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Updated Apr 09, 2024

How to Create a Business Budget, With Free Budget Template

A budget helps you estimate your spending and revenue so your business remains financially stable.

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Jamie Johnson, Senior Analyst & Expert on Business Operations
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Creating a budget for your business may seem daunting. However, it’s a crucial first step in any successful business plan. While a business budget can take multiple forms, it will include how much money you have coming in and what you must spend to continue operating. It also shows how much money you must earn to continue making a profit and paying your expenses.

What is a business budget template?

A business budget template is a customizable worksheet business owners can use as a budget planning guide. Budget planning templates can be a huge help for business owners who don’t have time to create a business budget from scratch. They’re handy tools that give you a place to record all your numbers in an organized way, helping you set up an easy-to-read budget you can update quickly. 

Budgets can be complicated, so consider downloading a template if this is your first time creating a business budget. Even if you choose to create your own, referring to templates or sample budgets may be helpful to keep yourself on the right track.

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Different types of businesses may need different budget templates. For example, service-based businesses may want a budget template emphasizing overhead costs, while large companies may need a labor budget template.

Free small business budget template

If you’re unsure where to begin, download Business.com’s free budget template. This template will help you track your expenses, estimate your monthly income and record what you earned and spent. 

Our budget template has five tabs. To use it, take the following steps:

  1. Make a copy or download the template. 
  2. On the first tab, Instructions, replace the Your business’s name text with your actual business name. Once you do that, your business name will automatically fill in on the other pages.

Here’s a breakdown of how to use the other four tabs.

Annual budget

The Annual Budget tab examines how much money your business brings in each year. Use this tab to input your company’s yearly revenue and expenses. Be as specific and detailed as possible because this information is used throughout the budget template.

Monthly budget

The Monthly Budget tab shows your monthly expenses. Since you already filled out the Annual Budget information, this data has been prorated and you have monthly estimates for each of your yearly totals.

By default, each month’s budget is weighted equally. However, you can change this by updating the percentages in line 5. Your percentages must add up to 100.

Monthly actuals

The Monthly Actuals tab is for financial tracking. You’ll use this tab to track your actual expenses and revenue as they come in each month, allowing you to see how much money your business is making.

Overview

The Overview tab shows how your actual numbers compare to your budget. It gives an overview of your annual and monthly budgets. This information helps you see where your business is doing well and identify areas for improvement. To see your finances for a particular month, select that month from the drop-down list in line 4.

Why do you need a business budget template?

A business budget template is vital to keep your expenses and financial goals updated. A good template makes it easy to see how much money you have available, what you need to pay for and how much money you have left after covering your necessary fixed and variable expenses.

Your business budget template will show you if you can grow your business, give yourself or your employees raises and purchase inventory and assets. If you don’t have sufficient money coming in, it will reveal which bills you don’t have the funds to pay or if you are nearing bankruptcy.

If you must apply for a business loan or grant, the application may ask for financial accounting documentation, such as a monthly or annual budget, to give the lender an idea of your business’s financial standing and how you manage your money. For these reasons, having an up-to-date budget from the beginning is in your best interest.

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If your budget shows it's time to cut business expenses, consider looking for lower-cost vendors, streamlining your marketing or eliminating unnecessary perks.

How do you create a startup business budget?

If your business is new or in the planning stages, creating a budget is tricky ― even with a template – because you don’t have actual numbers to plug in. Still, it’s something you need for your business plan and loan applications.

Here are five steps to help you create a startup budget to get your business off on the right foot.

1. Set your budget goal.

Your budget goal is the total amount you are willing to spend on your business. Setting this number helps you establish clear parameters for your budget from the beginning and keep your spending in check.

To set your goal, consider the amount of money you currently have or can realistically obtain. How much money makes sense for you to spend? Keep in mind that loans must be repaid, often with interest and you shouldn’t deplete your personal savings. 

2. Categorize your expenses.

For this step, brainstorm all potential expenses on a budget worksheet. Begin with your startup costs, which are any one-time expenses related to starting your business.

Startup costs could include a building (if you’re buying, not renting), computers and photography equipment. Be specific and write down the exact costs of every item you must purchase and any associated costs. For example, to build a website, you must pay for a designer, host, domain name, plugins, stock photos and security software.

Next, categorize each item as “essential,” “nonessential,” or “later”:

  • Essential items: Essential items, as the name suggests, are purchases crucial to starting your business, such as a business license.
  • Nonessential items: Nonessential items will make your life easier but are not crucial to your business’s operation. For example, professionally designed logos or websites are likely nonessential elements. What you deem “nonessential” can be subjective but try to look at your business as a whole and use your best judgment.
  • Later items: Later items can be put off for at least six months and are not required for your business’s immediate functions. Examples include a fresh coat of paint for your building or a state-of-the-art voice-over-internet-protocol phone system

Add up your essential and nonessential items to get your estimated startup costs.

TipBottom line
Save money on startup costs by investigating free point-of-sale systems and cheap payroll services. You can always upgrade as you grow.

3. Estimate your losses.

Your losses are how long you will go without turning a profit while accumulating overhead expenses. Losses are a result of a new business needing time to build a customer base and your budget must reflect them.

Start by calculating your estimated monthly overhead costs, including subcontractors, payroll, software subscriptions, website fees, rent and advertising fees. This will create your operating budget.

Next, estimate how many months you will go without revenue. Forecasting income can be difficult when starting out, so determine your break-even number and use that figure to make an educated guess.

4. Build in a safety net.

Given the unpredictable nature of starting a business, it’s easy to exceed your estimated budget. Building some financial padding into your budget can help you cover unexpected costs. 

Think of this money like a vehicle’s airbags ― they’re used only in an actual emergency. To create your safety net, add 10 percent to each expense in your startup budget and 15 percent to your monthly operating costs.

Did You Know?Did you know
Many of the best accounting software solutions can help with your business budgets. When choosing accounting software, see if it comes with budgeting capabilities.

5. Refine your budget.

Now that you have some rough numbers to work with, it’s time to tighten them up to make your budget more actionable. Start by going through your nonessential startup items. Is there anything you can cut out or move to the “later” category? Can you reduce the cost of any items by buying something secondhand or trading labor?

Next, look at your overhead costs and determine if any are unnecessary and can be cut. If you can’t get your budget to balance, you can also reevaluate your essential costs. Go through them with a trusted advisor or colleague to determine if they are all truly essential to starting your business.

author image
Jamie Johnson, Senior Analyst & Expert on Business Operations
Jamie Johnson has spent more than five years providing invaluable financial guidance to business owners, leading them through the financial intricacies of entrepreneurship. From offering investment lessons to recommending funding options, business loans and insurance, Johnson distills complex financial matters into easily understandable and actionable advice, empowering entrepreneurs to make informed decisions for their companies. As a business owner herself, she continually tests and refines her business strategies and services. Johnson's expertise is evident in her contributions to various finance publications, including Rocket Mortgage, InvestorPlace, Insurify and Credit Karma. Moreover, she has showcased her command of other B2B topics, ranging from sales and payroll to marketing and social media, with insights featured in esteemed outlets such as the U.S. Chamber of Commerce, CNN, USA Today, U.S. News & World Report and Business Insider.
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