goals.
By tracking the budget over a more extended period, businesses can identify trends and address financial concerns more efficiently.
Special business expense budget
Creating special business expense budgets can provide greater visibility into the necessary budgetary requirements for hosting these events. Compartmentalizing these expenses from other recurring operational costs enables businesses to see the bigger picture.
Special business expense budgets are for specific events like trade shows, conferences, conventions, etc., which provide greater insight into budgetary needs associated with hosting such events without getting lost amongst other recurring operational costs.
Some special business budget examples are event budgets, project budgets, travel budgets, and so on.
Business budget for multiple products
Businesses operating in industries with multiple products must create individual sub-budgets for each product to track performance across divisions or departments. This type of budget helps local businesses gain insight into resource allocation to maximize efficiency so that teams deliver maximum value at a minimal cost.
Startup and small business budget
Startups and small businesses typically have limited resources compared to large corporations, so they need well-thought-out plans just as much, if not more so, than established companies.
A startup business needs tight control over its income statement while predicting what direction it will take over time; meanwhile, a small business must ensure costs remain low while still delivering quality outcomes based on customer needs. For most small businesses, a spreadsheet for income and expenses is an excellent place to start.
An adequate startup/small business budget helps ensure that these companies can succeed despite their size constraints.
Related read: 10-step guide on how to start a business
Why are business budget templates important?
Developing accurate business budgets can be a laborious procedure requiring contributions from accounting professionals and managers. Collecting data, projecting expenses and revenues, and devising budgets suitable for the business can be a strain on resources for businesses.
Fortunately, creating a budget template saves a considerable amount of time. These templates provide a stable foundation that can be customized to suit the business’s particular needs.
Employing pre-made templates enables businesses to dedicate additional time to other aspects of running a successful enterprise, including customer service, product development, and marketing, beyond just numbers.
Furthermore, each template offers unique advantages, allowing managers to choose the best options based on individual needs rather than trying to fit a round peg square hole. You can pick from pre-made marketing budget templates, small business budget templates, project budget templates, and startup budget templates, etc.
Moreover, some offer helpful features like taxation calculators & interactive charts that display trends over days, weeks, months, and years, whatever timeline happens, given context.
Frequently asked questions about business budget templates
Structure your business budget based on your needs and goals. Include all expenses and income sources like sales profit or investment returns.
The four fundamental rules for effective budgeting are:
Track income and expenses.
Set realistic financial goals.
Live below your means.
Follow through with the plan.
The first five items you should include in a budget are:
2. Fixed expenses
3. Variable expenses
4. Debt payments
5. Savings or investments
The Cash Flow Method is a simple way to budget. It helps you to track your cash flow regularly (daily or weekly), and identify areas to reduce costs or spending for increased monthly savings.
To create a business budget, you need income statements, balance sheets, cash flow statements, cost estimates, invoices, receipts, and tax returns.
Creating an adequate business budget is essential for small businesses and entrepreneurs to stay on track financially. Business budget templates are a helpful tool that can help guide your decisions, manage cash flow and maximize efficiency.
By following these best budgeting practices, like tracking income, expenses, debts, and savings, you should have everything necessary to create an accurate business budget and keep your business running smoothly.
Ultimately, having a comprehensive understanding of where resources are allocated will give your business a competitive edge – enabling it to make sound financial decisions that propel growth in the long term.