Creating a budget for your business helps focus efforts and financial resources to your company's most important goals. You'll concentrate on sales targets when creating the revenue portion of your budget and think through each cost for the expenses, whether it will vary from last year, if you can cut the expense this year, and many other questions. 

How to Use Your Business Budget

Your business will reap the benefits of budgeting if you update the budget monthly, using your expenses and income from the prior month as your guide, while also keeping in mind your firm's financial goals or targets for the year.

Additionally, work with your senior staff to see if they have information on upcoming issues that could impact the budgeted sales and expenses, either positively or negatively. This enables you to adjust your budget and financial expectations as you go.

Your company's monthly budget review may indicate where efforts to meet business targets have been successful. For example, if you switch health insurance carriers to obtain lower-cost coverage, you can see how that change has affected your bottom line month over month, and year over year, as well.

A monthly business budget review can also help you spot potential problems. For example, if you have a retail business, you may realize you need to ramp up your advertising spending more in the fall to take advantage of the holiday shopping season. Or if you've made changes that could have tax implications for your company, you may need to increase your budgeted accountant fees expense in anticipation of the extra accounting work required to work through the implications.

The following worksheet lays out the income statement line items you can use to set up a basic business budget. Depending on your particular business type, you may have to include additional types of income or expenses, but this worksheet should give you the general idea of the types of items you should include in your business budget.

Basic Business Budget Worksheet
CATEGORY	BUDGET AMOUNT	ACTUAL AMOUNT	DIFFERENCE
Sales Revenue
Interest Income
Investment Income
Other Income
TOTAL INCOME
EXPENSES
Accounting Services
Advertising
Bank Service Charges
Credit Card Fees
Delivery Charges
Deposits for Utilities
Estimated Taxes
Health Insurance
Hiring Costs
Installation/Repair of Equipment
Interest on Debt
Inventory Purchases
Legal Expenses
Licenses/Permits
Loan Payments
Office Supplies
Payroll
Payroll Taxes
Printing
Professional Fees
Rent/Lease Payments
Retirement Contributions
Subscriptions and Dues
Utilities and Telephone
Vehicle Expenses
Other
Other
TOTAL EXPENSES
TOTAL INCOME MINUS TOTAL EXPENSES

Why Write a Business Budget at All?

If your business is small, you may wonder why you need a budget. After all, you most likely have a pretty good idea of your monthly cash flow and expenses. It may be even truer if your business is well-established, with a cash flow pattern that is quite similar year over year.

However, even if this is the case for your business, consider at least drafting a basic budget, like the one on this worksheet. Even the best-established business can run into problems with its supply chain, or face a sudden, unexpected expense like a substantial rent increase.

Having a budget in place, even if it's a rudimentary one that you update only once per year, can still help you plan for those eventualities and ride them out when they happen. It also might reveal additional areas where you could shave costs to increase your profits. An Excel Spreadsheet can be used to create the budget.