Business budgets are necessary for keeping a finger on the pulse of your business's financial health. Download our free business budget template and learn how to use it.
- A business budget template tracks your actual revenue and expenses against your budget projections, giving you an overview of the financial health of your company.
- You can use your accounting software to create a budget or download our free business budget template.
- One of the most important parts of creating a business budget is having a realistic idea of what you expect to earn and spend.
Creating a budget for your business may seem like a daunting task, but it's a vital step in your business's development. In fact, you'll probably need one as part of your business plan. If you're not sure how to get started, consider using our business budget template.
What is a business budget template?
A business budget can take multiple forms. At its most basic level, it is a document that shows how much money you have coming in, what you need to spend money on, and how much money you will need to make to continue making a profit and satisfy your expenses.
A small business budgeting template is a handy tool that gives you a place to record all your numbers in an organized way, making your budget easy to read and update. If your accounting software doesn't have a built-in budgeting template, you can create one on your own using Excel or another spreadsheet application, or you can download an existing template.
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Why do you need a business budget template?
A business budget template is vital to keep your expenses and financial goals up to date, in check and referenceable. A good template makes it easy for you 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 expenses. It 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 show you which bills you don't have the funds to pay or if you are nearing bankruptcy.
If you need to apply for loans or grants, the applications may ask you for a monthly or annual budget, as well as an income statement or balance sheet to give the lender an idea of where your business stands financially and how you manage your money. For these reasons, it is in your best interest to have an up-to-date budget from the beginning.
How to choose and use a business budget template
The first step in creating a business budget is to determine whether to create it from scratch or to use a preexisting budget template. Budgets can get complicated fast, so you may want to download a template if this is your first time creating a business budget. Even if you choose to create your own, it may be helpful to refer to templates or sample budgets to keep yourself on the right track.
If you decide to use a business budget template, download business.com's easy-to-use template that is suitable for small businesses.
To use it, start by entering your business's name at the top of the first tab. It will automatically fill in on the other pages. Then, go to the Annual Budget tab and input your yearly revenue and expenses. Be as specific and comprehensive as you can, as this information will be used to populate the Monthly Budget tab.
On the Monthly Budget tab, you'll notice that the numbers you entered under Annual Budget have been prorated so you can see monthly estimates for each of your yearly totals. By default, each month is weighted equally, but you can change the weighting of each month by adjusting the value in the Percent of Total Year cells on line 5. If you choose to reweight these percentages, keep in mind that your yearly total must add up to 100%.
Next, use the Monthly Actuals tab to enter your actual revenue and expense numbers as they come in each month.
Finally, go to the Overview tab to see how your actual numbers compare against your budget. This snapshot of your annual, year-to-date and monthly budgets shows you what numbers you're hitting and where you need to improve. If you want to see your financials for a certain month, select the reporting month from the dropdown list on line 4.
How do you create a startup business budget?
If your business is new or still 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 – especially if you're planning to apply for a small business loan to help you launch your business. Here are five steps to help you create a startup budget so you can start 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. This 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 makes sense for you to spend? Keep in mind that loans must be paid back, often with interest, and you must not deplete your personal savings. [Read related article: How to Decide Which Type of Business Loan Is Right for You]
2. Categorize your expenses.
For this step, start by brainstorming all of your potential expenses on a budget worksheet. Begin with your startup costs, which are any one-time expenses related to starting your business, such as a building (if you're buying, not renting), computers or photography equipment. Be specific; write down the exact costs of every item you will need to purchase and any associated costs. For example, to build a website, you will need to pay for a designer, host, domain name, plugins, stock photos and security software.
Next, categorize each item as "essential," "nonessential" or "later." Essential items, as the name suggests, are purchases that are crucial to getting your business off the ground, such as a business license.
Nonessential items are things that will make your life easier but are not crucial to the operation of your business. This can be subjective, but try to look at your business as a whole and use your best judgment. An example of a nonessential item would be a professionally designed logo or website.
Later items are things that you can put off for at least six months and are not required for the function of your business, like a fresh coat of paint for your building exterior.
Then, add up your essential and nonessential items to get your estimated startup costs.
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. These are things you will need to pay for more than once that are not tied to your business's product or service, such as subcontractors, payroll, software subscriptions, website fees, rent or advertising fees. This will create your operating budget.
Next, estimate how many months you will go without revenue. It can be difficult to forecast your income when starting out, so begin with the number you will need to hit to break even, and then use that number to come up with an educated guess.
4. Build in a safety net.
Many small business owners exceed their budgets. It is easier to do than many think, given the unpredictable nature of starting a business. Build some financial padding into your budget to cover you in the event of unexpected costs; think of this money as an airbag that's only there to be used in a true emergency.
To create your safety net, add 10% of each expense in your startup budget and add 15% of your monthly operating costs.
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, say, buying something secondhand or trading labor?
Next, look at your overhead costs. Determine if any of them are unnecessary, at least while you're starting out, and can be cut.
You can also reevaluate your essential costs if you cannot get your budget to balance. Go through them with a trusted friend or colleague to determine if they are all truly essential to start your business.