How to Build a Business Budget in 4 Simple Steps

How to Build a Business Budget in 4 Simple Steps

Strategically managing your budget is one of the essential skills you can have as a business owner. Without it, cash flow problems will quickly start knocking on your door, and your business can lose its direction and stability. Every tool that can help you stay away from this scenario should be a welcome addition to your strategy.


This is where a business budget comes in. It’s not the most exciting task, but once complete, it kills two birds with one stone; controlling your spending becomes easier to manage, and you have a more detailed view of the financial health of your business.


This article will cover how budgeting can help your business, and what steps you should take when making a template of your own.


Benefits of business budgets


Cash flow overview


Often having to wear many hats, business owners can gradually lose focus of where money is coming from and where it’s going.


Once you have a budget template in front of you, you can carefully examine your income sources and discover how your individual products or services are performing. Is there anything that is not delivering? Perhaps you need to rework the product and try a new approach to promoting it or end it altogether.


Likewise, tallying up your expenses can bring a new perspective on exactly just how much you’re spending, and help you discover opportunities to cut back. Are there any categories that are taking up disproportionate amounts of finance, but are not essential to your business? Work on those items to be more cost-effective in the future.


Deciding on sales targets


By tallying up your expenses, you’ll also understand what is the threshold you need to reach in order to break even. Such information can help you determine the health of your business and—if necessary—gives you time to take measures like acquiring a short-term loan.


Applying for finance


Speaking of loans, a budget is one of the documents that lenders might ask you to provide in order to assess your business. Having this document integrated with your basic financial practices can significantly ease the approval process and increase the amount you are eligible for.


How to make a business budget


So now that we’ve covered some of the benefits of this process, how exactly should you go about creating a business budget? Here are four simple steps to follow.


Step one: Tally up your expenses.


Expenses can fall into two categories - fixed and variable. Fixed expenses are costs that stay the same each month and are therefore easy to predict, like rent and payroll—basics that you need to stay operational. Variable expenses are costs that are trickier to predict for longer than a month or two in advance since they depend on factors like the number of customer orders you need to fulfil. For example, raw materials or inventory can be classed as a variable expense.


Step two: Set income targets.


After calculating your expenses and cutting back anything unnecessary, you’ll be able to see how much income you need in order to break even and make a profit. If your targets are difficult to achieve, it’s time to think of solutions that would either cut costs back or generate more revenue.


Step three: Estimate numbers for the next quarter.


Predictions are never an exact science, but there are ways to look at the numbers you’ve gathered from past months and create a forecast.


The best advice for any business is to underestimate your income and overestimate your expenses, especially if you’re new to budgeting. In terms of income, sales forecasting can prove helpful, and doesn’t have to be complicated (or expensive). There are various approaches you can take, with free templates available online.


Step four: Keep track of differences.


After a few months, you can compare your predictions to your actual numbers, and make adjustments. Within your budget sheet, keep one final row where you can track these differences. Regardless of whether the discrepancies are positive or negative, keep a sharp eye and ask yourself why they happened.


You could discover a potential problem at an early stage. Perhaps you’re overspending in a certain category, or a source of income isn’t delivering as much as before.


Alternatively, you might be able to identify that you’re earning more money from a specific category due to a rise in customer interest. If this increase keeps happening month by month, it could be time to consider what you need to do to keep up with demand.


Overall, a business budget might take time and effort to complete, but once you have it, you can make more well-informed decisions that will give you a strategic advantage.


Vasilena Stamboliyska is an author at Spotcap AustraliaHer aim is to provide small businesses with insightful guides on a variety of financial topics to help them make the most of every opportunity.


1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)

Leave a Reply

Your email address will not be published. Required fields are marked *

business plan template

Get Instant Access to the Business Plan Template that has helped thousands of Business Owners in every sector plan and grow their business.

Learn More
fees and benefits

Our Programs start from as little as $10 a day making it affordable for all business types.

Learn More

Top Rated Articles

The History of Business Coaching

The Inner Series...   In order to understand the history of business coaching, it’s important to go back to t


How your company can adapt to the Digital Revolution

Over the last couple of years, technological innovation has brought about a rapid change in the customer service landsca


7 Biggest Challenges Facing Your Business

It is kind of inevitable that businesses will face challenges at different stages of their growth and development. So, p


Recently Viewed

How I changed my Facebook Business Page Name

I started a Facebook page for my business many years ago. I had spent thousands of dollars running ad campaigns and gain


How to Start the Lifestyle Business You've Always Dreamed Of

liOne of the toughest parts of starting your own business is figuring out what kind of company you want to run. There ar


9 Skills Every Businessman Needs To Have When Starting a Business

Starting a business is no easy challenge. As a business owner, you must have the ability to lead your company to success

  • Over the past 6 months the incredible team at MMP have supported us to shift our attitude towards our business & month on month our revenue is increasing to the point we will be able to employ additional staff to support our business goals long into the future. Do not regret our decision one single bit!

    • Emma Reece

  • Working with my coach has enabled me to see the areas where my business is failing. This was pretty confronting to me to be honest. MMP has the tools to improve these areas and the guidance on how to implement them.

    • Sharon Robinson

  • I have been working with Max My Profit for approx 3 years now, and over that time I have learnt a lot of things about not only what it takes to run a business, but I have also learnt things about myself. I don't believe i'd be the person or have the business I have today if it wasn't for Max My Profit and our Business Excelerator. Great team to work with if you want to take your business serious!

    • Ben Choy

  • As a new client for Max My Profit (MMP) it has taken no time at all to realise the benefits of business coaching. Despite many years of senior management experience starting a new business requires best practice systems and processes built on a solid platform of detailed planning. I look forward to the benefits of adopting the formula being shared by MMP.

    • Campbell MacLeod

  • Max My Profit Are truly awesome at what they do. They have helped me over the past 12 months to get off the tools in my business and start working on my business. I am looking forward to 2019 with enthusiasm not concern. Thanks so much.

    • Aaron Kemp

  • If you are committed to Growth the Max My Profit Team has the tools and expertise to excelerate all areas of your life. They Care, They Listen, They Understand You as an Individual first then they focus on Your business. Thank you Max My Profit my rating is a 6/5 - Kindest Regards The Mr Handyfix Team

    • Catherine Kavadas

  • The team at Max My Profit are an absolute pleasure to deal with. I love working with a team who is on top of what they are doing and have a clear view of what they are working on with you and helping ensure you get to the end goal.

    • Lauren Watts

  • I have been working with MaxMyProfit over the years and what they do for SME's in growing their business is fantastic. Also due to there knowledge and their supporting material for companies across the 5 lifestyle stages and assisting them through this process day in day out is extremely comforting as a small business owner and have referred them many businesses over the years.

    • Steve Laingy

  • Working with a business coach from MaxMyProfit has been one of the best things I have done for my business. I had several other coaches before MaxMyProfit but these guys are a step above the others. I have seen a significant increase in sales, now have a business that can run itself and the coaching program has paid for itself many times over.

    • Matthew Kitchin

  • Much more than just business coaches. There is an absolute treasure chest of business knowledge in their members site.

    • Iain Campbell

  • Max My Profit are unique as they really partner with you to develop and implement a plan that will drive success for the business. I was hesitant to proceed as previous business coaches tell you what to do and rely on you to implement.

    • Michael de Haan

  • I attended one of Max My Profits introductory events in Melbourne. Having been an accountant for almost 30 years, I was somewhat sceptical. Boy was I wrong. I not only enjoyed the presentation, but I gleaned so much from just that session.

    • Daniel Odd

  • These guys are an absolute wealth of knowledge for Small Business. The programme and support networks they have set up ensure learn more every day and can take your business from good to great. Thanks so much.

    • John Butler