budget in a business plan

A How-To Guide for Creating a Business Budget

Amanda Smith

Reviewed by

September 23, 2022

This article is Tax Professional approved

Most business owners know how important a business budget is when it comes to managing expenses and planning for the future—but in a challenging economic environment like the one we’ve been experiencing, your business budget takes on even greater significance.

With inflation running rampant and the possibility of a recession looming, business owners need to be able to forecast their cash flow, manage their expenses, and plan for the future. Creating a detailed business budget is the first step.

Whether you want to revamp your budgeting method, or you’ve never created a business budget before, this guide will walk you through the process.

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What is a business budget?

A budget is a detailed plan that outlines where you’ll spend your money monthly or annually.

You give every dollar a “job,” based on what you think is the best use of your business funds, and then go back and compare your plan with reality to see how you did.

A budget will help you:

• Forecast what money you expect to earn
• Plan where to spend that revenue
• See the difference between your plan and reality

What makes a good budget?

The best budgets are simple and flexible. If circumstances change (as they do), your budget can flex to give you a clear picture of where you stand at all times.

Every good budget should include seven components:

1. Your estimated revenue

This is the amount you expect to make from the sale of goods or services. It’s all of the cash you bring in the door, regardless of what you spent to get there. This is the first line on your budget. It can be based on last year’s numbers or (if you’re a startup ), based on industry averages.

2. Your fixed costs

These are all your regular, consistent costs that don’t change according to how much you make—things like rent, insurance, utilities, bank fees, accounting and legal services, and equipment leasing.

Further reading: Fixed Costs (Everything You Need to Know)

3. Your variable costs

These change according to production or sales volume and are closely related to “ costs of goods sold ,” i.e., anything related to the production or purchase of the product your business sells. Variable costs might include raw materials, inventory, production costs, packaging, or shipping. Other variable costs can include sales commission, credit card fees, and travel. A clear budget plan outlines what you expect to spend on all these costs.

The cost of salaries can fall under both fixed and variable costs. For example, your core in-house team is usually associated with fixed costs, while production or manufacturing teams—anything related to the production of goods—are treated as variable costs. Make sure you file your different salary costs in the correct area of your budget.

Further reading: Variable Costs (A Simple Guide)

4. Your one-off costs

One-off costs fall outside the usual work your business does. These are startup costs like moving offices, equipment, furniture, and software, as well as other costs related to launch and research.

5. Your cash flow

Cash flow is all money traveling into and out of a business. You have positive cash flow if there is more money coming into your business over a set period of time than going out. This is most easily calculated by subtracting the amount of money available at the beginning of a set period of time and at the end.

Since cash flow is the oxygen of every business, make sure you monitor this weekly, or at least monthly. You could be raking it in and still not have enough money on hand to pay your suppliers.

6. Your profit

Profit is what you take home after deducting your expenses from your revenue. Growing profits mean a growing business. Here you’ll plan out how much profit you plan to make based on your projected revenue, expenses, and cost of goods sold. If the difference between revenue and expenses (aka “ profit margins ”) aren’t where you’d like them to be, you need to rethink your cost of goods sold and consider raising prices .

Or, if you think you can’t squeeze any more profit margin out of your business, consider boosting the Advertising and Promotions line in your budget to increase total sales.

7. A budget calculator

A budget calculator can help you see exactly where you stand when it comes to your business budget planning. It might sound obvious, but getting all the numbers in your budget in one easy-to-read summary is really helpful.

In your spreadsheet, create a summary page with a row for each of the budget categories above. This is the framework of your basic budget. Then, next to each category, list the total amount you’ve budgeted. Finally, create another column to the right—when the time period ends, use it to record the actual amounts spent in each category. This gives you a snapshot of your budget that’s easy to find without diving into layers of crowded spreadsheets.

See the sample below.

Pro tip: link the totals on the summary page to the original sums in your other budget tabs . That way when you update any figures, your budget summary gets updated at the same time. The result: your very own budget calculator.

You can also check out this simple Startup Cost Calculator from CardConnect. It lays out some of the most common expenses that you might not have considered. From there, you can customize a rough budget for your own industry.

Small business budgets for different types of company

While every good budget has the same framework, you’ll need to think about the unique budgeting quirks of your industry and business type.

Seasonal businesses

If your business has a busy season and a slow season, budgeting is doubly important.

Because your business isn’t consistent each month, a budget gives you a good view of past and present data to predict future cash flow . Forecasting in this way helps you spot annual trends, see how much money you need to get you through the slow months, and look for opportunities to cut costs to offset the low season. You can use your slow season to plan for the next year, negotiate with vendors, and build customer loyalty through engagement.

Don’t assume the same thing will happen every year, though. Just like any budget, forecasting is a process that evolves. So start with what you know, and if you don’t know something—like what kind of unexpected costs might pop up next quarter— just give it your best guess . Better to set aside money for an emergency that doesn’t happen than to be blindsided.

Ecommerce businesses

The main budgeting factor for ecommerce is shipping. Shipping costs (and potential import duties) can have a huge impact.

Do you have space in your budget to cover shipping to customers? If not, do you have an alternative strategy that’s in line with your budget—like flat rate shipping or real-time shipping quotes for customers? Packaging can affect shipping rates, so factor that into your cost of goods sold too. While you’re at it, consider any international warehousing costs and duties.

You’ll also want to create the best online shopping experience for your customers, so make sure you include a good web hosting service, web design, product photography, advertising, blogging, and social media in your budget.

Inventory businesses

If you need to stock up on inventory to meet demand, factor this into your cost of goods sold. Use the previous year’s sales or industry benchmarks to take a best guess at the amount of inventory you need. A little upfront research will help ensure you’re getting the best prices from your vendors and shipping the right amount to satisfy need, mitigate shipping costs, and fit within your budget.

The volume of inventory might affect your pricing. For example, if you order more stock, your cost per unit will be lower, but your overall spend will be higher. Make sure this is factored into your budget and pricing, and that the volume ordered isn’t greater than actual product demand.

You may also need to include the cost of storage solutions or disposal of leftover stock.

Custom order businesses

When creating custom ordered goods, factor in labor time and cost of operations and materials. These vary from order to order, so make an average estimate.

Budgeting is tricky for startups—you rarely have an existing model to use. Do your due diligence by researching industry benchmarks for salaries, rent, and marketing costs. Ask your network what you can expect to pay for professional fees, benefits, and equipment. Set aside a portion of your budget for advisors—accountants, lawyers, that kind of thing. A few thousand dollars upfront could save you thousands more in legal fees and inefficiencies later on.

This is just scratching the surface, and there’s plenty more to consider when creating a budget for a startup. This business startup budget guide from The Balance is a great start.

Service businesses

If you don’t have a physical product, focus on projected sales, revenue, salaries, and consultant costs. Figures in these industries—whether accounting, legal services, creative, or insurance—can vary greatly, which means budgets need flexibility. These figures are reliant on the number of people required to provide the service, the cost of their time, and fluctuating customer demand.

Small business budgeting templates

A business budget template can be as simple as a table or as complex as a multi-page spreadsheet. Just make sure you’re creating something that you’ll actually use.

Create your budget yearly—a 12-month budget is standard fare—with quarterly or monthly updates and check-ins to ensure you’re on track.

Here are some of our favorite templates for you to plug into and get rolling.

• The Balance has a clear table template that lists every budget item, the budgeted amount, the actual amount, and the difference between the two. Use this one if you’re looking to keep it simple.
• Capterra has both monthly and annual breakdowns in their Excel download. It’s straightforward, thorough, and fairly foolproof.
• Google Sheets has plenty of budget templates hiding right under your nose. They’re easy to use, and they translate your figures into clear tables and charts on a concise, visual summary page.
• Smartsheet has multiple resources for small businesses, including 12-month budget spreadsheets, department budget templates, projection templates, project-by-project templates, and startup templates. These templates are ideal if you’re looking for a little more detail.
• Scott’s Marketplace is a blog for small businesses. Their budget template comes with step-by-step instructions that make it dead simple for anyone.
• Vertex42 focuses on Excel spreadsheets and offers templates for both product-based and service-based businesses, as well as a business startup costs template for anyone launching a new business.

Budgeting + bookkeeping = a match made in heaven

Making a budget is kind of like dreaming: it’s mostly pretend. But when you can start pulling on accurate historical financials to plan the upcoming year, and when you can check your budget against real numbers, that’s when budgets start to become useful.

The only way to get accurate financial data is through consistent bookkeeping.

Don’t have a regular bookkeeping process down pat? Check out our free guide, Bookkeeping Basics for Entrepreneurs . We’ll walk you through everything you need to know to get going yourself, for free.

If you need a bit more help, get in touch with us. Bookkeeping isn’t for everyone, especially when you’re also trying to stay on top of a growing business—but at Bench, bookkeeping is what we do best.

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The Best Free Business Budget Templates

Published: October 12, 2023

Business budgets are a source of truth for your income and expenses. That includes all the money you spend — from A/B testing your marketing campaigns to your monthly office rent.

While organizing the numbers may sound difficult, using a business budget template makes the process simple. Plus, there are thousands of business budget templates for you to choose from.

We’ll share seven budget templates that can help organize your finances. But first, you’ll learn about different types of business budgets and how to create one.

What is a Business Budget?

A business budget is a spending plan that estimates the revenue and expenses of a business for a period of time, typically monthly, quarterly, or yearly.

The business budget follows a set template, which you can fill in with estimated revenues, plus any recurring or expected business expenses.

For example, say your business is planning a website redesign. You'd need to break down the costs by category: software, content and design, testing, and more.

Having a clear breakdown will help you estimate how much each category will cost and compare it with the actual costs.

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Types of Budgets for a Business

Master budget, operating budget, cash budget, static budget, departmental budget, capital budget, labor budget, project budget.

Business budgets aren’t one size fits all. In fact, there are many different types of budgets that serve various purposes. Let’s dive into some commonly used budgets:

Think of a master budget as the superhero of budgets — it brings together all the individual budgets from different parts of your company into one big, consolidated plan. It covers everything from sales and production to marketing and finances.

It includes details like projected revenues, expenses, and profitability for each department or business unit. It also considers important financial aspects like cash flow, capital expenditures, and even creates a budgeted balance sheet to show the organization's financial position.

The master budget acts as a guide for decision-making, helps with strategic planning, and gives a clear picture of the overall financial health and performance of your company. It's like the master plan that ties everything together and helps the organization move in the right direction.

Your operating budget helps your company figure out how much money it expects to make and spend during a specific period, usually a year. It not only predicts the revenue your business will bring in, but also outlines expenses it will need to cover, like salaries, rent, bills, and other operational costs.

By comparing your actual expenses and revenue to the budgeted amounts, your company can see how it's performing and make adjustments if needed. It helps keep things in check, allowing your business to make wise financial decisions and stay on track with its goals.

Free Business Budget Templates

Manage your business, personal, and program spend on an annual, quarterly, and monthly basis.

• Personal Budget Template
• Annual Budget Template
• Program Budget Template

You're all set!

Click this link to access this resource at any time.

A cash budget estimates the cash inflows and outflows of your business over a specific period, typically a month, quarter, or year. It provides a detailed projection of cash sources and uses, including revenue, expenses, and financing activities.

The cash budget helps you effectively manage your cash flow, plan for cash shortages or surpluses, evaluate the need for external financing, and make informed decisions about resource allocation.

By utilizing a cash budget, your business can ensure it has enough cash on hand to meet its financial obligations, navigate fluctuations, and seize growth opportunities.

A static budget is a financial plan that remains unchanged, regardless of actual sales or production volumes.

It’s typically created at the beginning of a budget period and doesn’t account for any fluctuations or changes in business conditions. It also assumes that all variables, such as sales, expenses, and production levels, will remain the same throughout the budget period.

While a static budget provides a baseline for comparison, it may not be realistic for businesses with fluctuating sales volumes or variable expenses.

A departmental budget focuses on the financial aspects of a specific department within your company, such as sales, marketing or human resources.

When creating a departmental budget, you may look at revenue sources like departmental sales, grants, and other sources of income. On the expense side, you consider costs such as salaries, supplies, equipment, and any other expenses unique to that department.

The goal of a departmental budget is to help the department manage its finances wisely. It acts as a guide for making decisions and allocating resources effectively. By comparing the actual numbers to the budgeted amounts, department heads can see if they're on track or if adjustments need to be made.

A capital budget is all about planning for big investments in the long term. It focuses on deciding where to spend money on things like upgrading equipment, maintaining facilities, developing new products, and hiring new employees.

The budget looks at the costs of buying new stuff, upgrading existing things, and even considers depreciation, which is when something loses value over time. It also considers the return on investment, like how much money these investments might bring in or how they could save costs in the future.

The budget also looks at different ways to finance these investments, whether it's through loans, leases, or other options. It's all about making smart decisions for the future, evaluating cash flow, and choosing investments that will help the company grow and succeed.

A labor budget helps you plan and manage the costs related to your employees. It involves figuring out how much your business will spend on wages, salaries, benefits, and other labor-related expenses.

To create a labor budget, you'll need to consider factors like how much work needs to be done, how many folks you'll need to get it done, and how much it'll all cost. This can help your business forecast and control labor-related expenses and ensure adequate staffing levels.

By having a labor budget in place, your business can monitor and analyze your labor costs to make informed decisions and optimize your resources effectively.

A project budget is the financial plan for a specific project.

Let's say you have an exciting new project you want to tackle. A project budget helps you figure out how much money you'll need and how it will be allocated. It covers everything from personnel to equipment and materials — basically, anything you'll need to make the project happen.

By creating a project budget, you can make sure the project is doable from a financial standpoint. It helps you keep track of how much you planned to spend versus how much you actually spend as you go along. That way, you have a clear idea of whether you're staying on track or if there are any financial challenges that need attention.

How to Create a Business Budget

While creating a business budget can be straightforward, the process may be more complex for larger companies with multiple revenue streams and expenses.

No matter the size of your business, here are the basic steps to creating a business budget.

1. Gather financial data.

Before you create a business budget, it’s important to gather insights from your past financial data. By looking at things like income statements, expense reports, and sales data, you can spot trends, learn from past experiences, and see where you can make improvements.

Going through your financial history helps you paint a true picture of your income and expenses. So, when you start creating your budget, you can set achievable targets and make sure your estimates match what's actually been happening in your business.

2. Find a template, or make a spreadsheet.

There are many free or paid budget templates online. You can start with an already existing budget template. We list a few helpful templates below.

You may also opt to make a spreadsheet with custom rows and columns based on your business.

3. Fill in revenues.

Once you have your template, start by listing all the sources of your business’ income. With a budget, you’re planning for the future, so you’ll also need to forecast revenue streams based on previous months or years. For a new small business budget, you’ll rely on your market research to estimate early revenue for your company.

When you estimate your revenue , you're essentially figuring out how much money you have to work with. This helps you decide where to allocate your resources and which expenses you can fund.

4. Subtract fixed costs for the time period.

Fixed costs are the recurring costs you have during each month, quarter, or year. Examples include insurance, rent for office space, website hosting, and internet.

The key thing to remember about fixed costs is that they stay relatively stable, regardless of changes in business activity. Even if your sales decrease or production slows down, these costs remain the same.

However, it's important to note that fixed costs can still change over the long term, such as when renegotiating lease agreements or adjusting employee salaries.

5. Consider variable costs.

Variable costs will change from time to time. Unlike fixed costs, variable costs increase or decrease as the level of production or sales changes.

Examples include raw materials needed to manufacture your products, packaging and shipping costs, utility bills, advertising costs, office supplies, and new software or technology.

You may always need to pay some variable costs, like utility bills. However, you can shift how much you spend toward other expenses, like advertising costs, when you have a lower-than-average estimated income.

6. Set aside time for business budget planning.

Unexpected expenses might come up, or you might want to save to expand your business. Either way, review your budget after including all expenses, fixed costs, and variable costs. Once completed, you can determine how much money you can save. It’s wise to create multiple savings accounts. One should be used for emergencies. The other holds money that can be spent on the business to drive growth.

Fill out the form to get the free templates.

How to manage a business budget.

There are a few key components to managing a healthy business budget.

Budget Preparation

The process all starts with properly preparing and planning the budget at the beginning of each month, quarter, or year. You can also create multiple budgets, some short-term and some long-term. During this stage, you will also set spending limits and create a system to regularly monitor the budget.

Budget Monitoring

In larger businesses, you might delegate budget tracking to multiple supervisors. But even if you’re a one-person show, keep a close eye on your budget. That means setting a time in your schedule each day or week to review the budget and track actual income and expenses. Be sure to compare the actual numbers to the estimates.

Budget Forecasting

With regular budget tracking, you always know how your business is doing. Check in regularly to determine how you are doing in terms of revenue and where you have losses. Find where you can minimize expenses and how you can move more money into savings.

Why is a Budget Important for a Business?

A budget is crucial for businesses. Without one, you could easily be drowning in expenses or unexpected costs.

The business budget helps with several operations. You can use a business budget to keep track of your finances, save money to help you grow the business or pay bonuses in the future, and prepare for unexpected expenses or emergencies.

You can also review your budget to determine when to take the next leap for your business. For example, you might be dreaming of a larger office building or the latest software, but you want to make sure you have a healthy net revenue before you make the purchase.

Best Free Business Budget Templates

1. marketing budget template.

Knowing how to manage a marketing budget can be a challenge, but with helpful free templates like this marketing budget template bundle , you can track everything from advertising expenses to events and more.

This free bundle includes eight different templates, so you can create multiple budgets to help you determine how much money to put toward marketing, plus the return on your investment.

2. Small Business Budget Template

For small businesses, it can be hard to find the time to draw up a budget, but it’s crucial to help keep the business in good health.

Capterra offers a budget template specifically for small businesses. Plus, this template works with Excel. Start by inputting projections for the year. Then, the spreadsheet will project the month-to-month budget. You can input your actual revenue and expenses to compare, making profits and losses easy to spot.

3. Startup Budget Template

What if you don’t have any previous numbers to rely on to create profit and expense estimates? If you are a startup, this Gusto budget template will help you draw up a budget before your business is officially in the market. This will help you track all the expenses you need to get your business up and running, estimate your first revenues, and determine where to pinch pennies.

4. Free Business Budget Template

You might be familiar with Intuit. Many companies, big and small, rely on Intuit’s services like Quickbooks and TurboTax. Even if you don’t use the company’s paid financial services, you can take advantage of Intuit’s free budget template , which works in Google Sheets or Excel.

It features multiple spreadsheet tabs and simple instructions. You enter your revenue in one specific tab and expenses in another. You can also add additional tabs as needed. Then, like magic, the spreadsheet uses the data in the income and expense tabs to summarize the information. This template can even determine net savings and the ending balance.

5. Department Budget Sheet

A mid- to large-size company will have multiple departments, all with different budgetary needs. These budgets will all be consolidated into a massive, company-wide budget sheet. Having a specific template for each department can help teams keep track of spending and plan for growth.

This free template from Template.net works in either document or spreadsheet formats. This budget template can help different departments keep track of their income and spending.

6. Project Budget Template

Every new project comes with expenses. This free budget template from Monday will help your team estimate costs before undertaking a project. You can easily spot if you're going over budget midway through a project so you can adjust.

This template is especially useful for small companies that are reporting budgets to clients and for in-house teams getting buy-in for complex projects.

7. Company Budget Template

Want to keep track of every penny? Use this template from TemplateLab to draw up a detailed budget. The list of expenses includes fixed costs, employee costs, and variable costs. This business template can be especially useful for small businesses that want to keep track of expenses in one, comprehensive document.

Create a Business Budget to Help Your Company Grow

Making your first business budget can be daunting, especially if you have several revenue streams and expenses. Using a budget template can make getting started easy. And, once you get it set up, these templates are simple to replicate.

With little planning and regular monitoring, you can plan for the future of your business.

Editor's note: This post was originally published in September 2021 and has been updated for comprehensiveness.

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  February 27, 2024

How to create a business budget: 8 simple steps.

No matter the size of your business, a business budget is vital to planning and guiding your business’s growth. By understanding the fixed expenses of a company and accounting for the ebb and flow of work, a proper business budget can help your business maintain itself through the year and create protection around unplanned expenses through well allocated funds. In this guide, we'll walk you through the process of creating a business budget, outlining essential steps to help you manage your finances effectively.

What Is a Business Budget?

A business budget is a financial plan outlining projected revenues and expenses for a business during a specific period of time (most typically a year, though there are often monthly or quarterly reexaminations). Although there are variables throughout the year, a complete and accurate budget will serve as a blueprint for businesses in managing income and expenditures, guiding decision-making processes, and ensuring financial stability. 

What Should a Business Budget Include?

A comprehensive business budget’s purpose is to provide a business a holistic view of their financial health. When looking through bank statements, take note of those expenses that reoccur throughout the year and note those—as well as those unexpected expenses your company should instead anticipate. Key components to include are:

• Revenue Forecast: Anticipated income from sales, services, or other sources after deducting costs, taxes, and other fees.
• Fixed Operating Expenses: Costs associated with running the business, such as rent, utilities, salaries, and supplies.
• Capital Expenditures: Investments in assets like equipment, machinery, or property.
• Debt Service: Payments towards loans, credit lines, or other forms of debt.
• Taxes: Estimated tax liabilities, including income tax, sales tax, and payroll taxes.
• Contingency Funds: Reserves set aside for unexpected expenses or emergencies.
• Profit Targets: Desired levels of profitability, indicating the financial performance you aim to achieve.

Why Is Budgeting Important to a Business?

Budgeting plays a crucial role in the financial management of a business for several reasons:

• Resource Allocation: Helps allocate resources efficiently to prioritize essential activities and investments.
• Financial Control: Provides a framework for monitoring and controlling expenses to prevent overspending.
• Performance Evaluation: Facilitates performance measurement against predetermined targets, enabling timely corrective actions.
• Decision Making: Guides decision-making processes by providing insights into the financial implications of various options.
• Risk Management: Identifies potential risks and allows for proactive mitigation strategies to safeguard financial stability.

How Does Budgeting Help a Business?

Effective budgeting contributes to the success and sustainability of a business in numerous ways:

• Improved Cash Flow Management: Helps maintain adequate cash reserves to meet financial obligations and fund growth initiatives.
• Enhanced Profitability: Enables businesses to identify opportunities for revenue growth and cost optimization, leading to higher profitability.
• Better Resource Utilization: Ensures optimal utilization of resources by aligning expenditures with strategic priorities and operational needs.
• Increased Financial Transparency: Provides stakeholders with a clear understanding of the company's financial health and performance.
• Long-term Planning: Facilitates long-term planning by forecasting future financial requirements and setting achievable goals.

How to Create a Business Budget

Now that we’ve gone over the importance of a business budget, it’s time to understand the steps you need to take in order to create a comprehensive plan.

Gather Financial Information

Start by compiling relevant financial data, including past income statements, balance sheets, and cash flow statements. Analyze historical trends to identify patterns and make informed projections for the upcoming period.

Determine Your Financial Goals

Define clear, measurable financial goals aligned with your business objectives. Whether it's increasing revenue, reducing costs, or improving profitability, setting specific targets will provide a roadmap for your budgeting process.

Identify Revenue Sources

Identify all potential sources of revenue, including sales, services, investments, and other income streams. Estimate the expected revenue for each source based on market trends, historical data, and sales forecasts.

Estimate Expenses

Next, list all anticipated expenses, categorizing them into fixed and variable costs. Fixed expenses, such as rent and salaries, remain constant regardless of business activity, while variable expenses, like supplies and utilities, fluctuate based on demand.

Factor in Contingencies & Emergency Funds

Allocate a portion of your budget for contingencies and emergency funds to cover unforeseen expenses or revenue shortfalls. Building a financial cushion will provide stability and resilience during challenging times.

Balance Your Budget

Balance your budget by ensuring that projected revenues exceed estimated expenses. If there's a deficit, identify areas where you can reduce costs or increase revenue to achieve equilibrium.

Monitor & Track Your Budget

Regularly monitor and track your budget against actual financial performance to identify variances and deviations. Use accounting software or spreadsheets to update your budget and make adjustments as needed to stay on course.

Review & Adjust Budget Regularly

Review your budget periodically, ideally on a quarterly or annual basis, to assess its effectiveness and relevance. Adjust your budget as necessary based on changing market conditions, business priorities, and performance trends.

Contact Mowery & Schoenfeld for Help with Business Budgeting

Creating and managing a business budget requires expertise and strategic planning. At Mowery & Schoenfeld, we specialize in helping businesses develop robust financial strategies to achieve their financial goals. Contact us today to learn how our team of experienced professionals can assist you with business budgeting and financial management. 

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How to Create a Basic Business Budget

8 Min Read | Mar 13, 2024

You’d never intentionally set your business up to fail, right? But if you don’t know your numbers and how to make a business budget, that’s exactly what you’re doing. Money problems and bad accounting are two reasons why many small businesses don’t make it past their first five years. 1

Talking about budgets can feel overwhelming. We get it. For a lot of business leaders, it’s a lot more comfortable dreaming up big ideas and getting stuff done than digging into numbers. But you can’t set yourself up for steady growth until you have a handle on the money flowing in and out of your company. You also can’t enjoy financial peace in your business.

Not a numbers person? That’s okay. Follow the simple steps below to learn how to create a budget for a business and manage your finances with confidence. We’ll even give you a link to an easy-to-use small-business budget template in the EntreLeader’s Guide to Business Finances .

But before we get to that, let’s unpack what a budget is and why you need one.

Don't Let Your Numbers Intimidate You

With the EntreLeader’s Guide to Business Finances, you can grow your profits without debt—even if numbers aren’t your thing. Plus, get a free business budget template as part of the guide!

What Is a Business Budget?

A business budget is a plan for how you’ll use the money your business generates every month, quarter and year. It’s like looking through a windshield to see the expenses, revenue and profit coming down the road. Your business budget helps you decide what to do with business profit, when and where to cut spending and grow revenue, and how to invest for growth when the time comes. Leadership expert John Maxwell sums it up: “A budget is telling your money where to go instead of wondering where it went.”

But here’s what a business budget is not: a profit and loss (P&L) report you read at the end of the month. Your P&L is like a rearview mirror—it lets you look backward at what’s already happened. Your P&L statement and budget are meant to work together so you can see your financial problems and opportunities and use those findings to forecast your future, set educated goals, and stay on track.

Why Do I Need to Budget for My Business?

Creating a budget should be your very first accounting task because your business won’t survive without it. Sound dramatic? Check this out: There are 33.2 million small businesses in the United States. Out of the small businesses that opened from 1994 to 2020, 67.7% survived at least two years. But less than half survived past five years. 2    The top reasons these businesses went under? They hit a wall with cash-flow problems, faced pricing and cost issues, and failed to plan strategically . 3

As a business owner, one of the worst feelings in the world is wondering whether you’ll be able to make payroll and keep your doors open. That’s why we can’t say it enough: Make a business budget to stay more in control and have more financial peace in running your business.

A budget won’t help you earn more money, but it will help you:

• Maximize the money you’ve got
• Manage your cash flow
• Spend less than your business earns
• Stay on top of tax payments and other bills
• Know if you’re hitting your numbers so you can move at the true speed of cash

How to Create a Budget for a Business

Your ultimate goal is to create a 12–18-month business budget—and you will get there! But start by building out your first month. Don’t even worry about using a fancy accounting program yet. Good ol’ pen and paper or a simple computer document is fine. Just start! Plus, setting up a monthly budget could become a  keystone habit  that helps kick-start other smart business habits.

Here’s how to create your first budget for business:

1. Write down your revenue streams.

Your revenue is the money you earn in exchange for your products or services. You’ll start your small- business budget by listing all the ways you make money. Look at last month’s P&L—or even just your checking account statement—to help you account for all your revenue streams. You’re not filling in numbers yet. Just list what brings in revenue.

For example, if you run an HVAC business, your revenue streams could be:

• Maintenance service calls
• Repair services and sales
• New unit installation
• Insulation installation
• Air duct cleaning

2. Write down the cost of goods sold (if you have them).

Cost of goods is also called inventory. These expenses are directly related to producing your product or service. In the HVAC example, your cost of goods would be the price you pay for each furnace and air conditioning unit you sell and install. It could also include the cost of thermostats, insulation and new ductwork.

3. List your expense categories.

It’s crazy how much money can slip through the cracks when we’re not careful about putting it in the budget. Think through  all  your business expenses—down to the last shoe cover your technicians wear to protect your customers’ flooring during house calls. Here’s a list of common business budget categories for expenses to get you started:

• Office supplies and equipment
• Technology services
• Training and education

Related articles : Product Launch: 10 Questions to Ask Before You Launch a New Product New Product Launch: Your 10-Step Checklist

4. Fill in your own numbers.

Now that you have a solid list of revenue and expense categories, plug in your real (or projected) numbers associated with them. It’s okay if you’re not sure how much you’ll sell just yet or exactly how much you’ll spend. Make an educated guess if you’re just starting out. If your business has been earning money for a while, use past P&L statements to guide what you expect to bring in. Your first budget is about combining thoughtful guesswork with history and then getting a more realistic picture month over month.

5. Calculate your expected profit (or loss). 

Now, number nerds and number haters alike—buckle in. We’re about to do some basic accounting so you know whether you have a profit or loss. This is your chance to figure out exactly how much you’re spending and making in your business.

Take your  gross revenue (the total amount of money you expect to make this month) and subtract your expenses and  cost of goods sold  to find your profit or loss. Here’s what that calculation looks like:

Revenue - Expenses - Cost of Goods Sold = Profit or Loss

Don’t freak out if your first budget shows a loss. That actually happens a lot with your first few monthly budgets. You’re learning and getting context on what’s coming in and going out so you can make adjustments. Keep doing your budget, and before you know it, you’ll be a rock star at telling your money where to go, planning for emergencies ,  investments and opportunities , and building momentum.  

6. Review your budget often. 

Whew! Once you get that first business budget under your belt, take a deep breath and celebrate. You’ve just done something huge for your business! (You’ll also be happy to know, budgeting gets easier from here since you can copy and paste your first one and tweak your income and expenses each month.)

But here’s the thing: Your budget can’t just sit in a drawer or on your computer. You’ve got to look at it consistently to make sure you’re actually following it.

Weekly Review

At least once a week, someone in your business (whether it’s you, a qualified team member or a bookkeeper) needs to track your transactions so you know what’s happening with your money all month. Then you can make adjustments before you have more month than money.

Every time you review your budget, ask yourself these three questions:

• Are we on target to hit our revenue goal this month?
• If not, what we can change to get there?
• Are there any expenses we can cut or minimize?

Monthly Review

You also need to review your business budget when you close your books every month to compare it to your actuals—your P&L. Otherwise, how can you know how you’re doing?

7. Work toward a 12–18-month budget.

Now that you’ve created your first month’s budget, move on to the next one. You’ve got this! The more budget-building reps you get in, the better you’ll be at looking forward and planning for growth. In no time, you’ll reach that ultimate goal of a 12–18-month budget. Just keep adjusting as you go based on all you’re learning about getting an accurate road map for your finances.

As you start owning your numbers, remember: It’s okay if you’re a little intimidated by the process of accounting and making a budget for business. But it’s not okay to avoid the financial details that will make or break you. So just keep applying the basics we covered and keep moving forward.

Follow the steps above to create your budget, and review it often to stay on track.

Want a tool to make budget building simpler? Check out the EntreLeader’s Guide to Business Finances. It includes an easy-to-use small-business budget template in the extra resources section.

What are the benefits of budgeting?

A business budget will help you:

• Make informed, strategic decisions
• Invest in under-resourced areas
• Trim over-resourced areas
• Plan for the future
• Set goals and track your progress

Does using a small-business budget template save time?

Yes! Using a small-business budget template helps you plug in the numbers you need to operate with more confidence and fewer wrong turns. Check out the small-business-budget template inside our EntreLeader’s Guide to Business Finances .

How do I budget if I own a seasonal business?

Just like farmers put extra hay in the barn to cover leaner months, if you’re a seasonal business owner, you need to set aside resources in times of plenty to cover months your business turns down. Use your P&L statements to go back in time and look at financial performance year over year. Then, create your business budget based on what you learn and on any changes you see coming. You can also go to trade conferences to get an idea of your industry’s seasonal benchmarks.

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About the author

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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How to Create a Business Budget for Your Small Business

According to a study done by CBinsights, a few of the top reasons why small businesses fail include include pricing and cost issues, losing focus and running out of cash. These issues can be prevented by having a realistic budget in place.

Before you can focus on the budget, however, you need to identify what aspects of your business you’d like to improve. This will allow you to decide what can be done with your funds. Based on that list, you can set up short-term and long-term goals.

These goals will be directly affected by your incoming and outgoing cash. A short-term goal can be paying off a debt or purchasing new equipment. Long-term goals, like keeping aside marketing expenses, are crucial because they are connected to the overall growth of your business.

You should be practical about the goals you set. They should be purely based on your business’ capacity to spend and save. Once you have your goals in place, you can create an effective, foolproof budget by following these steps.

1. Analyze costs

Before you start drafting a budget, you must research the operating costs involved in your business. Knowing your costs inside and out gives you the baseline knowledge needed to craft an effective spending plan.

If you create a rough budget and later discover that you need more money for your business activities, this will jeopardize your goals. Your budget should be such that you can increase your revenue and profit enough as your business expands to handle your growing expenses. Your budget should factor in fixed, variable, one-time, and unexpected costs. Some examples of a fixed expense are rent, mortgages, salaries, internet, accounting services, and insurance. Examples of variable costs include cost of goods sold and commissions for labor.

There is not much harm in overestimating the costs involved since you will need enough cash to handle your future expenditures. If your business is new, then you must include start-up costs as well. Planning the budget this way will help you make informed decisions and tackle any unwanted financial surprises.

2. Negotiate costs with suppliers

This step will be useful for those businesses which have been functional for more than a year and are dependent on suppliers to sell products. Before you get started on your yearly budget, have a chat with your suppliers and try getting discounted rates for the materials, products, or services you need before you make your payments.

Negotiations allow you to create trustworthy relationships with your suppliers. This will be helpful when incoming cash is thin. For example, you might have a seasonal business. When you have enough cash saved, you can pay advance amounts to your suppliers as compensation for the times when you are unable to make payments. The main goal here is to find efficient ways to reduce cost of doing business.

3. Estimate your revenue

Many businesses have failed in the past by overestimating revenue and borrowing more cash to meet operational needs. This defeats the very purpose of creating a budget. To keep things realistic, it’s a good idea to analyze previously recorded revenue. Businesses must track revenue periodically on a monthly, quarterly and annual basis.

Your previous year’s revenue figures can act as a reference point for the upcoming year. It’s important to rely solely on this empirical data. This will help you set realistic goals for your team, leading to the eventual growth of your business.

4. Know your gross profit margin

The gross profit margin is the cash you are left with after your business has dealt with all the expenses at the end of the year. It gives insight into the financial health of your business. Here’s an example of why you need to understand this parameter while creating a budget.

Suppose your business made a revenue $5,000,000 and yet there are debts to be paid. At the end of the year, your expenses are more than your revenue, which is not a good sign for a growing business. This tells you that you must identify the expenses that are not benefiting the business in any way and eliminate them. The best way to do this would be to list out the cost of goods sold for all materials and deduct them from the overall sales revenue. This information is needed to get a real picture on how your business is faring, allowing you to increase profit and reduce costs.

5. Project cash flow

There are two components to cash flow : customer payments and vendor payments. You need to balance these two components to keep the cash flowing in your organization.

To do your best to ensure timely customer payments, it’s important to have flexible payment terms and the ability to receive payments through common payment channels. Unfortunately you will need to deal with customers who might not comply to the stated terms. This might affect your cash flow forecast due to missing payments.

You can encourage payment by giving customers a grace period and creating strict business policies for paying late. Beyond this, you must have some money allocated in your budget for ‘bad debt,’ in case the customer never pays.

When you know your incoming cash flow, you can fix an amount for your employee salaries and travel expenses. You can also allocate some money to pay off your fixed vendor expenses. If you are still left with cash, you can then spend on business initiatives such as professional development or new equipment.

6. Factor in seasonal and industry trends

It’s unrealistic to expect that you will achieve every business goal and reach your estimates every month. In an annual cycle, there will be months where your business will be booming, and there may be a few months where sales are slow. Due to seasonal inconsistency and industry trends, you will have to spend cash effectively so that the business isn’t at risk of shutting down during slower periods.

To overcome this challenge while creating a budget, gather insights as to when your business performs better. The aim should be to generate enough revenue during peak months to sustain the business during off seasons.

For example, let’s assume that you are a business owner of a winter clothing company. Your products are on demand only during that season, so most of your revenue comes during that period. For the rest of the year, you can use the earnings to keep the business going and market to specific target groups, like hikers or travelers. This will help you gauge how successful your products are during off seasons, what revenue to expect, and how much to save during your peak periods.

7. Set spending goals

Making a budget is more than just adding your costs and subtracting them from your earnings. How wisely you spend your money determines how well your business will fare. Goals provide a system to check if your money is being spent on the right areas to avoid unwanted expenses.

For example, if you are spending money on stationary that is going unused for operational or marketing efforts, it may be time to cut those costs. This money can be better applied to your marketing campaigns, bringing in more leads and revenue. Gauge and invest in those expenses that would benefit your business in the long run.

8. Bring it all together

Once you have gathered all the information from the previous steps, it’s time to create your budget. After you have subtracted your fixed and variable expenses from your income, you will get an idea of the amount that you can work with. Be prepared to tackle the unexpected one-time expenses that come your way. You can then find ways to use the money effectively to achieve your short-term and long-term goals.

Role of accounting software in budgeting

Budgeting for a business is a large task, which is why you might need assistance. Creating a budget will involve analyzing costs, estimating revenue, and projecting cash flow. Having an accounting system in place will give you real-time information about your finances, helping you to create a feasible budget.

The key to creating a good budget is to evaluate the previous years’ data and draw realistic projections. An accounting system can give you access to all this information in one place, no matter when you need it.

The effectiveness of a budget also depends on how well any projected goals have been achieved by your business. To check this, an accounting system generates financial reports that record your actuals, and those can then be compared with the budget. Comparing your budget with your actuals is an important step to gauge the effectiveness of a budget.

Budgeting is an essential process, especially for small businesses, as it allows business owners to estimate and allocate money for different business activities. Preparing a budget also gives you a clear idea of the money that can be used to achieve business goals and ensure that there is enough in hand to handle a crisis. For small businesses, it might get a bit difficult to make estimations for the whole year as the initial stages of growing an organization are often volatile. In such cases, you can create smaller budget estimates for a duration of two or three months and keep reviewing it for better results. When an accounting system is introduced, the process becomes even more manageable. You can easily handle tasks like projecting cash flow or estimating costs, and you can set realistic goals for your business.

Related Posts

• Business Budget: What is it & Why is it important?
• How Is Cash Flow Calculated?

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Great article, Easy to read, straight to the point, very informative.

Wonderful article! Just what I needed

a valuable information for person like me who doesn’t has finance background.

wonderful said,

I really like this article, it is very easy to read, gives an idea and try to make the budget process a much easier task

Simple and precise article

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How to Create a Small Business Budget in 5 Simple Steps

Want to protect the financial health of your small business? You need a business budget. Here's how to create one.

When you build a business, there are a lot of things to stay on top of, from marketing and finding new  clients  to building a website and establishing your digital presence. But there’s one element that you want to stay on top of from the very beginning—and that’s your business budget.

Having a detailed and accurate budget is a must if you want to build a thriving, sustainable business. But how, exactly, do you create one? What are the steps for business budget planning?

As a small business owner, let’s take a look at how to create a business budget in five simple, straightforward steps.

What’s a Business Budget—and Why Is It Important?

Before we jump into creating a business budget, let’s quickly cover what a business budget is—and why it’s so important for small businesses.

A business budget is an overview of your business funds. It outlines key information on both the current state of your finances (including income and expenses) and your long-term financial goals. Because your budget will play a key role in making sound financial decisions for your business, it should be one of the first tasks you tackle to improve business success.

And, as a  financially savvy owners, you’ll also want to have a budget in place to help you:

• Make sound financial decisions.  In many ways, your business budgets are like a financial road map. It helps you evaluate where your  business finances  currently stand—and what you need to do to hit your financial goals in the future for business growth.
• Identify where to cut spending or grow revenue.  Your business budgets can help you identify areas to decrease your spending or increase your revenue, which will increase your  profitability  in the process, outline unexpected costs, and help your sustain your business goals.
• Land funding to grow your business.  If you’re planning to apply for a business loan or raise funding from investors, you’ll need to provide a detailed budget that outlines your income and expenses.

Now that you understand why budget creation is so important to your business decisions, let’s jump into how to do it.

Business Budget Step 1: Tally Your Income Sources

First things first. When building a small business budget, you need to figure out how much money your business is bringing in each month and where that money is coming from – this will hep create an operating budget based on your business income.

Your sales figures (which you can access using the Profit & Loss report function in FreshBooks) are a great place to start. From there, you can add any other sources of income for your business throughout the month.

Your total number of income sources will depend on your business model.

For example, if you run a  freelance  writing business, you might have multiple sources of income from:

• Freelance writing projects
• A writing course you sell on your website
• Consulting with other writers who are starting small businesses

Or, if you run a brick-and-mortar retail business, you may only have one source of income from your store sales.

However many income sources you have, make sure to account for any and all income that’s flowing into your business—then tally all those sources to get a clear picture of your total monthly income to build your master business budget template.

Business Budget Step 2: Determine Fixed Costs

Once you’ve got a handle on your income, it’s time to get a handle of your costs—starting with fixed costs.

Your fixed costs are any expenses that stay the same from month to month. This can include expenses like rent, certain utilities (like internet or phone plans), website hosting, and payroll costs.

Review your expenses (either via your bank statements or through your FreshBooks reports) and see which costs have stayed the same from month to month. These are the expenses you’re going to categorize as fixed costs.

Once these costs are determined, add them together to get your total fixed and variable costs expense for the month.

TIP:   If you’re just starting your business and don’t have financial data to review, make sure to use projected costs. For example, if you’ve signed a lease for office space, use the monthly rent you will pay moving forward.

Business Budget Step 3: Include Variable Expenses

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Variable costs don’t come with a fixed price tag—and will vary each month based on your business performance and activity. These can include things like usage-based utilities (like electricity or gas), shipping costs, sales commissions, or travel costs.

Variable expenses will, by definition, change from month to month. When your profits are higher than expected, you can spend more on the variables that will help your business scale faster. But when your profits are lower than expected, consider cutting these variable costs until you can get your profits up.

At the end of each month, tally these expenses. Over time, you’ll get a sense of how these expenses fluctuate with your business performance or during certain months, which can help you make more accurate financial projections and budget accordingly.

Business Budget Step 4: Predict One-Time Spends

Many of your business expenses will be regular expenses that you pay for each month, whether they’re fixed or variable costs. But there are also costs that will happen far less frequently. Just don’t forget to factor those expenses when you create a budget as well.

If you know you have one-time spends on the horizon (for example, an upcoming business course or a new laptop), adding them to your budget can help you set aside the financial resources necessary to cover those expenses—and protect your business from unexpected costs in the form of a sudden or large financial burden.

On top of adding planned one-time spends to your budget, you should also add a buffer to cover any unplanned purchases or expenses, like fixing a damaged cell phone or hiring an IT consultant to deal with a security breach. That way, when an unexpected expense pops up (and they always do), you’re prepared!

Business Budget Step 5: Pull It All Together

You’ve gathered all of your income sources and all of your revenue and expenses. What’s next? Pulling it all together to get a comprehensive view of your financial standing for the month.

On your businesses master budget, you’ll want to tally your total income and your total expenses (i.e., adding your total fixed costs, variable expenses, cost of goods, and one-time spends)—then compare cash flow in (income) to cash flow out (expenses) to determine your overall profitability.

Having a hard time visualizing what a business budget looks like in action? Here’s an operating budget example to give you an idea of what your new business budget might look like each month:

A Client Hourly Earnings: $5,000 B Client Hourly Earnings: $4,500 C Client Hourly Earnings: $6,000 Product Sales: $1,500 Loans: $1,000 Savings: $1,000 Investment Income: $500

Total Income: $19,500

Fixed Costs

Rent: $1,000 Internet: $50 Payroll costs: $5,000 Website hosting: $50 Insurance: $50 Government and bank fees: $25 Cell phone: $50 Accounting services : $100 Legal services: $100

Total Fixed Costs: $6,425

Variable Expenses

Sales commissions: $2,000 Contractor wages: $500 Electricity bill: $125 Gas bill: $75 Water bill: $125 Printing services: $300 Raw materials: $200 Digital advertising costs: $750 Travel and events: $0 Transportation: $50

Total Variable Expenses: $4,125

One-Time Spends

Office furniture: $450 Office supplies for new location: $300 December business retreat: $1,000 New time tracking software: $500 Client gifts : $100

One-Time Spends: $2,350

Expenses: $12,900

Total Income ($19,500) – Total Expenses ($12,900) = Total Net Income ($6,600)

Above all, once you have a clear sense of your profitability for the month, you can use it to make the right financial decisions for your small business moving forward.

For example, if you realize you’re in the red and spending more than you earn, you might cut your spending and focus on  finding new clients . Alternatively, if your income is significantly higher than your expenses, you might consider investing your profits back into your business (like investing in new software or equipment).

Use Your Business Budget to Stay on Track

Putting in the work to create a budget for your small business may seem like a hassle. But while it takes a bit of time and energy, it’s worth the extra effort. Thorough business budgeting gives you the financial insights you need to make the right decisions for your business to grow, scale, and prosper in the future.

This post was updated in October 2023

Written by Deanna deBara , Freelance Contributor

Posted on June 20, 2017

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Key takeaways

• A business budget is a financial plan that helps estimate a company's revenue and expenses, making it an essential tool for small businesses
• The steps to creating a business budget include choosing budget and accounting software, listing expenses and forecasting revenue
• If a business finds itself in a budget deficit, strategies such as cutting costs, negotiating with suppliers and diversifying revenue streams can help

As a small business owner, keeping your finances organized through a business budget is crucial to running a successful company.

Business budgeting involves creating a financial plan that estimates future revenue and expenses to make informed financial decisions, which can ultimately move the needle on your business’s financial goals and help it grow in profitability.

What is a business budget?

A business budget is a financial plan that outlines the company’s current revenue and expenses. The budget also forecasts expected revenue that can be used for future business activities, such as purchasing equipment. It sets targets for your business’s revenue, expenses and profit and helps you determine if you’ll have more money coming in than you pay out.

A business budget is an essential tool that helps you make wise business decisions. Without it, it’s difficult to gauge your business’s financial health.

What is the difference between a cash flow statement and a business budget?

A cash flow statement  (CFS) is a financial document that summarizes the movement of cash coming in and going out of a company. The CFS gauges how effectively a company manages its finances, including how it manages debt responsibilities and funds day-to-day operations.

It’s similar to a business budget in that you can see expenses and revenue. But while a budget gives a moment-in-time snapshot of your business’s financial performance compared to forecasts, the cash flow statement focuses on the actual inflows and outflows of money through your business.

Follow these steps to ensure a well-developed budget, from understanding your expenses to generating revenue and adjusting expenses to balance the budget.

1. Choose a budget and accounting software

First, you’ll want to store your expense and revenue information with accounting software to help you track your numbers and generate reports. Some software may also help you assign categories to the transactions, identify tax deductions and file taxes. Quickbooks is an example of accounting software.

Some business bank accounts also have accounting software built in, helping you stay organized by keeping your accounting and banking in one place.

2. List your business expenses

The next step in creating a small business budget is to list all your business expenses. Here are the types of expenses you want to include in your budget:

• Fixed expenses: Fixed expenses cost a fixed amount monthly or within the assessed period. Those costs include rent, insurance, salaries and loan payments.
• Variable expenses: Variable expenses can change monthly or over time, making them trickier to budget. This might include materials, direct labor, utility bills or marketing expenses.
• Annual or one-time costs: Some costs only occur a few times per year, while others you’ll only pay for as needed, such as buying new equipment. You still want to budget for these expenses by allocating a portion of your weekly or monthly budget toward one-time expenses.
• Contingency funds: Unexpected business costs can throw a wrench in your budget if not planned for. Such costs could include emergency repairs, necessary equipment purchases, sudden tax increases or unforeseen legal fees. To plan for these costs, you can create a contingency or emergency fund that’s separate from your operational budget.
• Maintenance costs: To allocate funds for maintenance costs, begin by including regular inspections and maintenance in your budget. Then, make sure to leave room for changes and unexpected maintenance costs.

3. Forecast your revenue

To estimate your future revenue, start by deciding on a timeline for your forecast. A good place to start is the previous 12 months. Your accounting software may also include revenue forecasting as one of its features, which can automate this step for you.

The timeline and your recent past growth can help you understand how much revenue you’ll generate in the future. Consider external factors that could drive revenue growth, such as planned business activities like expansion, marketing campaigns or new product launches.

You’ll also want to think about anything that might slow your growth. Many businesses experience seasonal fluctuations, which can impact your budget if you don’t plan for it. To account for these changes, list the minimum expenses required to keep your business running. Use your financial statements to understand these costs, and consider averaging out irregular expenses over the year to avoid surprises.

Ideally, your business should build a cash reserve during profitable periods to cover expenses during slower seasons. If necessary, consider various financing options, such as a business credit card or line of credit, that you can draw from to manage cash flow during peak or off times.

4. Calculate your profits

The next step in creating a business budget is to calculate your business profits. You can look at your total profits by calculating revenue minus expenses. That way, you see how much money you have to work with, called your working capital .

You should also understand your profit margins for each of your products and services, which can help you set prices or decide whether to offer a new product or service.

How to calculate your profit margins

To find out your gross profit margin, you’ll first need to calculate the gross profit. To calculate your business’s gross profit, subtract the cost of goods sold (COGS) from your total revenue. COGS includes all the expenses related to producing your products and services.

Once you have the gross profit, use the gross profit margin formula: (Revenue – COGS) / Revenue x 100. This will give you a percentage that shows how much profit you gain from that particular product after accounting for the product’s costs.

5. Make a strategy for your working capital

Knowing what to do with extra revenue, which is your working capital, is crucial for managing your business finances and growth. Here’s how to get started with a financial strategy that propels your business goals forward:

• Set spending limits for different categories in your budget. When listing your expenses, you should have set a dollar amount for each category. You can estimate this by a monthly average or a general forecasted amount.
• Set realistic short- and long-term goals. These goals will motivate you to stick to your budget and guide your spending decisions.
• Compare your actual spending with your net income and priorities. Look at the areas you’re spending and consider whether you need to reallocate money to different categories. Consider separating expenses into business needs and extras.
• Adjust your budget and actual spending. Adjust your spending to ensure you do not overspend and can allocate money towards your goals. If you need to cut spending, consider the categories that are extras, such as types of marketing that you don’t know will generate a return on investment.

6. Review your budget and forecasts regularly

Finally, review your budget regularly. By frequently checking in on your budget, you can identify any discrepancies between your planned and actual expenses and adjust accordingly. This allows you to proactively handle any financial issues that may arise rather than reacting to them after they’ve become a problem.

Regular reviews also allow you to refine your budgeting process and improve its accuracy over time. Keep in mind that your budget is not set in stone but rather a tool to guide your financial decisions and help you achieve your business goals.

What to do if you have a deficit in your business budget

Finding a deficit in your small business budget can be alarming, but there are several strategies you can employ to handle this situation.

• Do a cash flow analysis. Begin by doing a cash flow analysis to review what your business is earning and spending money on. Identify potential problems and adjust the budget as needed to prevent overspending.
• Cut nonessential business costs. Cutting spending may involve eliminating nonessential costs and transferring funds from other categories to overspent categories. Your goal is a balanced or profitable budget.
• Negotiate with suppliers. Be transparent in your communications with suppliers and explain your quality standards and why you’re seeking cost reduction. Explore options for cost reduction that do not compromise quality, such as process improvements or ordering in larger quantities.
• Create a lean business model. By removing anything that doesn’t benefit your customer, your business can potentially save time and resources. Lean business models focus on continually improving processes and customer experience without adding additional resources, time or funds.
• Add revenue and diversify revenue streams. Raising revenue requires a realistic plan with measurable goals to increase sales and overall business income. You can also consider other products and services you could offer that would make your business profitable.
• Use financing to cover temporary gaps. Applying for a small business loan can help pay bills during an unplanned shortfall. Since this will add an expense to your budget, make sure you can handle the loan repayments and your regular expenses.
• Plan for a deficit. In some cases, a planned budget deficit might be a strategic decision, such as investing in new opportunities that promise long-term benefits.

Bottom line

Having a well-developed business budget is crucial for making informed decisions. You can effectively manage your small business’s finances by tracking and analyzing your business’s inflows and outflows, forecasting your expected revenue and adjusting your budget to stay balanced.

Even in the face of a budget deficit, there are various strategies you can use to keep your business profitable, including negotiating costs with your suppliers, assessing your business operations and offering new products and services.

With a solid business budget in place, you can confidently navigate financial challenges and drive long-term success for your small business.

Frequently asked questions

What are the benefits of a business budget, what are the components of a business budget, how do you calculate fixed and variable costs in a business budget.

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Accounting | How To

How To Create a Small Business Budget [+Free Template]

Published June 20, 2023

Published Jun 20, 2023

REVIEWED BY: Tim Yoder, Ph.D., CPA

WRITTEN BY: Eric Gerard Ruiz, CPA

This article is part of a larger series on Bookkeeping .

• 1. Create a Budget Process
• 2. Determine Key Assumptions in Budgeting
• 3. Create the Sales Budget
• 4. Create the Inventory and Purchases Budget
• 5. Create the COGS Budget
• 6. Create the Sales & Administrative Budget
• 7. Create the Capital Budget
• 8. Create the Cash Budget
• 9. Assemble Proforma Financial Statements

Common Problems in Budgeting

Bottom line.

Creating a business budget is an important step in planning. A small business budget starts with creating the budgeting process, the operating budgets, such as sales, inventory and purchases, cost of goods sold (COGS), and sales and administrative, and ends with the financial budgets, such as cash, capital, and proforma financial statements.

To help you get started, we’ve provided a very simplified version of a budget spreadsheet to illustrate how information from each area of your business is combined to form an annual budget. We’ll discuss how to use this spreadsheet throughout our article.

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Budgeting is an important subset of managerial accounting. Read our small business guide to managerial accounting and learn how managerial accounting concepts can be applied in a small business setup.

Step 1: Create a Budget Process

The budget process shows how the different departments of the business create a budget. Without a process, budgeting would be chaotic, and it would result in inefficiencies. In the budget process, you need to consider the following:

• Budget period: When are budgets created, reviewed, implemented, and evaluated against actual performance?
• Budgeting method: How are budgets created? Is it created from scratch (zero-based budgeting)? Is it based on actual results with adjustments (incremental budgeting)?
• Budget involvement: Who creates the budgets?
• Budget committee: Who oversees and approves the budgets?
• Budget manual: What are the guidelines for creating budgets?

Budget Period

The first thing to consider in the budget process is the budget period. How long should budgets be prepared? When will it be implemented? The budget period can be any time before the next business year begins. Hence, you can create next year’s budget three months prior to the end of the current year.

The crucial periods for budget planning are as follows:

• Budget preparation : The time at which managers and heads create a budget for their department.
• Budget review and approval : The time at which top management will review and approve all lower-level budgets.
• Budget implementation : The time at which all concerned parties will act upon planned activities stated in the budget. This phase runs until the effectiveness of the budget lasts.
• Budget accountability : The time at which top management will assess if the business is meeting its budgetary goals. This phase runs intermittently during the year, such as monthly, quarterly, or semiannually, especially during performance evaluation and review.

As a small business, you need not be particular about the phases. You can modify the phases depending on small business needs.

Budgeting Method

There are four different types of budgeting methods, but for small businesses, we picked only two, as they are the most appropriate for the setup:

• Zero-based budgeting : This is a budgeting technique that starts from scratch. It doesn’t use information from past budgets. Instead, departments and managers need to justify every dollar in the budget without referring to past performance or past budgeting practices.
• Incremental budgeting : This is a budgeting technique that uses actual figures from the past years and adjusts with a certain percentage. For example, if actual sales last year is $20,000, the incremental budgeted sales could be 10 percent more or $22,000.

Budget Involvement

Small businesses must consider what kind of involvement is needed during the budgeting process, given that budgets can be used to measure the performance of departments and managers. There are two kinds of budget involvement—for small businesses, authoritative budgeting is suitable if the small business owner is heavily involved in daily operations. Alternatively, participatory budgeting applies if the owner delegates decision-making to managers.

1. Authoritative budgeting

Also known as top-down budgeting, this budget involvement strategy only includes top management in the budgeting process, where operating personnel and lower-level employees have little to no say in the budget. It takes less time to create since there are fewer employees involved.

However, some operating personnel and lower-level employees may disagree with top management’s estimates in the budget. At the least, this strategy creates discord between top management and operating personnel due to conflicting views. But if prepared appropriately, authoritative budgeting reflects the business’ vision, mission, and goals better.

2. Participatory budgeting

This is also called bottom-up budgeting, and this budget involvement strategy includes operating personnel and lower-level employees in creating a budget. It is a budget co-created by everyone involved or affected by the budget being created.

It enhances the relationship between top management and operating personnel since everyone has a say in the budget. However, this strategy can take time since more employees are involved in the budgeting process. Also, some lower-level managers can use this opportunity to insert some budgetary slack so that they look good during performance.

Budget Committee

The budget committee is responsible for compiling all lower-level budgets and assembling them into one package called the master budget and reviewing and approving budgets from different departments. For small businesses, the composition of the budget committee can be the small business owners, chief executive officer (CEO), treasurer, budget coordinator, and chief accountant.

The role of the budget coordinator is to reach out to lower-level managers and communicate the wishes of the budget committee. If you’re a family-grown small business, family members, including the small business accountant or finance officer, can be committee members.

Budget Manual

The first order of business of the budget committee is to create a budget manual, which outlines the budgeting process. Lower-level managers and department heads will use the budget manual when creating lower-level budgets. The budget committee may also set specific budget formats and deadlines.

A budget manual standardizes the budgeting process—it ensures fairness and comparability among departments and managers. With this manual in place, you can prevent the instance of inserting unfamiliar line items in the budget or using different sources in forecasting budgeted figures.

The budget manual should include the following:

• Statements of budgetary purpose
• Budgetary activities, such as budget preparation, budget hearing and evaluation, budget approval, budget execution, and budget accountability
• Schedule of budgetary activities and deadlines
• Sample budgets
• Key assumptions used in budgeting

You can create a budget easily using QuickBooks Online. Its budgeting functions create budgets per account in the chart of accounts. Read our QuickBooks Online review for detailed information on our recommendation.

Step 2: Determine Key Assumptions in Budgeting

After performing the groundwork for budgeting, the next step is determining the key assumptions. These assumptions make it easy to prepare budgets since not all information is readily available until it happens. These assumptions are not arbitrary because they must be based on past experience and good business practices.

Examples of assumptions are:

• Sales forecast
• Selling price per unit
• Cost per unit
• Estimated discounts given to customers
• Estimated sales returns
• Desired ending inventory per month or quarter
• Number of raw materials used to produce one good unit
• Number of labor hours needed to produce one good unit
• Number of overhead hours (if any) needed to produce one good unit
• Inventory cost flow method used, such as first-in, first-out (FIFO), last-in, first-out (LIFO), or average cost
• Cash collection patterns
• Cash payments patterns
• Cash retention policies

Input your assumptions in the second tab of our downloadable spreadsheet. When done, all of the reports will automatically populate. It’s the quality of your assumptions that will determine if your budget is realistic. As you improve your budgeting process, you’ll come up with additional assumptions to include in the process.

Step 3: Create the Sales Budget

The sales budget is the first budget that should be prepared because almost all budgets will depend on the information in it. It is the responsibility of the sales department to forecast and create the sales budget of the company, and it is crucial that the department forecast sales reasonably using the appropriate forecasting method. Our article about sales forecasting discusses the method of sales forecasting and shows how CRM software can help.

Below is an example of the sales budget taken from our small business master budget template.

Sales budget

Step 4: Create the Inventory & Purchases Budget

There are two ways to call this budget: merchandising companies can call it inventory and purchases budget while manufacturing companies can call it production budget. However, the information shown in this budget remains the same. The inventory or production budget shows the number of units needed to meet the sales demand.

Inventory budget

The image above shows the sample inventory budget in our free template. One of our assumptions is that the business intends to keep 5% of next quarter’s sales forecast as current quarter’s ending inventory. In Q1, desired ending inventory is 500 units, which is 5% of 10,000 units of Q2’s sales forecast.

After determining the number of units needed, multiply them to the standard cost of inventory to get the total cost of inventory. The standard inventory cost is also the budgeted cost of inventory. Since some inventory prices fluctuate, setting standard costs makes it easy for us to budget.

When adding values in the total column, do not sum up the values in the beginning and desired ending inventory rows. Instead, the total beginning inventory in the total column should be the Q1 beginning inventory, while the total ending inventory should be the Q4 ending inventory.

Step 5: Create the COGS Budget

The next logical step after budgeting inventory and purchases is to determine the COGS. Through the COGS budget, we can estimate the level of COGS per quarter. This budget is necessary for preparing the proforma income statement.

Below is the COGS budget from our small business budget template:

COGS budget

Step 6: Create the Sales & Administrative Budget

The sales and administrative (S&A) budget presents the budgeted costs for sales expenses, office expenses, and administrative expenses. This is necessary for budgeting the salaries of employees and other fixed expenses. The image below shows the sales and administrative budget from our template:

S&A budget

Most expenses in this budget are fixed costs. That’s why the amounts are the same for every quarter. Manufacturing companies may also call this budget a “fixed overhead budget.”

Step 7: Create the Capital Budget

A capital budget shows all the planned capital expenditures during the year. In our capital budget example below, there are no figures because the sample company didn’t plan any capital decisions for 2024. However, we’ve included common capital decisions for you to fill out when you use our template. For instance, a bank loan is a capital inflow while the purchase of equipment is a capital outflow.

Capital budget

The capital budget in our downloadable spreadsheet does not auto-populate from the assumptions tab. Instead, enter your budgeted loans and purchases directly in the report.

Step 8: Create the Cash Budget

The last budget that you need to prepare is the cash budget, which shows all the cash inflows and outflows from all budgets. Almost all budgets above affect cash flow. For example, the sales budget can show all cash inflows from cash sales and subsequent cash collections from credit sales.

Cash budget

Accounts Receivable & Accounts Payable Schedule

Collections from accounts receivables (A/R) and payments of accounts payable (A/P) are integral parts of the cash budget. Creating the A/R and A/P schedules helps in computing the ending balance of A/R and A/P and the amount of cash collections and payments per quarter. Below are the supporting A/R and A/P schedules for our cash budget above:

A/R and A/P schedules

Step 9: Assemble the Proforma Financial Statements Based on Budgeted Figures

The ultimate result of the budgeting process is the proforma financial statements, which are the budgeted or projected results of planned activities. If the budget goes as planned, the actual financial statements should be near the proforma financial statements. Below are the proforma income statement and balance sheet in our small business budget template.

Proforma Income Statement

Proforma Owner’s Equity Statement

Proforma Balance Sheet

Budgeting helps businesses plan on future events and meet company goals. However, it is likely that you will experience difficulties and problems during the budgeting process. The four problems we’ll discuss are budgetary slack, goal incongruence, budget myopia, and standard setting.

Budgetary slack and goal incongruence occur when managers are not aligned with the business’s overall goals and objectives, while budget myopia happens when the business forgets to consider the impact of short-term decisions in the long run. Lastly, standard setting often poses a problem when standards are too high or ideal. Let’s discuss each of them in greater detail below.

Budgetary Slack

Sometimes, managers and heads can use budgets to preempt results to their favor. This unethical practice is called budgetary slack or budget padding. Budget slacks occur when managers underestimate revenue goals and overestimate expense goals and when the business follows the participatory budget involvement strategy.

When time for evaluation arrives, budget slacks will make the manager’s performance as exemplary. Managers tend to include budgetary slacks when top management is too strict and punitive whenever budgets aren’t met.

For example, the sales manager underestimates the sales forecast at $50,000 for the first quarter, knowing that they can achieve actual sales of $70,000. This example shows how budgetary slack can affect performance evaluation and create a false reflection of the company’s ability to generate revenue.

Goal Incongruence

Budgets are goals. When goals of management and employees don’t meet, the budget will not reflect the results that’s best for the business as a whole. Preventing goal incongruence enhances the quality of the budget. The goal of employees should be aligned with the business’s goals, and top management should provide opportunities for employees to pursue their career growth within the business.

Improper communication of business goals and ineffective leadership are the common causes of goal incongruence. As a small business owner or manager, you should show employees that you are committed to them with respect to their professional goals and that you expect them to align themselves with the business’s overall goals.

Budget Myopia

Budget myopia occurs when budgeting focuses only on short-term goals without considering how these goals will affect the company in the future. Managers become “myopic” in budgeting when they see budgets as measures for performance—they forget that the main objective of budgeting is to plan, organize, and manage the firm’s resources. As a result, budget realignments occur because there is a failure to plan future events.

Standard Setting

Another hurdle in budgeting is setting standards, which are tools for planning and controlling. If used inappropriately, they can cause problems in the budgeting process. It is important that you have to set your standards at a practical level.

Practical standards allow room for error or inefficiencies. It gives employees a chance to learn and improve their outputs without affecting performance. Unwise managers often impose ideal standards or standards that require optimum performance and perfection.

As a result, imposing ideal standards results in employee burnout, decreased productivity, and negative employee morale. Discouraged employees might also result in dysfunctional behavior that might be detrimental to the company.

Frequently Asked Questions (FAQs)

Why is budgeting important.

Budgets help in planning and managing business resources. Since plans and goals require an outflow of resources, budgets help the business determine the right amount of resources needed to achieve the goal.

Who should have an active participation in the budgeting process for small businesses?

The small business owner should have an active role in helping managers and supervisors craft their budgets. As the owner, you should guide your employees to align their goals with the business’ overall goals.

With our small business budget guide and template, you can create a small business master budget. We hope that the template will help you understand why budgeting is crucial to the planning, organizing, and controlling business operations.

About the Author

Find Eric Gerard On LinkedIn

Eric Gerard Ruiz, CPA

Eric is an accounting and bookkeeping expert for Fit Small Business. He has a CPA license in the Philippines and a BS in Accountancy graduate at Silliman University. Since joining FSB, Eric has used his expertise and authority in curating and writing content about small business accounting and bookkeeping, accounting software, financial accounting and reporting, managerial accounting, and financial management.

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Budgeting and business planning

Once your business is operational, it's essential to plan and tightly manage its financial performance. Creating a budgeting process is the most effective way to keep your business - and its finances - on track.

This guide outlines the advantages of business planning and budgeting and explains how to go about it. It suggests action points to help you manage your business' financial position more effectively and ensure your plans are practical.

Planning for business success

The benefits, what to include in your annual plan, a typical business planning cycle, budgets and business planning, benefits of a business budget, creating a budget, key steps in drawing up a budget, what your budget should cover, what your budget will need to include, use your budget to measure performance, review your budget regularly.

When you're running a business, it's easy to get bogged down in day-to-day problems and forget the bigger picture. However, successful businesses invest time to create and manage budgets, prepare and review business plans and regularly monitor finance and performance.

Structured planning can make all the difference to the growth of your business. It will enable you to concentrate resources on improving profits, reducing costs and increasing returns on investment.

In fact, even without a formal process, many businesses carry out the majority of the activities associated with business planning, such as thinking about growth areas, competitors, cashflow and profit.

Converting this into a cohesive process to manage your business' development doesn't have to be difficult or time-consuming. The most important thing is that plans are made, they are dynamic and are communicated to everyone involved. See the page in this guide on what to include in your annual plan.

The key benefit of business planning is that it allows you to create a focus for the direction of your business and provides targets that will help your business grow. It will also give you the opportunity to stand back and review your performance and the factors affecting your business. Business planning can give you:

• a greater ability to make continuous improvements and anticipate problems
• sound financial information on which to base decisions
• improved clarity and focus
• a greater confidence in your decision-making

The main aim of your annual business plan is to set out the strategy and action plan for your business. This should include a clear financial picture of where you stand - and expect to stand - over the coming year. Your annual business plan should include:

• an outline of changes that you want to make to your business
• potential changes to your market, customers and competition
• your objectives and goals for the year
• your key performance indicators
• any issues or problems
• any operational changes
• information about your management and people
• your financial performance and forecasts
• details of investment in the business

Business planning is most effective when it's an ongoing process. This allows you to act quickly where necessary, rather than simply reacting to events after they've happened.

• Review your current performance against last year/current year targets.
• Work out your opportunities and threats.
• Analyse your successes and failures during the previous year.
• Look at your key objectives for the coming year and change or re-establish your longer-term planning.
• Identify and refine the resource implications of your review and build a budget.
• Define the new financial year's profit-and-loss and balance-sheet targets.
• Conclude the plan.
• Review it regularly - for example, on a monthly basis - by monitoring performance, reviewing progress and achieving objectives.
• Go back to 1.

New small business owners may run their businesses in a relaxed way and may not see the need to budget. However, if you are planning for your business' future, you will need to fund your plans. Budgeting is the most effective way to control your cashflow, allowing you to invest in new opportunities at the appropriate time.

If your business is growing, you may not always be able to be hands-on with every part of it. You may have to split your budget up between different areas such as sales, production, marketing etc. You'll find that money starts to move in many different directions through your organisation - budgets are a vital tool in ensuring that you stay in control of expenditure.

A budget is a plan to:

• control your finances
• ensure you can continue to fund your current commitments
• enable you to make confident financial decisions and meet your objectives
• ensure you have enough money for your future projects

It outlines what you will spend your money on and how that spending will be financed. However, it is not a forecast. A forecast is a prediction of the future whereas a budget is a planned outcome of the future - defined by your plan that your business wants to achieve.

There are a number of benefits of drawing up a business budget, including being better able to:

• manage your money effectively
• allocate appropriate resources to projects
• monitor performance
• meet your objectives
• improve decision-making
• identify problems before they occur - such as the need to raise finance or cash flow difficulties
• plan for the future
• increase staff motivation

Creating, monitoring and managing a budget is key to business success. It should help you allocate resources where they are needed, so that your business remains profitable and successful. It need not be complicated. You simply need to work out what you are likely to earn and spend in the budget period.

Begin by asking these questions:

• What are the projected sales for the budget period? Be realistic - if you overestimate, it will cause you problems in the future.
• What are the direct costs of sales – i.e. costs of materials, components or subcontractors to make the product or supply the service?
• What are the fixed costs or overheads?

You should break down the fixed costs and overheads by type, e.g.:

• cost of premises, including rent, municipal taxes and service charges
• staff costs –e.g. wages, benefits, Québec Parental Insurance Plan (QPIP) premiums, contributions to the Québec Pension Plan (QPP) and to the financing of the Commission des normes du travail (CNT)
• utilities – e.g. heating, lighting, telephone
• printing, postage and stationery
• vehicle expenses
• equipment costs
• advertising and promotion
• travel and subsistence expenses
• legal and professional costs, including insurance

Your business may have different types of expenses, and you may need to divide up the budget by department. Don't forget to add in how much you need to pay yourself, and include an allowance for tax.

Your business plan should help in establishing projected sales, cost of sales, fixed costs and overheads, so it would be worthwhile preparing this first. See the page in this guide on planning for business success.

Once you've got figures for income and expenditure, you can work out how much money you're making. You can look at costs and work out ways to reduce them. You can see if you are likely to have cash flow problems, giving yourself time to do something about them.

When you've made a budget, you should stick to it as far as possible, but review and revise it as needed. Successful businesses often have a rolling budget, so that they are continually budgeting, e.g. for a year in advance.

There are a number of key steps you should follow to make sure your budgets and plans are as realistic and useful as possible.

Make time for budgeting

If you invest some time in creating a comprehensive and realistic budget, it will be easier to manage and ultimately more effective.

Use last year's figures - but only as a guide

Collect historical information on sales and costs if they are available - these could give you a good indication of likely sales and costs. But it's also essential to consider what your sales plans are, how your sales resources will be used and any changes in the competitive environment.

Create realistic budgets

Use historical information, your business plan and any changes in operations or priorities to budget for overheads and other fixed costs.

It's useful to work out the relationship between variable costs and sales and then use your sales forecast to project variable costs. For example, if your unit costs reduce by 10 per cent for each additional 20 per cent of sales, how much will your unit costs decrease if you have a 33 per cent rise in sales?

Make sure your budgets contain enough information for you to easily monitor the key drivers of your business such as sales, costs and working capital. Accounting software can help you manage your accounts.

Involve the right people

It's best to ask staff with financial responsibilities to provide you with estimates of figures for your budget - for example, sales targets, production costs or specific project control. If you balance their estimates against your own, you will achieve a more realistic budget. This involvement will also give them greater commitment to meeting the budget.

Decide how many budgets you really need. Many small businesses have one overall operating budget which sets out how much money is needed to run the business over the coming period - usually a year. As your business grows, your total operating budget is likely to be made up of several individual budgets such as your marketing or sales budgets.

Projected cash flow  -your cash budget projects your future cash position on a month-by-month basis. Budgeting in this way is vital for small businesses as it can pinpoint any difficulties you might be having. It should be reviewed at least monthly.

Costs  - typically, your business will have three kinds of costs:

• fixed costs - items such as rent, salaries and financing costs
• variable costs - including raw materials and overtime
• one-off capital costs - purchases of computer equipment or premises, for example

To forecast your costs, it can help to look at last year's records and contact your suppliers for quotes.

Revenues  - sales or revenue forecasts are typically based on a combination of your sales history and how effective you expect your future efforts to be.

Using your sales and expenditure forecasts, you can prepare projected profits for the next 12 months. This will enable you to analyse your margins and other key ratios such as your return on investment.

If you base your budget on your business plan, you will be creating a financial action plan. This can serve several useful functions, particularly if you review your budgets regularly as part of your annual planning cycle.

Your budget can serve as:

• an indicator of the costs and revenues linked to each of your activities
• a way of providing information and supporting management decisions throughout the year
• a means of monitoring and controlling your business, particularly if you analyse the differences between your actual and budgeted income

Benchmarking performance

Comparing your budget year on year can be an excellent way of benchmarking your business' performance - you can compare your projected figures, for example, with previous years to measure your performance.

You can also compare your figures for projected margins and growth with those of other companies in the same sector, or across different parts of your business.

Key performance indicators

To boost your business' performance you need to understand and monitor the key "drivers" of your business - a driver is something that has a major impact on your business. There are many factors affecting every business' performance, so it is vital to focus on a handful of these and monitor them carefully.

The three key drivers for most businesses are:

• working capital

Any trends towards cash flow problems or falling profitability will show up in these figures when measured against your budgets and forecasts. They can help you spot problems early on if they are calculated on a consistent basis.

To use your budgets effectively, you will need to review and revise them frequently. This is particularly true if your business is growing and you are planning to move into new areas.

Using up to date budgets enables you to be flexible and also lets you manage your cash flow and identify what needs to be achieved in the next budgeting period.

Two main areas to consider

Your actual income  - each month compare your actual income with your sales budget, by:

• analysing the reasons for any shortfall - for example lower sales volumes, flat markets, underperforming products
• considering the reasons for a particularly high turnover - for example whether your targets were too low
• comparing the timing of your income with your projections and checking that they fit

Analysing these variations will help you to set future budgets more accurately and also allow you to take action where needed.

Your actual expenditure  - regularly review your actual expenditure against your budget. This will help you to predict future costs with better reliability. You should:

• look at how your fixed costs differed from your budget
• check that your variable costs were in line with your budget - normally variable costs adjust in line with your sales volume
• analyse any reasons for changes in the relationship between costs and turnover
• analyse any differences in the timing of your expenditure, for example by checking suppliers' payment terms

Original document, Budgeting and business planning , © Crown copyright 2009 Source: Business Link UK (now GOV.UK/Business ) Adapted for Québec by Info entrepreneurs

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How to Master the Fine Art of Business Planning and Budgeting

Updated on: 5 January 2023

Starting a business is a challenging thing: you have to work hard and do your best to ensure its success. However, the work doesn’t end even when your business actually becomes operational. You still have to do so much more to ensure that it will keep on track.

Of course, it could be hard, especially for the beginners. It seems that you have to keep an eye on so many things and focus on so many urgent tasks every day that there isn’t any time left for business planning and budgeting. However, it is very important to find that time, because business planning and budgeting are actually one of the most important things for business success.

Why so? Because a plan allows you to get a better understanding of how you see your business, how you want to develop it, and so on. When you create a plan, you set targets that you want to achieve as well as define the ways of evaluating the success of your business.

Basically, planning gives you all the necessary tools that you can use to improve your business in the nearest future. However, this happens only when planning is done correctly.

What to Include in Your Annual Plan?

If you want to create a perfect business plan, you have to know what has to be included in it and how big it will be. Of course, there are no strict limitations to a size of a business plan as each business is different. However, if you are doing it for the first time, I recommend starting with a yearly plan: it is not too big and not too short.

A good annual plan has to include the following things:

• an executive summary
• a list of products and services you offer (or plan to offer this year)
• a detailed description of your target market
• a financial plan
• a marketing plan as well as a sales plan
• milestones and metrics
• a description of your management team

In order to write it in the best way possible, you need to spend some time thinking about the current status of your company as well as how it should look like by the end of the year. Describe your target market, think about the goals that have to be achieved this year, about the products and services that have to be launched.

Visualize the information to make it easier for you to see the whole picture (this is especially important for those, who don’t have much experience in planning). You can use charts, and different diagram types such as mind maps to visualize and organize your ideas and plans.

Try choosing a few main goals for your company and add them to the annual plan being as specific as possible: for example, if you want to increase your earnings, you should specify by how much (10%, 15%, etc.). It’s also good to think about the obstacles you might face and come up with some ways to minimize the potential risks that could occur.

Remember that while a business plan has to be specific and detailed when you write it, it shouldn’t remain static by the end of the year. No business is predictable enough for this to happen: you should understand it and prepare to act quickly, adding changes to a business plan if something unexpected happens.

Business Planning Cycle

As I said, typical business planning isn’t a static thing – actually, it’s a cycle that usually looks like this:

• You take some time to evaluate the effectiveness of your business. In order to do so, you should compare its current performance with the last year’s one – or with targets set earlier this year.
• Then you have to think about opportunities that might appear as well as the threats you might face.
• Remember about both successes and failures your business experienced throughout last year. Analyze them and think what can be done to repeat/avoid them.
• Think of the main business goals you would like to achieve and be sure to add them to the new annual plan (or edit the old one according to them).
• Create a budget.
• Come up with budget targets.
• Complete the plan.
• Be sure to review it regularly (every month, every three months, etc.), making changes if necessary.

Repeat the whole cycle.

Business Planning and Budgeting

When a business is still small and growing, it might seem unnecessary to plan its budget. However, it’s crucial if you want to avoid financial risks and be able to invest in opportunities when they appear.

Moreover, with the rapid growth of your business, you might find yourself in a situation where you aren’t able to control all the money anymore. Expansion of the business usually includes the creation of different departments responsible for different things – and each of these departments needs to have its own budget.

As you see, the bigger your business becomes, the more complicated it gets. While it’s okay to not control every cent by yourself, it is still up to you to make sure that your business keeps growing instead of becoming unprofitable. That’s why it’s so important to create a budget plan that allows you to understand the exact income your business brings by the end of the month and the amount of it, you are able to save or spend on different things.

It is important to remember that a business plan is not a forecast in any way. It doesn’t predict how much money you’ll make by the end of the year. Instead, it’s a tool for ensuring that your business will remain profitable even after covering all the necessary expenses.

Moreover, a business plan also ensures that you’ll have the opportunity to invest money into future projects, fund everything that has to be funded this year, and meet all of the business objectives.

Benefits of a Business Budget

The whole budget planning has a lot of benefits:

It allows you to evaluate the success of your business: when you know exactly how much profit your business gave you at the beginning of the year, you are able to compare it with the profit by the end of the year, understanding whether your financial goals have been met or not.

It allows managing money effectively: for example, if you save money for predicted one-time spends, you won’t be caught by surprise by them.

It helps identify the problems before they actually happen: for example, if you evaluate your budget and see that the income left after covering all the expenses is quite small, you’ll understand that you need to make more profit this year.

It helps make smarter decisions, by only investing money that you can afford to invest.

It allows you to manage your business more effectively, allocating more resources to the projects that need them the most.

It helps in increasing staff motivation.

Basically, when you have a budget plan ready, you have your back covered.

How to Create a Budget?

There are so many articles written on how to create a perfect business budget, but most of them narrow down to these 5 simple things:

• Evaluate your sources of income. You have to find out how much money your business brings on a daily basis in order to understand how much money you can afford to invest and spend.
• Make a list of your fixed expenses. These ones repeat every month and their amount doesn’t change. Some people forget to exclude the sum needed to cover these expenses from the monthly income, but it’s important to do so in order to get a clear understanding of your budget.
• Don’t forget about variable expenses. These ones don’t have a fixed price but still have to be paid every month. Come up with an approximate sum you’ll have to pay and include it in your budget.
• Predict your one-time expenses. Every business needs them from time to time, but if you plan your budget forgetting about these expenses, spending money on them could affect it greatly and not in a positive way.
• When you list all the income and expense sources, it’s time to pull them all together. Evaluate how much money you’ll have each month after you cover all these expenses. Then think of what part of that sum you could afford to invest into something.

While a whole process of budget creation might seem too complicated, you still should find time to do it. It’s totally worth the effort – moreover, such a plan could help you not only throughout the next month but also throughout the next year (if your expense and income sources won’t change much).

Of course, it’s still important to review it from time to time, making changes when necessary. However, the review process won’t be as complicated as the creation of a budget plan from scratch.

Key Steps in Drawing up a Budget

If you’ve never created a budget plan before, you could make some budgeting mistakes . However, when it comes to financial planning, the smallest mistake could have a negative impact. The following tips can help you easily avoid most mistakes, making your budget plan more realistic.

• Try to take it slow

The more time you spend on budgeting, the better it is for you. It’s hard to create a flawless budget plan quickly: there’s a big chance you might miss something. That’s why it’s vital to make sure that you’ve listed all the sources of your income and expenses, and are prepared well.

• You can use last year’s data

Last year’s data could help you see the whole picture better: you can compare it with this year’s data, finding out whether your income has increased or decreased. However, you should use it only for comparing and as a guide. You have new goals and resources this year, and the environment you’re working in has changed too, so your current planning and strategies should differ from the ones you used last year.

• Make sure that a budget is realistic

The most important thing about a budget plan is that it has to cover not only predictable expenses but also less predictable ones. Of course, making predictions is hard but using previous data along with some other business plans as examples could make the whole process easier.

A budget also has to be detailed: the information it contains has to allow you to monitor all the key details of your business, be it sales, costs, and so on. You could also use some accounting software for more effective management.

• It’s okay to involve people

If your business is big enough, you probably have some employees responsible for a part of the financial operations. It’s good to involve them in a budget creation process too, using their knowledge and experience to predict some expenses, for example. If the people you involve are experienced enough, the combination of their professionalism and your knowledge will make a budget more realistic and effective.

• Visualizing helps

Various charts and diagrams are so popular in business for a reason: they allow tracking your incomes and expenses easily. For example, you can create one chart based on your plan and another chart based on an actual budget and compare them during planned revisions to see whether your budget plan works just as expected or not.

As I mentioned above, it’s easier to control finances when you are running a small business. Such business needs only one budget that is created for a certain period – in most cases, for a year. Larger businesses, however, require something else. They have various departments, so it is better to create several budgets at once, tailoring each of them to a certain department’s needs.

Don’t Forget to Review!

I’ve already mentioned that a review is an important process of every business planning and budgeting. No matter how good your plan is, it is impossible to predict everything with 100 percent accuracy. Your business will grow and the environment around it will change, so the quicker you’ll react to such changes, the better it is for you.

That’s why you should schedule budget reviews from time to time. I recommend starting with reviewing it every month and then switching to a more comfortable schedule. Every month review can help you notice the flaws of your plan (which is especially important if you don’t have much experience in this kind of thing) as well as understand how stable your business is.

If you see that you don’t have to make changes often, you could start reviewing your plan every three or six months (however, I recommend doing it more often).

You can use various common diagrams to help you . The best thing about diagrams is that they help visualize data well, which is very important when you need to see the whole picture more clearly – and this happens often during budget planning. For example, a diagram or a chart of your company’s income can show you how much your finances have grown during a certain period. Moreover, if you notice certain downfalls in a chart (that aren’t predicted), you’ll be able to react to it quickly, fixing things that went wrong.

What do you need to consider during the whole review process? First, your actual income. Probably it will be different each month: every business has its own peak sales periods and drop sales ones, and you have to find them and remember them for more effective planning next year. It is important to check whether the income matches the one you predicted or not: if not, you have to find out why it happened.

Second, you have to evaluate your actual expenses. See if they differ from your budget, how much do they affect it, why they exceed your expectations (if they do), and so on.

Probably the best thing about reviewing is that it allows you to react to all the unexpected situations quickly, saving your business from the potential troubles and downfalls. So be sure not to skip it.

As you see, writing a business plan is a complex process. You have to be very attentive, to plan everything, starting with your goals and ending with your expenses, to consider so many things and to involve other people in planning if possible. Moreover, you also have to learn all the time, reviewing your plans, making changes, finding the ways to react to unexpected situations.

But while this might look like a tough thing to do, it is very convenient for everyone who wants to manage their business successfully. The planning takes a lot off your shoulders and makes the whole business running process easier. You are able to evaluate the effectiveness of your business by looking at the monthly income increase, at the goals you wanted to achieve, and so on. You are also able to predict the potential downfalls of your business and to use the tools you have to minimize all the risks.

You are able to evaluate the effectiveness of your business by looking at the monthly income increase, at the goals you wanted to achieve, and so on. You are also able to predict the potential downfalls of your business and to use the tools you have to minimize all the risks.

I hope that this guide will help you create strong and realistic budget and business plans, and successfully implement them in running your business. If you have some tips on business and budget planning that you want to share, please do so in the comment section below!

Author’s Bio:

Kevin Nelson started his career as a research analyst and has changed his sphere of activity to writing services and content marketing. Apart from writing, he spends a lot of time reading psychology and management literature searching for the keystones of motivation ideas. Feel free to connect with him on Facebook , Twitter , Google+ , Linkedin .

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.

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How to Create a Business Budget

Last Updated: November 18, 2021 Approved

This article was co-authored by Samantha Gorelick, CFP® . Samantha Gorelick is a Lead Financial Planner at Brunch & Budget, a financial planning and coaching organization. Samantha has over 6 years of experience in the financial services industry, and has held the Certified Financial Planner™ designation since 2017. Samantha specializes in personal finance, working with clients to understand their money personality while teaching them how to build their credit, manage cash flow, and accomplish their goals. wikiHow marks an article as reader-approved once it receives enough positive feedback. In this case, several readers have written to tell us that this article was helpful to them, earning it our reader-approved status. This article has been viewed 181,122 times.

Building a realistic budget is an effective way to help keep your business profitable. To create your budget, you'll need to make a revenue forecast, estimate your costs, and leave enough room for a reasonable profit margin. Don't worry though—it's easier than it sounds. Our how-to guide will walk you through the simple steps of creating your own financial plan, even if you're a total beginner to budgeting!

Understand the Basics of Budgeting

• For example, assume your business is planning for next year. A budget will outline your estimated revenues, and then include a plan for expenses that is less than those revenues, so that you can earn a profit.
• A balanced budget means your revenues are equal to your expenses. A surplus means your revenues exceed expenses, and a deficit means expenses exceed revenues. As a business, your budget should always strive to be in a surplus state.

• A budget should guide every single business expenditure. For example, if you realize midway through a year that your business desperately needs updated computers, you can consult your budget to see how much estimated surplus revenue you will generate for the remainder of the year. You can then explore costs for computer upgrades and see if that fits within the surplus figure while allowing you to earn a profit, or alternatively, if you have the additional revenue to support taking out a loan for the computers.

• Sales: Sales refer to how much total money your business brings in from all sources. A budget will involve an estimate or forecast of your future sales.
• Total costs: Total costs are what it costs your business to generate your sales. These include fixed costs (like rent), variable costs (like materials used to make your products), and semi-variable costs (like salaries).
• Profits: Profits are equal to revenues minus total costs. Since profit is the goal of business, your budget should include expenses that are low enough to earn you a decent return on your investment.

Forecasting Revenue

• Remember that revenue forecasts are rarely accurate. The point is to provide the best possible estimate using the knowledge you have. [6] X Research source
• Always be conservative. This means assume you will receive sales volumes and pricing on the low end of the possible range.

• For example, assume you are opening a therapy practice. Therapists in your region may charge $100 to $200 per hour. Compare your qualifications, experience, and service offerings to your competition, and estimate your price. You may decide $100 is wise.
• If you offer multiple products and services, make sure to research prices for those too.

• Do you have any customers or contracts lined up? If so, include these. You can then assume referrals from customers and advertising will add to these volumes over the year.
• Compare to existing businesses. If you have colleagues who have established businesses, ask them what their volumes were like early on. For a therapy practice, your colleagues may tell you during their first year they averaged about 10 client hours a week.
• Look at what drives sales volumes. If you are opening a therapy practice, for example, your reputation, referrals, and advertising will bring in people. You could decide that based on these resources, one new client every two weeks is reasonable. You could then go further and make an estimate that each client will pay for one hour a week, and last for an average of six months.
• Once again, remember that revenue forecasts are purely estimates.

• Look at pricing. Do you have reason to believe your prices will increase or decrease?
• Look at volume. Are more people going to be purchasing your product or service? If your business has been growing by 2% annually, you can assume the same for the following year if no significant changes have occurred. If you plan on aggressively advertising, you could bump that up to 3%.
• Look at the market. Is your market growing? For example, imagine that you run a coffee shop in a downtown neighborhood. You may be aware that the neighborhood is rapidly growing due to new people moving in. This could be reason to add to your growth forecast.

Creating the Budget

• Contact an accountant if you are having difficulties. Chartered Professional Accountants in the UK and Certified Public Accountants (CPAs) in the US are trained to advise businesses in the area of budgeting, and for a fee they can assist you in any aspect of the budget creation process.
• A simple online search of "business budget template" can yield thousands of results. You can even find custom templates for your particular type of business.

• Research online or ask a financial adviser what the typical margins for your kind of business should be.
• If 10% is typical for your business, you know that if you are forecasting $100,000 of revenues, your expenses should equal no more than $90,000.

• Add up all these costs to get an idea of your fixed costs for the next year.
• If you have past financial data, use these fixed costs and adjust them for any rent increases, bill increases, or new costs.

• This will vary depending on how much you sell, which is why it is known as a variable cost. You can use your revenue forecast to determine this. For example, if you estimate you will sell 12 cars in your first year, your inventory costs will be the cost to purchase 12 cars.

• Add up all your estimated semi-variable costs.

• Are your total costs less than your revenues?
• Do your total costs provide a profit margin greater than or equal to your target?
• If the answer to either of these questions are no, you will need to look into making cuts. To do this, look at all your costs, and examine what you can do without. Labor costs are one of the most flexible areas to find savings (though you risk upsetting your employees when you cut hours). You can also look into finding a location with lower rents, or reducing utilities costs.

Expert Q&A

You Might Also Like

• ↑ Samantha Gorelick, CFP®. Financial Planner. Expert Interview. 6 May 2020.
• ↑ http://www.investopedia.com/terms/b/budget.asp
• ↑ http://www.inc.com/encyclopedia/businessbudget.html
• ↑ http://www.entrepreneur.com/article/76418
• ↑ http://articles.bplans.com/how-to-forecast-sales/
• ↑ http://www.investopedia.com/terms/s/semivariablecost.asp

About This Article

To create a business budget, start by forecasting your yearly expenditures. To do this, add together fixed costs like rent, insurance, and property taxes. Then, add variable costs like inventory purchases and semi-variable costs like internet packages or employee salaries. Compare this number to your forecasted yearly revenue, which you can determine by comparing to last year’s revenue, or if you’re a new business, by doing market research to figure out what similar businesses make in a year. If your revenue is lower than your expenditures, figure out places you can cut from your budget. To learn how market forecasting can help give you an accurate estimate, keep reading! Did this summary help you? Yes No

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7 free small business budget templates for future-proofing your finances

As a small business owner, you're likely balling with a lot more than your personal checking account. If you don't properly manage your business finances, there's more on the line than an overdraft fee—you now have an entire organization to account for.

Small business budgets are necessary to balance revenue, estimate how much you'll spend, and project financial forecasts, so you can stay out of the red and keep your business afloat.

But creating a small business budget template isn't a small task. Since I don't have a business to run, I did the heavy lifting for you—check out these free, downloadable templates for your small business budgeting.

Table of contents:

2. Overhead budget template

3. multiple-project budget template.

4. Startup budget template 

5. Labor budget template

6. cash flow budget template, 7. administrative budget template, periodic budget reviews, how to design your small business budget plan, small business budget faq, 1. static budget template.

Best for: Multiple departments or revenue streams; Industries with complex operations

A static budget combines all the function-specific budgets a business uses into one. Typically, a static budget includes the following items (plus any other budgets your business might use):

Cash flow projections: Estimations of how much money will flow into and out of your business. They also help you decide when, how, and what you should spend money on.

Total expected spending: All estimated expenses, including labor and administrative costs. 

By integrating all of your budgets and projections, the static budget provides a full picture of your business's estimated expenses and financial strategy for the upcoming fiscal year. 

Best for: Service-based businesses

It's easy to forget about expenses that aren't directly tied to production, like delivery charges or utilities. But these costs exist (and can add up quickly), so you need an overhead budget. A detailed overhead budget template will include:

Administration expenses

It compares your budgeted amount to actual figures (warning: it may be a rude awakening) and can help improve accuracy for future financial planning. 

Predicting overhead spending helps you plan how to use other funds more practically too—if you know how much you'll spend on overhead, you can make better business decisions. For example, you'd know whether you can afford to invest money into other initiatives like adding a delivery service or upgrading equipment.

Best for: Project-based industries

If you're managing multiple projects like website development or event planning, each with its own budget and expenses, you need a multiple-project budget to help keep your head on straight. This type of budget will help you track the following items per project:

Product-by-product COGS (cost of goods sold)

Labor costs

Equipment and resource costs

Indirect project expenses like travel

A multiple-projects budget establishes estimates for everything you need to get projects across the finish line. It also lets you track costs to ensure you're not spending more than you accounted for in the budget.

4. Startup budget template

Best for: New small businesses and startups

Startups need to ensure financial success from the get-go, so they can reinvest profit into the business and potentially attract more investors. 

But unlike established small businesses, you don't have past financial data to base expenses on. That's why you need a startup budget to focus on expenses for your first year of business, including items like:

Funding from investors and loans

Licensing and permits

Logo and website design

Website domain

Business software

Security installation 

Overhead expenses

Capital expenses

Best for: Larger businesses with lots of employees

Unless you're a one-person show, you'll need a labor budget. And even if you are a one-person show, it's good to know if you can afford to pay yourself. A labor budget breaks down all employee-related costs like: 

Payroll taxes

Contract labor

Break down employee costs into direct, indirect, fixed, and variable categories to clarify how your company allocates its resources. You can also consider different scenarios more easily when you understand the breakdown of labor costs.

For example, you can simulate the impact of adding or reducing staff in specific departments or assess the effects of different compensation structures on different teams.

An accurate forecast of labor costs ensures you can sustainably meet your staffing needs and can help you make informed hiring decisions. Down the road, it can also help you determine if you can afford to give your staff raises, bonuses, or additional benefits.

Best for: Businesses with fluctuating income and expenses; Seasonal businesses; Retail

As important as it is to be mindful of how much money you're spending, you should also track how much money you're making . A cash flow budget helps estimate how money is flowing in and out of your business. It includes:

Starting balance (set at the beginning of the month, quarter, or year)

Projected cash inflow from all revenue streams

Estimated cash expenditures

Ending balance (calculated at the end of the month, quarter, or year)

This type of budget lets you proactively manage your resources, anticipate potential cash shortages, and strategize for growth. For instance, if you know you're only going to break even this year, you may wait on expanding or making a large investment. 

Best for: Businesses focused on streamlining operations

An administrative budget includes all those general expenses that the company as a whole needs to function. This type of budget accounts for: 

Depreciation expenses

Training and development

Communication expenses

Accounting fees

While you could technically include administrative expenses in an overhead budget and call it a day, a separate administrative budget gives more of an eagle-eye view of how well your business is operating. 

Without an eye on administrative costs, you may be spending unnecessarily or lose focus on areas where it'd be wiser to invest your money. In other words, you could be spending way too much on fancy pens when you should be saving up to upgrade your cash register. 

A budget isn't a "set it and forget it" deal. Regular budget reviews can help you stay on track with your financial goals and respond proactively to changing market conditions. 

You should compare your estimated budget to actual spending. Then you can see where you went over and where you can splurge more. Try to review your budget monthly, quarterly, and yearly.

Monthly: Compare actual performance against your budgeted figures for the month. Identify any deviations and look for insights into cash flow, sales trends, and expense management.

Quarterly: Dive deeper into performance over the last three months. Use trends to project revenue and expenses for the upcoming quarter and identify areas for improvement.

Yearly: Reflect on your long-term financial objectives for the fiscal year. Assess the effectiveness of your budgeting strategies, and set new budget targets for the upcoming year. 

It's cliched but true: you gotta spend money to make money. But that's no excuse to start throwing cash at your business willy-nilly.

Budgeting forces you to prioritize your objectives, so you spend money on the things that matter most. Here's how to create a small business budget in four steps:

Identify your working capital for the budgeting period. Add up your current assets like cash, accounts receivable, and inventory. Then subtract current liabilities like accounts payable and short-term debt. The remaining amount is what you have left to cover your operational expenses during the budgeting period.

Separate business and personal expenses. If you haven't already, open a dedicated business bank account. This makes it easier to track, categorize, and analyze your finances.

Determine your fixed and variable costs. Make a list of costs that stay the same every month (fixed costs) and what changes (variable costs). These will change based on the purpose of the budget. For instance, a labor budget will only consider employee-related costs.

Calculate your total expenses. Add up all the costs for your business, including fixed costs, variable costs, labor, and any other applicable expenses. This total is how much your business needs to run. Any leftover money from your working capital can be allocated toward other business investments. 

Budgeting methods

If you've budgeted before and hated it, you may just have been using an ineffective budgeting method for your preferences. Here are a few budgeting methods to try instead: 

Traditional: This budget is set for a determined amount of time and uses last year's numbers as a benchmark. Once you set your budget, you don't change it unless you get approval for an adjustment.

Rolling: This dynamic approach spans a continuous time frame instead of a fixed time period. As each month or quarter passes, you add a new budget period and drop the oldest period. This lets businesses adjust projections based on real-time performance and market conditions.

Flexible: This budget changes along with your sales forecast. As real-time sales activity deviates from budgeted amounts, you recalculate the budget to reflect the new data. 

Still don't know where to start with your small business budget? Check out the answers to these common questions before you open a new Google Sheet.

What should a business budget include?

A business budget should include all income sources and expenses. Income sources could include projected revenue from sales, loans, or potential investor funding. Expenses may include items like office space rent, employee salaries, insurance, and marketing. Add anything that helps paint a full picture of your finances.

How much does the average small business startup cost?

The average small business startup costs $40,000 in its first year of business. But this will absolutely vary depending on your type of business, unique expenses, and cash income. For instance, there are multiple types of businesses you can start with $10,000 or less.

What is the best free business budgeting software?

The best free budgeting business software will depend on what your business needs, but you can try apps like Mint or Wave. Or you can use a spreadsheet—scroll up for some free small business budget templates.

Automate your small business

Knowing when or where to invest money into your business is just one of the many tasks you have on your plate as a small business owner. Learn how automation for small businesses can help take some of those recurring tasks off your hands, so you can focus on growing your business. 

Related reading:

The best free small business software

The best CRMs for small businesses

How to create effective document templates

21 free Google Sheets templates to boost productivity

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Cecilia Gillen

Cecilia is a content marketer with a degree in Media and Journalism from the University of South Dakota. After graduating, Cecilia moved to Omaha, Nebraska where she enjoys reading (almost as much as book buying), decor hunting at garage sales, and spending time with her two cats.

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Free Small-Business Budget Templates

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A business budget template is one of the most important tools you can use to run your small business. However, many small-business owners skip this vital business management step.

The misconceptions surrounding budgeting are plenty. It seems complicated and time-consuming. But with a good business budget template, the process can be much less daunting.

An effective small-business budget template is a living document. Creating a budget and then forgetting about it is wasted effort. You must compare your actual numbers against your budgeted numbers regularly.

Therefore, your budget should be easy to access and adjust on an ongoing basis. But you don’t have to spend a lot of money on business budgeting software , if you don't want to. There are several free small-business budget templates available online.

QuickBooks Online

Why you need a business budget template

A business budget template is an essential tool for business owners who want to take care of their bottom line. Why should you invest in a smart template from the start?

Here's how a business budget template can set you up for success:

Track cash flow, expenses and revenue.

Prepare for regular business slowdowns.

Allocate your budget to the portions of your business that need capital most.

Plan for business investments and purchases.

Project all costs to starting and running your business.

Generally speaking, your business budget template can act as a business health scorecard if you invest in setting one up properly. Here's our list of the best budget templates available so you can do just that.

Capterra’s Free Small-Business Budget Template

The Capterra small-business budget template has been a fan favorite since it was published in 2015. In this one simple Excel workbook, you can create your monthly budget, your annual budget and then compare your actual numbers to your budgeted numbers. It also has a convenient overview sheet, which gives users access to their performance at a glance.

To help you through the process, Capterra has included a detailed Instructions tab, which walks you through how to use the template step by step. Start here to save yourself hours of time and frustration. As a bonus, there are several resources linked on the Instructions tab to help you create the perfect budget for your small business.

PDFConverter.com 15 Best Budgets

Rather than one bloated Excel workbook that tries to do everything, PDFConverter.com has compiled a library of 15 small-business budget templates.

These templates cover a wide range of budgeting needs, from a basic overview of your business income and expenses to marketing budget templates. The startup budget template is ideal for newbie entrepreneurs still in the planning stage of their businesses. And the cash flow template is perfect for identifying and plugging cash flow leaks.

Annual Business Budget in Google Sheets

Do you love all things Google? You can create a comprehensive budget for your small business right from Google Sheets. Simply navigate to your Sheets and then click on Template Gallery . Our friends at Intuit QuickBooks have created an annual business budget you can use for free.

To fully appreciate the power of the template, review the Summary tab after you have entered your budget figures. The tables and graphs on this tab offer a visual representation of your income and expenses, making it easy to see where you stand at a glance.

Microsoft Office Template

This beautiful template from Microsoft Office focuses exclusively on expenses, but it does that job exceptionally well. There are tabs for planned and actual expenses, a tab for automatically calculated variances between the two and an expense analysis tab complete with pie charts.

Your accounting software

While not a free template per se, you likely have a powerful budgeting tool available right inside your business accounting software . Though not as flexible as a separate template, there are many advantages to using the budgeting feature of your accounting software.

The budgeting feature in your accounting software will coincide with your chart of accounts. Depending on the software you use, you can create a budget to actual comparison reports with the click of a button, making analysis a cinch.

Some software programs even let you set multiple budget scenarios and have “cloning” features, which simplify the budgeting process after the first year.

Designing your budget

Now that you’ve chosen your business budget template, it’s time to start designing your budget. This is where many small-business owners procrastinate because people typically see budgeting as restrictive or punishing.

It's time to shift your perspective on budgeting. Most people start with income and tinker with their expense amounts until they arrive at a balanced or surplus budget. This method usually leads to unrealistic projections and ends in frustration.

Instead of a top-down approach, consider “reverse engineering” your budget by following these four simple steps:

Form your income projections and write those down outside of your budget template. Put this paper or spreadsheet away until after you have completed the next step.

Enter your expenses into your budget template. Be very honest in your entries and include everything. Going through several months’ or even a year’s worth of accounting data or bank and credit card statements will ensure you capture all your spending. This is not the step where you want to try to eliminate expenses. Record everything, only excluding expenses you have already eliminated from your monthly or annual spending.

Enter your income from the projections you formed in step 1.

Review your budget. If your budget shows a projected loss, analyze your expenses and identify areas where you can reduce spending.

This approach makes sure you avoid the temptation of forcing your budget to balance. While you do want your budget to balance — or better, to show a cash surplus — having unrealistic income or expense numbers will lead to frustration and resistance during the budgeting process.

Monthly or quarterly, compare your actual income and expense numbers to your budgeted numbers. Regular tracking helps identify financial pitfalls before they become unmanageable.

Frequently asked questions

How do i make a budget template.

You can create a small-business budget template from scratch by using free software like Microsoft Excel or Google Sheets. However, it’s often more efficient to download a template (see our list above). A template with built-in tables and formulas makes plugging in your revenue and expenses and calculating your profit or loss quick and straightforward.

What is included in a small-business budget?

Your small-business budget will include your revenue, expenses and your profit or loss. Each section will be broken into subcategories. For example, under revenue, you might have sales and income from sponsorships. Expenses might be broken down into rent, employee salaries and marketing. After you tally your revenue and expenses, you can then calculate your profit and loss statement.

How much should a small-business budget be?

A budget will vary by your business and industry. For example, you can potentially start a social media consulting business for less than $5,000. But a food truck business may necessitate a budget of at least $50,000. You must tailor your small-business budget to your unique needs.

On a similar note...

Business Plan Budget Example: Everything You Need to Know

A business plan budget example is smart to have when managing a company. 3 min read updated on February 01, 2023

A business plan budget example is smart to have when managing a company. It sets the outline for how much money you'll spend in your business and what you'll spend it on. This isn't a forecast, however, which is where you predict the future of your budget. A budget is the assumed plan for the future's outcome.

Is Budget and Business Planning Required for Small Businesses?

New owners of small businesses can run their company in a way that's more relaxed and not find it necessary to set a budget. However, it is a smart idea to have a plan for the future of your business and fund those plans. The best way to control your money is by budgeting, which lets you invest in any potential new business opportunities when it's appropriate. If you find your company grows, you won't always be able to interact with it as much and be hands-on with the daily operations.

You might need to split the budget up into different sections such as production, sales, and marketing. It's common for money to begin in a variety of directions through the organization. Budgets are an essential tool to help you control how much you're spending.

Benefits of Business Budget Planning

There are many benefits to creating a business budget . These include being better at the following:

• Planning for the future.
• Improving decision-making.
• Monitoring performance.
• Effectively managing money.
• Giving out the right resources to projects.
• Meeting your objectives.
• Solving problems before they become bigger.
• Increasing staff motivation.

How to Draft a Business Budget Plan

The key to having success in a business is to form, monitor, and manage your budget. This will help you designate resources where you need them so your company stays successful and profitable. The process doesn't necessarily need to be complicated, as you'll just need to figure out how much you think you'll earn and make in your budget period. You can start by asking yourself what the project sales might be for your budget period. It's better to be realistic and not overestimate, as this will cause issues in the future.

You'll also need to think about any direct costs of sales. This includes the costs of materials, subcontractors, and components to make your product or supply your service. The overhead costs or fixed costs also need to be included in the business budget. You can break these down by the cost of the premises, which include municipal taxes, monthly rent, and service charges. The staff costs also need to be taken into consideration, which includes benefits, wages, insurance, and pension plans.

Utilities are another expense to budget for , which include lighting, heating, and telephone costs. If you'll be printing or shipping anything, you'll have to factor in costs for postage, stationery, and printing. There may be costs for promotion, advertising, vehicles, equipment, and subsistence and travel expenses. The exact expenses your company will have will vary, and it's best to budget for each department. Make sure to include how much you'll pay yourself and a tax allowance. There are many costs to consider that you probably haven't thought about, which is why creating a business plan for your budget is important.

Once you have an estimate of how much you'll make and how much you'll spend, you'll be able to figure out exactly how much profit you're making. This lets you look at the budget you just made and see where costs can be cut. If you think you'll have problems with cash flow, you may need to rethink the budget and cut out entire departments.

Once you've created this budget, it's important to stick it as closely as possible. You should review it on a continuous basis and revise it if you need to, however. Many businesses have a rolling budget so they're constantly budgeting for the next year.

It's crucial to be realistic when it comes to your budget projects. If you're unsure if they're accurate, it 's better to be conservative and underestimate the revenue while overestimating the expenses. This can be hard if you're just starting a company, as you may not know exactly how much you'll need to spend on items and services.

If you need help with a business plan budget example, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Hire the top business lawyers and save up to 60% on legal fees

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• How to Start a Business: A Comprehensive Guide for Entrepreneurs
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Free Small Business Budget Templates

By Andy Marker | August 12, 2020

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We’ve compiled the most useful free small business budget templates in Microsoft Excel and Google Sheets formats, and also provided helpful details for filling out these templates. 

Included on this page, you’ll find many useful small business budget templates, including a simple small business budget template and a business budget template . Plus, discover why you need a small business budget template , and how to create a small business budget template .

Small Business Budget Template

Use this small business budget template to track and manage your business’s finances. This  easy-to-fill template includes a sheet for month-by-month income, another sheet for tallying monthly expenses, and a third sheet for recording cash flow balances that factors in credit and debit cashflow balances. Easily track and view monthly income and expenses to calculate total profits. The completed budget will help you gauge how close you are to reaching your financial goals. 

For more on small business templates, see “ Free Business Templates for Organizations of All Sizes .”

Download Free Small Business Budget Template - Excel

Business Budget Template

This detailed, all-in-one budgeting template is a perfect fit for small business owners who want  to keep tabs on the financial health of their company. The template includes columns for labor hours, rate, materials, unit costs, and budgeted and actual figures for tallied over/under figures. Use the template to easily compare budgeted amounts to actual expenses for greater insight into how well you’re meeting your budget. 

For more on business budget templates, see “ Free Business Budget Templates for Any Company .”

Download Business Budget Template - Excel

12-Month Business Budget Template

Track your small business’s month-by-month financials with this easily fillable 12-month business budget template. The template includes profit and loss category rows for cost of goods sold (GOGS), sales and marketing costs, labor costs, and earnings before interest and taxes (EBIT). You can also factor in cash, inventory, accounts receivable, net fixed assets, and long-term debt to gain month-by-month, quarterly, and annual insight into your business’s time-sensitive budget.

Download 12-Month Business Budget Template - Excel

Business Budget Template for Multiple Products

Use this customizable template to track single or multiple-project budgets to get a comprehensive picture of your company’s financials. This business budget template for multiple projects allows you to factor in business income (actual vs. budgeted), product-by-product COGS figures, and gross profit (non-operating income) so you can quickly tally your total adjusted income. Enter operating expenses to see your company’s financial position and how close you are to reaching your goals. 

Download Business Budget Template for Multiple Products - Excel

For more operating budget templates, refer to our collection in this article .

Annual Business Budget Template

Get a yearly checkup on your company’s financial health with this annual business budget template. Use the income sheet to enter your sales figures (fees billed, commission income, service income, etc.), and compare those numbers to individual entries on an expenses sheet (COGS, travel, insurance, etc.). Plus, use the summary sheet to see an overview of your spending, based on income vs. expenses. The completed template will show you how close you are adhering to your budget and can help you determine any clarifications or adjustments. 

Download Annual Business Budget Template - Excel For more annual business budget templates, see our article “ Free Annual Business Budget Templates ”.

Business Expense Budget Template

For an expense-by-expense, detailed drilldown of your small business’s expenditures — and how they affect your company’s budget — this template features a planned expenses sheet that totals your projected employee, office, marketing, training, and travel costs, and compares these against a sheet of your actual expenses. Use the third expense variance sheet to inspect the variance between the two (planned vs. actual), and the expense analysis sheet to gain a dashboard view, so you can analyze your organization’s overall financial health.

Download Business Expense Budget Template - Excel

Professional Business Budget Template

Use this professional business budget template to make informed decisions about how projected and actual expenses affect your company’s bottom line. Enter employee and operations expenses on one sheet, compare them to actual expenses on a business expense actual sheet, and then inspect the variances and any discrepancies. A professional business analysis sheet provides a comprehensive analytical overview so you can see where you need to make adjustments to help your company meet its financial goals. 

Download Professional Business Budget Template - Excel

If you are looking for budget templates for nonprofits, check out  this article  for a vast variety of budget templates suitable for any nonprofit organization. 

Startup Budget Template

Designed with simplicity in mind, this single-sheet, startup budget calculator features a single dashboard view on your business expenses. Use the template to easily compare projected and actual expenses, and use the first-year budget calculations section to gain immediate insight into projected average monthly costs, based on budgeted and actual income and expenses. Factor in small business expenses, such as office space, loans, and marketing costs, to ensure your company is financially successful from the get-go. 

Download Start-up Budget Template - Excel

For more startup budget templates, see “ Free Startup Budget Templates ”.

Why You Need a Small Business Budget Template

A small business budget template is a reliable tool that enables you to calculate expenses, revenue, and profits to see how close you are to reaching your organization’s financial goals. You can also use a template to factor in unexpected costs and revenue to determine which expenditures to trim in order to keep the company’s profitability on track. In short, a small business budget reveals additional opportunities and possible revenue streams. 

A small business budget template provides a clear, autotallied, factor-by-factor picture of a company’s estimated capital vs. the reality of expenditures. Simply enter the following details: 

• Planned Expenses: These include employee costs (wages and benefits), office costs (lease, utilities, etc.), and other known payments.
• Additional Costs: These costs might include marketing, legal fees, training, and travel. 
• Actual Costs: This refers to how much items actually cost (compared to planned expenses). 
• Planned Income: This includes anticipated income from sales, services, investors, etc. 
• Actual Income: This refers to the actual income (compared to planned income). 

Once you enter the above budget details, use the template to inspect the variances between the projected budget and the actual numbers to track your business’s finances and make any necessary adjustments.

How to Create a Small Business Budget Plan

A small business budget allows you to plan for expenses and analyze anticipated income against actual income. When creating a small business budget, consider the following factors: 

• Specify Fixed and Variable Costs: Determine all fixed and variable costs involved in running your small business, such as office space, equipment, employee wages, insurance, and training. 
• Factor in Cost of Goods: Enter the cost of goods (COGS), which includes beginning inventory, shipping charges, and related labor. 
• Estimate Your Income: Calculate the income you expect to earn, whether it is from existing capital, investors, or projected profits. 
• Analyze Your Profit Margin: Compare the variance between projected costs and actual costs — as well as projected income compared to actual income — to determine how close you are to meeting financial goals. 
• Adjust Your Budget: Update your budget as needed, once you see how estimates compare with actual income and expenses.

We’ve also compiled the most useful free budget proposal templates for organizations, project managers, grant writers, researchers, team members, and other stakeholders. 

Discover a Better Way to Manage a Small Business Budget and Finance Operations

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When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time.  Try Smartsheet for free, today.

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Why Is Budgeting Important in Business? 5 Reasons

• 06 Jul 2022

There are few skills as critical to running a business as budgeting. Yet, over half of the executives surveyed in a 2019 McKinsey study report feeling dissatisfied with the transparency surrounding their organizations’ budgets.

Any employee—especially managers—should understand budgeting and how it can profoundly impact an organization.

Here’s a primer on the importance of budgeting in business.

Access your free e-book today.

What Is Business Budgeting?

Budgeting is the process of preparing and overseeing a financial document that estimates income and expenses for a period. For business owners, executives, and managers, budgeting is a key skill for ensuring organizations and teams have the resources to execute initiatives and reach goals.

A basic budget consists of projected income and expenses for a given period (for instance, the upcoming quarter or year). After expenses are subtracted from projected income, the leftover money can be allocated to projects and initiatives, ensuring you’re not planning to overspend.

Budgets from previous periods can be compared to the company’s actual financial allocation and performance, giving an idea of how close predictions were to actual spend.

For example, imagine you allocated $10 million for your company’s annual corporate social responsibility (CSR) project. Unforeseen circumstances caused it to run $1 million over budget, and that money had to come out of other projects’ budgets.

During the project’s postmortem, you ask questions like, “Why did we run over budget? Was this an issue of inefficiency or misallocation?” When creating the budget for next year, you use those insights to tighten the process and keep the project’s spend at $10 million or more accurately allocate funds to other projects.

Types of Budgeting

There are several budgeting types that each prioritize different factors when approaching a financial plan. These include:

• Zero-based budgeting , which sets each item at zero dollars at the start of periods before reallocating
• Static budgeting or incremental-based budgeting , which uses historical data to add or subtract a percentage from the previous period to create the upcoming period’s budget
• Performance-based budgeting , which emphasizes the cash flow per unit of product or service
• Activity-based budgeting , which starts with the company’s goals and works backward to determine the cost of attaining them
• Value proposition budgeting , which assumes no line item should be included in the budget unless it directly provides value to the organization

The right budgeting type varies by company and situation. If your organization is in financial distress, the zero-based method may be the best fit, as it starts from scratch each period. Trying out several methods is a good way to determine which is ideal; when doing so, ensure your entire organization is aligned.

Related: 6 Budgeting Tips for Managers

Why Is Budgeting Important?

Budgeting involves number-crunching, attention to detail, and making informed decisions about fund allocation—but it’s well worth the effort. Here are five reasons budgeting is important in business.

1. It Ensures Resource Availability

At its core, budgeting’s primary function is to ensure an organization has enough resources to meet its goals. By planning financials in advance, you can determine which teams and initiatives require more resources and areas where you can cut back.

If, for instance, your team needs to hire an additional employee to scale efforts, budgeting for that in advance can allow you to plan other spending.

2. It Can Help Set and Report on Internal Goals

Budgeting for an upcoming period isn’t just about allocating spend; it’s also about determining how much revenue is needed to reach company goals.

You can use budgeting to set company-wide and team financial goals that align with them. This is especially prominent when using activity-based budgeting, but it’s beneficial no matter which type you use.

Financial goals should be attainable enough that you count on them to inform the rest of your budget allocations. Your goals inform the expenses needed to reach them and vice versa.

You can also use budgeting to update employees on progress and revisit the next period’s goals. For instance, if your company aimed to gain 10,000 new users this past year but fell short by 4,000, what could you have done differently? Does the initiative require fund redistribution? What resources could have propelled progress?

Tracking progress, or lack thereof, allows you to align your team and plan for growth in the next period.

3. It Helps Prioritize Projects

A byproduct of the budgeting process is that it requires prioritizing projects and initiatives. When prioritizing, consider the potential return on investment for each project, how each aligns with your company’s values, and the extent they could impact broader financial goals.

The value proposition budgeting method forces you to determine and explain each line item's value to your organization, which can be useful for prioritizing tasks and larger initiatives.

4. It Can Lead to Financing Opportunities

If you work at a startup or are considering seeking outside investors , it’s important to have documented budgetary information. When deciding whether to fund a company, investors highly value its current, past, and predicted financial performance.

Providing documents for previous periods with budgeted and actual spend can show your ability to handle a company’s finances, allocate funds, and pivot when appropriate. Some investors may ask for your current budget to see your predicted performance and priorities based on it.

5. It Provides a Pivotable Plan

A budget is a financial roadmap for the upcoming period; if all goes according to plan, it shows how much should be earned and spent on specific items.

Yet, the business world is anything but predictable. Circumstances outside your control can impact your revenue or cause priorities to change at a moment’s notice.

Consider the onset of the coronavirus (COVID-19) pandemic in 2020. The economic impact of travel bans, lockdowns, and other safety precautions was far-reaching and unexpected. Executives were forced to quickly—yet thoughtfully—rework budgets to account for major losses and newfound safety concerns.

More than two years later, executives are rethinking their budgeting procedures to make it easier to pivot if needed. One shift noted by McKinsey is the turn toward zero-based budgeting to determine the minimum resources necessary to survive as a business—should the circumstances call for it.

A budget gives you a plan; maintaining an agile mindset enables you to pivot that plan and help lead your organization through turbulent times.

Learn to Budget Effectively

Anyone can learn to budget effectively and reap the benefits. To build a foundation of financial literacy , gain a deeper understanding of the levers that impact an organization’s finances, and discover how budgeting can enable you to become a better leader and manager, consider taking an online financial accounting course .

Do you want to take your career to the next level? Explore Financial Accounting —one of three online courses comprising our Credential of Readiness (CORe) program —which teaches the key financial topics needed to understand business performance and potential. Not sure which course is right for you? Download our free flowchart .

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What Is a Budget?

Understanding budgeting, corporate budgets, personal budgets.

• Budgeting Myths

Budgeting Concepts

Sticking to a budget.

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The Bottom Line

• Budgeting & Savings

What Is a Budget? Plus 10 Budgeting Myths Holding You Back

A budget refers to an estimation of  revenue and expenses that's made for a specified future period of time. Budgeting usually occurs on an ongoing basis, with individual budgets being re-evaluated regularly.

Budgets can be made for any entity that needs or wants to spend money, including governments and businesses, people, and households of any income level.

Key Takeaways

• A budget is an estimation of revenue and expenses utilized by governments, businesses, and individuals of any income level.
• A budget is a financial plan for a defined period that can greatly enhance the success of any financial undertaking.
• Corporate budgets are essential for operating at peak efficiency.
• Aside from earmarking resources, a budget can also aid in setting goals, measuring outcomes, and planning contingencies.
• Personal budgets are extremely useful in helping individuals and families to manage their finances.

Investopedia / Julie Bang

A budget is a microeconomic concept that reveals the trade-off made when one good is exchanged for another. In terms of the bottom line—or the end result of this trade-off—a surplus budget means profits are anticipated, a balanced budget means revenues are expected to equal expenses, and a deficit budget means expenses will exceed revenues.

To manage your monthly expenses, prepare for life's unpredictable events, and afford big-ticket items without going into debt, budgeting is essential. Keeping track of how much you earn and spend doesn't have to be drudgery, doesn't require you to be a math whiz, and doesn't mean you can't buy the things you want.

What it does mean is that you can maintain control over where your money goes and enjoy greater financial confidence and success.

How To Create a Budget

The specifics of budgeting will depend on your personal financial situation and goals. In most cases, though, the approach is the same no matter where you stand financially. Follow these seven steps to create your budget and adjust it as needed to reach specific financial goals.

• Add up all your income . This should include all income sources, such as a wages , salaries, tips, Social Security payments, disability, alimony, and investment income.
• Calculate your expenses . These are expenses you must pay each month, such as your mortgage or rent, food, transportation costs including gas, insurance premiums, taxes, childcare, internet service, your cell phone bill and other utility payments.
• Identify debt payments. Be sure to include your debt as well, such as loans and credit card payments. Determine the minimum payment for each debt. Subtract that from your income as well.
• Review your spending. Keep track of every dollar you spend, whether you pay with a credit card or cash, to determine what your real expenses are. Keep your receipts and note down additional spending that you hadn't budgeted for.
• Create a spending plan. The amount of income you have left is what you can spend on discretionary expenses. These can include additional debt payments or rainy day savings. Your plan should also include things like entertainment or surprise expenses. Give every dollar a job, based on your goals and what you discovered when you tracked your spending.
• Set financial goals. Do you want to save money? Pay off debt? Stop spending more than you have? Decide on realistic goals. Remember, you can adjust these over time. Work on the most pressing goals first, such as paying off debt or creating an emergency fund.
• Adjust each month. Each month, look at your spending and whether you progressed toward or achieved goals, Reevaluate and adjust where you assign your discretionary spending. A flexible budget will help you avoid overspending.

A budget can't work if you don't put it in writing. If you see it and commit to it, you'll have more incentive to stick to it.

Budgets are an integral part of running any business efficiently and effectively.

Budget Development Process

Corporate budgeting begins by establishing assumptions for the upcoming budget period. These assumptions are related to projected sales trends, cost trends, and the overall economic outlook of the market, industry, or  sector . Specific factors affecting potential expenses are addressed and monitored.

The budget is published in a packet that outlines the standards and procedures used to develop it, including the assumptions about the markets, key relationships with vendors that provide discounts, and explanations of how certain calculations were made.

The sales budget is often the first to be developed, as subsequent expense budgets cannot be established without knowing future cash flows . Budgets are developed for all the different subsidiaries, divisions, and departments within an organization. For a manufacturer, a separate budget is often developed for direct materials, labor, and overhead.

All budgets get rolled up into the master budget, which also includes budgeted financial statements , forecasts of cash inflows and outflows, and an overall financing plan. At a corporation, the top management reviews the budget and submits it for approval to the board of directors.

Static vs. Flexible Budgets

There are two major types of budgets: static budgets and flexible budgets. A static budget remains unchanged over the life of the budget. Regardless of changes that occur during the budgeting period, all accounts and figures originally calculated remain the same.

A flexible budget has a relational value to certain variables. The dollar amounts listed on a flexible budget change based on sales levels, production levels, or other external economic factors.

Both types of budgets are useful for management. A static budget evaluates the effectiveness of the original budgeting process, while a flexible budget provides deeper insight into business operations.

Advisor Insight

Derek Notman, CFP®, ChFC, CLU Intrepid Wealth Partners, LLC, Madison, WI

The importance of budgeting cannot be understated. A budget, also known as cash flow, is arguably more important than the actual cash that you have in your bank and investment accounts. Your cash flow is what allows you to pay for everything (or not).

Without knowing your cash flow, you could be putting yourself into a bad financial situation and not even know it. You can only get by without knowing your cash flow for so long before you get into financial trouble, so make the time to know the flow of your cash. Budgeting should be something that everyone does, regardless of their financial situation.

Individuals and families can have budgets, too. Creating and using a budget is not just for those who need to closely monitor their cash flows from month to month because money is tight. Almost everyone can benefit from budgeting—even people with large paychecks and plenty of money in the bank.

Once you've created a budget, you may have to do some juggling, especially in the first few months. This means adjusting spending here and there so that you stay within your planned budget for income and expenses.

Budgeting is a wonderful tool for managing your finances , but many people think it's not for them. It's important to become aware of budgeting myths—the erroneous logic that stops people from keeping track of their money and allocating it in ways that benefit them most. Then, you can create a budget that can help you live within your means, reach important goals, and build lasting wealth.

11 Budgeting Myths That Can Block Your Success

1. i don't need to budget.

Getting and keeping a handle on your monthly income and expenses allows you to make sure that your hard-earned money is being put to its highest and best purpose. For those who enjoy an income that covers all bills with money left over, a budget can help maximize savings and investments .

If one's monthly expenses typically consume the lion's share of net income , any budget should focus on identifying and classifying all the expenses that occur during the month, quarter, and year. And for people whose cash flow is tight, the budget can be crucial to identifying expenses that could be reduced or cut, and minimizing any wasteful interest being paid on credit cards or other debt.

2. I'm Not Great at Math

Generally speaking, you don't need to be great at math to make and follow a budget. First of all, understanding general concepts relating to your income, spending, debt, saving, and allocating your funds are important. Then, the basic ability to add and subtract is most of what's called for. That's especially true if you're budgeting manually, with pencil and paper.

And now, thanks to budgeting software programs, math barely enters into it. You simply have to be able to follow instructions. Many of these programs are free and legitimate. Or, if you know how to use spreadsheet software, you can make your own ledger. It's as simple as creating one column for your income, another column for your expenses, and then keeping a running tab on the difference between the two.

3. My Job Is Secure

No one's job is truly safe. If you work for a corporation, being laid off due to a difficult economy, downsizing, or a takeover always is a possibility. If you work for a small company, it could die with its owner, be bought out, or just fold.

You should always be prepared for a job loss by having at least three months' worth of living expenses in the bank. It's easier to accumulate this financial cushion if you know the amount you're bringing in and spending each month, which can be monitored with a budget.

4. Unemployment Insurance Will Tide Me Over

Unemployment compensation is not a sure thing. Let's say a bad situation at work leaves you with no choice but to quit your job. Unless you can prove constructive discharge (that is, that you were virtually forced to resign), your departure will be considered voluntary, making you ineligible for unemployment insurance. Besides, the benefits may fall well short of the wages you're used to: in even the highest paying states, they average less than $500 per week.

5. I Don't Want To Deprive Myself

Budgeting is not synonymous with spending as little money as possible or making yourself feel guilty about every purchase. The aim of budgeting is to make sure you're able to spend on what's needed and save a little each month, ideally at least 10% of your income. At the very least, budgeting can make sure that you aren't spending more than you earn.

Unless you're on a very tight budget, you should be able to buy baseball tickets and go out to eat. Tracking your expenses does not change the amount of money you have available to spend every month. It just shows you where that money is going and allows you to make decisions about changing your spending habit.

6. I Don't Want Anything Big

If you don't have any major savings goals (e.g., upsizing your living situation, starting your own business), it's hard to drum up the motivation to stash away extra cash each month. However, your situation and your attitudes likely will change over time.

Let's say that you and your partner live in New York City in a small one-bedroom apartment and things are going fine for both of you until your family dynamic changes. For instance, you may have a child or an in-law who comes to stay with you indefinitely. This may mean you'll need (and want) more room to accommodate the new addition. If you don't save up for anything big, you may not be able to afford this change in your living situation down the road.

7. I Won't Qualify for Student Financial Aid

Yes, the catch-22 of student financial aid is that the more money you have, the less aid you'll be eligible for. That's enough to make anyone wonder if it isn't better to spend it all and have no savings in order to qualify for the maximum amount of grants and loans.

But that catch mainly applies to earned income . Whether you are an adult student going back to school or the parent of a student headed to college, the Free Application for Federal Student Aid (FAFSA) form (used for Stafford Loans , Perkins Loans , or Pell Grants ), does not require you to report the value of your primary residence (if you own a home) or the value of your retirement accounts.

So if you want to save money without compromising your financial aid eligibility, you can do so by using your savings to buy a house, prepay your mortgage , or contribute more money to your retirement accounts. The savings that you put into these assets can still be accessed if you face an emergency, but you won't be penalized for it.

Even if you employ all the available legal strategies to maximize your financial aid eligibility, you still won't always qualify for as much aid as you need. So it's not a bad idea to have your own source of funds to make up for any shortfall.

8. I'm Debt-Free

Good for you! But being debt-free without any savings won't pay your bills in an emergency. A zero balance can quickly become a negative balance if you don't have a safety net. Budgeting can help you create one.

9. I Always Get a Raise or Tax Refund

It's never a good idea to count on unpredictable sources of income. This may be the year that your company is unable to give you a raise (or as much of a raise as you hope for). The same is true of bonus money. Tax refunds are more reliable, but this depends in part on how good you are at calculating your own tax liability.

Some people know how to figure how much they'll get in a refund (or how much they will owe) as well as how to adjust this figure through changes in payroll withholding throughout the year. However, changes in tax deductions , IRS regulations, or other life events can mean a nasty surprise when you prepare your tax return.

10. I Just Don't Have the Discipline

If you're still not convinced that budgeting is for you, here's a way to protect yourself from your own spending habits. Set up an automatic transfer from your checking account to a savings account that you don't see regularly (i.e., at a different bank). Schedule the transfer to happen right after you get paid.

If you are saving for retirement, you may have the option of contributing a set amount regularly to a 401(k) or other retirement savings plan. This way, you can pay yourself first, have enough money for the transfer, and know that you can meet your savings goal. 

11. It's a Luxury When I Barely Have Enough for the Essentials

Sometimes budgeting just isn't a priority because you have too much on your plate. But there are certain government programs that can help you manage your household expenses. For instance, the Supplemental Nutrition Assistance Program (SNAP) helps recipients of all income levels work with their food budgets to make their benefits go further.

At the very least, set up that budget so you get a feel for spending limits, any change in how you originally planned to allocate your funds, whether you're paying all you can to get rid of debt, or whether your slipping too far into debt.

In general, traditional budgeting starts with tracking expenses, eliminating debt, and once the budget is balanced, building an emergency fund. But to speed up the process, you could start by building a partial emergency fund.

Emergency Fund

This emergency fund acts as a buffer as the rest of the budget is put in place and should replace the use of credit cards for emergency situations.

The key is to build the fund at regular intervals, consistently devoting a certain percentage of each paycheck toward it, and if possible, putting in whatever you can spare on top. This will get you to think about your spending, too.

You should only use your emergency fund for true emergencies. For instance, if you lose your job and need to pay for expenses, you could tap into your rainy day fund until you join the workforce again. You can also use this money if you have an unexpected medical emergency that arises.

You would save money if you used your emergency fund to eliminate credit card debt , but the purpose of the fund is to prevent you from having to use your credit card for paying for unexpected expenses. With a proper emergency fund, you will not need your credit card to keep you afloat when something goes wrong.

Downsize and Substitute

Once you have a buffer between you and high-interest debt, you can start the process of downsizing. The more space you can create between your expenses and your income, the more income you will have to pay down debt and invest.

This can be a process of substitution as much as elimination. For example, cancel any recurring subscriptions that you don't regularly use or need. Use half of the money you save to invest for a goal or to pay off outstanding debts. Save the other half to bulk up your emergency fund.

Although eliminating expenses entirely is the fastest way to a solid budget, substitution tends to have more lasting effects. So consider:

• Shopping with friends and family so you can split the cost, especially if you buy in bulk
• Carpooling or taking public transportation to cut down on car-related costs

People can sometimes cut too many expenses so that they end up with a budget that they can't keep to. Substitution, in contrast, keeps the basics while slimming down costs.

Find New Sources of Income

Once you have your budget in place and have more money coming in than going out, you can start investing to create more income.

It is better to have no debt before you begin investing. If you are young, however, the rewards of investing in  higher-risk, high-return securities like stocks can outweigh most low-interest debt over time.

Keep your receipts so that you know exactly how much you spend each month. This can help you determine how much to budget for any expenses that may change from month to month.

You've got your budget set up. Now you've got to stick to it. But that credit card still calls your name, your clothes budget seems awfully small, and you feel deprived. At such moments, it helps to revisit the whole reason for a budget—to help you manage your finances, achieve financial goals, and lead a life free from fear of financial pitfalls.

Remember the Big Picture

Your budget can keep you out of overwhelming debt and help you build a financial future that will give you more freedom, not less. So think about the future you want and remember that keeping to your budget will help you get there. Adding to your debt load , on the other hand, will mean that your financial future could be less bright.

Review Your Spending

Every time you enter your spending in your software or budget notebook, review everything that's been spent to date, and compare it to income received. This will keep you abreast of where things stand and encourage you to keep at it, especially if you are reining in your spending as intended. This daily or weekly activity can give you an enormous sense of accomplishment and keep you on track.

Remove the Options That Allow You To Cheat

Make it more difficult to make impulse purchases. In other words, set up barriers that give you time to think: "Is this purchase necessary?" Opt out of retailer email lists. Remove your stored payment information on your favorite online shops so you can't just click to order. Adjust your phone settings to block tracking and advertising as much as possible.

Find Some Support

If you feel like you're the only one in your group who is on a budget, search for some like-minded folks. You could find an online forum, a monthly meeting, or even a couple of friends who'll listen to your concerns and share their budgeting experiences. Set up accountability calls with your frugal buddies to talk things over and keep temptation at bay.

Just know that you're not the only person setting sensible financial limits for yourself.

Go Old School

There's something powerful about handing over a stack of $20 bills for a purchase. You have to confront the money you're about to spend and accept that the spending is worth it. Swiping a debit card , on the other hand, may not feel nearly as real. 

Similarly, paying bills by writing checks and promptly entering the sums in your register keeps you up-to-date on how your account is affected in a way that autopay doesn't.

You don't have to use cash exclusively or completely forgo online payments. But handling transactions in hands-on ways can make you realize how much you're spending and enhance the power of self-regulation.

Reward Yourself

If you constantly look at what you have to give up, the very act of budgeting becomes distasteful. A mixture of long- and short-term gifts to yourself will help keep you motivated.

When you've been faithful to your budget for a month, give yourself a reward. Even small ones such as a night out with friends, a concert, or a little extra cash for spending can help.

Keep visual reminders of these rewards or the things you're saving up for. Start building associations in your brain that make sticking to your budget an enjoyable activity with happy results.

Schedule a Periodic Budget Evaluation

It's difficult to predict correctly how much money you'll need in every category of your budget. For instance, a new job may necessitate a wardrobe change and your existing clothing budget may not cut it. That's why it's important to conduct a regular check on how well your budget is working. It may need tweaking. This is to be expected. Just make sure that you always keep your long-term financial goals in the picture.

Educate Yourself

Learn all you can about finances, money management , and how you can best invest in yourself. Talk to your financially savvy friends and seek out real-world tips and advice from people who are doing well with their money.

The more you learn about handling money wisely and the rewards that can result from such an effort, the more concrete and acceptable the reasons for budgeting will be.

Ways To Budget When You're Broke

Budgeting is smart, but if you're suffering from mounting bills and a lack of funds, it may not be where your focus is. In such circumstances, consider some additional steps that you can take to gain control of your finances.

1. Avoid Immediate Disaster

Don't be afraid to request bill extensions or payment plans from creditors. Skipping or delaying payments only worsens your debt. And late fees ding your credit score. 

2. Prioritize Bills

Go over all your bills to see what can and should be paid first, prioritize those that are late, and then set up a payment schedule based on your paydays.

Call the bill companies to see how much you can pay now to get back on track toward a positive status. Explain that you are taking strict measures to catch up. Be forthright about the amount you can afford to pay now. Don't just promise to pay the full amount later.

3. Ignore the 10% Savings Rule

Stashing 10% of your income into your savings account is daunting or impossible when you're living paycheck to paycheck. It doesn't make sense to have $100 in a savings plan if you are fending off debt collectors . Your savings can wait until you can reclaim financial stability.

4. Face Your Spending

To fix your finances, you need to get a handle on your outlay first. Online banking and online budgeting software can help you categorize spending so you can make adjustments. Many people find that, just by looking at aggregate figures for discretionary expenses , they are spurred to reduce excessive spending.

5. Eliminate Unnecessary Expenses

Hopefully, your budget has given you a sense of where your money goes. Now it's time to tighten up. Start cutting back on items that you wouldn't miss. Change habits that are costing you, like letting food spoil before you can eat it. Prepare meals at home instead of going to restaurants or getting takeout.

You may be able to reduce some expenses that you shouldn't drop. For example, you might cut your auto insurance premium by switching carriers.

6. Negotiate Credit Card Interest Rates

Those ultra-high interest rates on your credit cards aren't fixed in stone. Call the card company and ask for a reduction in the annual percentage rates (APR) . If you have a good payment record, your request might be approved. This won't lower your outstanding balance, but it will keep it from mushrooming as fast.

7. Track Your Spending

Once you've gone through these steps, monitor your progress for a few months. You can do this by writing everything you spend in a notebook, with budgeting apps on your phone, or with the software you may already use for your budget.

Ensure that every cent is accounted for. Fine-tune and adjust your spending as needed after each month. This not only can help get you out of financial trouble. It also can put the spotlight back on the importance of your budget.

8. Seek New Income

For the time being, saving and investing is out. But consider ways to increase your earnings: working overtime, getting a second job, or picking up some freelance work.

How Do You Create a Budget?

Creating a budget takes some work. You'll need to calculate every type of income you receive each month. Next, track your spending and tabulate all your monthly expenses, including your rent or mortgage, utility payments, debt, transportation costs, food, miscellaneous spending, and more. You may have to make some adjustments initially to stay within your budget. But once you've gone through the first few months, it should become easier to stick to it.

What Is the 50-20-30 Budget Rule?

The 50-20-30 budget rule was popularized by Sen. Elizabeth Warren (D-Mass.) in her book All Your Worth: The Ultimate Lifetime Money Plan. The plan entails dividing all of your after-tax income into 50% for your actual needs, 30% for anything you want, and 20% for savings.

How Does Budgeting Help a Business?

Just like budgets help people, corporate budgeting helps businesses stay on top of their finances. They also help business leaders make very important investment decisions, manage and meet goals and objectives, and identify any financial hurdles that come their way.

A budget often conjures up images of complicated financial documents. But in reality, it's a money management tool that can be used by various entities, including governments, businesses, and individuals/households of every income level. Budgets can help prepare you to make better decisions about your money so that you can secure a brighter financial future.

Forbes Advisor. " The States With The Best And Worst Unemployment Benefits—And Why They’re So Different. "

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Trump campaign blasts Biden for ‘largest tax hike ever' as Americans face 'record-high inflation'

Biden's budget plan, according to trump's campaign, is 'defined by massive spending increases and tax hikes on americans'.

Larry Kudlow: Trump cut taxes, and the entire economy benefited

 FOX Business host Larry Kudlow reacts to the U.S. economy stalling under President Biden, on 'Kudlow.'

The campaign for former President Donald Trump — along with other Republicans and critics — has taken aim at President Biden over his recent budget proposals, including what they say would be the "largest tax HIKE ever."

The tax increase is part of Biden's $7.3 trillion budget plan for fiscal year 2025, which includes a $4.9 trillion tax hike and calls for an "unprecedented $86.6 trillion in spending" over ten years, according to Republicans on the House Budget Committee . The plan would also lead to the "largest debt in American history" at $54 trillion by 2034, according to the Republicans.

A Trump campaign spokesperson said Biden's plan "would take nearly $40,000 dollars away from the average American family, who is already losing thousands every year due to Biden's record-high inflation crisis."

The former president's campaign said Biden's budget plan was "defined by massive spending increases and tax hikes on Americans" and claimed the "bloated" budget does not address the priorities of the American people.

BIDEN'S TAX-HIKE PLAN WOULD COST THE US ECONOMY NEARLY 800K JOBS

The Trump campaign took aim at President Biden for his budget proposal, which they argued includes the "largest tax HIKE ever" and is "defined by massive spending increases." (Getty Images / Getty Images)

Citing a figure provided by Richard Stern , the director of the Grover M. Hermann Center for the Federal Budget at The Heritage Foundation, Trump's campaign said the tax hikes amount "to almost $36,000 in tax hikes per American family."

Instead of being used to cut the deficit, Brian Riedl, a senior fellow at the Manhattan Institute who focuses on budget, tax and economic policy, argued that roughly half of that revenue would be "plowed into … new entitlement expansions."

"So all these historic, revenue-maximizing taxes would barely even cut the deficit. Most goes to more spending," Riedl wrote in a post to X.

"When President Trump is back in the White House, he will advocate for more tax cuts for all Americans and reinvigorate America's energy industry to bring down inflation, lower the cost of living and pay down our debt," the Trump campaign spokesperson said.

Biden's tax increase proposal would also dramatically raise the rates paid by corporations and wealthy Americans.

As part of the proposal, Biden called for a 25% minimum tax rate on households worth more than $100 million, raising the capital-gains tax rate, quadrupling the corporate stock buyback tax to 4%, raising the corporate tax rate to 28% from 21%, increasing the Medicare tax paid by wealthy Americans, implementing a global minimum tax on multinational corporations and closing the carried interest loophole used by private equity and hedge fund managers.

A report released this month by the Tax Foundation, a group that advocates for lower taxes, found that the higher taxes laid out in Biden's plan would reduce economic output by 2.2% in the long run, slash wages by 1.6% and kill about 788,000 full-time equivalent jobs.

President Biden speaks in Milwaukee, Wisconsin, on March 13, 2024. (Alex Wroblewski for The Washington Post via Getty Images / Getty Images)

Higher taxes on corporations are the "largest driver of the negative" economic effects and alone would trim the nation's GDP by 0.9%, wages by 0.8% and full-time equivalent jobs by 192,000, the study revealed.

TRUMP-ERA TAX CUTS POISED TO EXPIRE SOON, MEANING YOU COULD FACE STEEPER TAXES

Altogether, the tax increases would reduce the federal deficit by about $3 trillion. Money from the newly generated revenue would also help to pay for expensive new programs floated by the president, including a monthly tax credit to help some homeowners offset steep mortgage payments, subsidies for child care and lower prescription drugs.

In the case of the capital gains tax, the proposed changes would "push the United States beyond international norms," according to the Tax Foundation.

The plan stands in contrast to the tax cuts offered during Trump's tenure in the White House. However, millions of Americans could soon face steeper tax bills when massive components of that legislation — known as the Tax Cuts and Jobs Act — expire at the end of 2025.

Signed into law by Trump in 2017, the law drastically overhauled the nation's tax code, including reducing the top individual income tax bracket to 37% from 39.6% and nearly doubling the size of the standard deduction.

However, those changes to the individual section of the tax code are poised to sunset in 2025, meaning that many taxpayers will face steeper levies if the law is not extended.

In addition to lowering the top tax bracket for wealthy Americans, the Trump-era law raised the thresholds for several income tax brackets — essentially lowering the liability for many households.

The expiration of the tax law on Dec. 31, 2025, will essentially mean that many Americans will be forced to pay anywhere between 1% and 4% more in taxes unless certain provisions are extended or made permanent.

Former President Donald Trump during a campaign rally at the Forum River Center March 9, 2024, in Rome, Georgia. (Chip Somodevilla/Getty Images / Getty Images)

The topic is likely to be a source of contention during the general election . Trump has pledged to make the tax cuts permanent if he is re-elected in November. Treasury Secretary Janet Yellen has also suggested that President Biden would seek to retain the tax reductions for Americans earning less than $400,000 during a second term in the White House.

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The problem, however, is that the Congressional Budget Office estimates that extending the TCJA would add roughly $3.7 trillion to the federal budget deficit.

Fox Business' Megan Henney contributed to this report.

Draft Annual Business Plan and Budget 2024-25

The City of Onkaparinga’s draft Annual Business Plan (ABP) and Budget 2024-25 is now open for feedback until 9am on Monday 13 May.

The focus of this year’s draft plan is budget repair. It was developed with reference to the February 2024 Essential Services Commission of SA's (ESCOSA) report which identified challenges to council’s financial sustainability.

Council has operated at a deficit for seven consecutive years, and we need to act now to return to a balanced budget as soon as possible. This will put us on track to keep delivering the services, programs and projects that support the city into the future.

To achieve this, the draft plan includes:

• $158.29 million in services, programs and asset maintenance
• $73.57 million in new projects and initiatives for the community
• a rate increase of 6.8 per cent plus rates from new properties
• managing employee costs to achieve an additional $2.48 million in cost efficiencies
• containing controllable costs to below CPI at 4.0 per cent
• recovering the full-service cost of community wastewater management system (CWMS)
• pausing the Onkaparinga Grants program for 12 months.

The draft plan will also meet all key financial indicators set for the local government sector.

Council has carefully developed this draft budget to balance the tough financial decisions with impact on community members. We remain committed to providing hardship support for those who need it most.

You can provide your feedback on the draft plan by completing the short survey below, and/or providing a comment/submission. The community engagement is open from Friday 19 April to 9am on Monday 13 May 2024.

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Halal mortgages in federal budget about 'being equal' for Muslims, providers say

Government indicated that it's 'exploring new measures to expand access'.

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Federal budget references to mortgage products aimed at Canadian Muslims have members of the community celebrating, along with the mortgage providers that look to serve them, despite a lack of detail from the government on what is to come.

In Tuesday's budget documents, the federal government indicated that it's "exploring new measures to expand access" to financing methods such as "halal mortgages."

The budget provided few details about the plan, other than to say the government had been consulting "financial services providers and diverse communities" and that an update would come in the 2024 fall economic statement. Despite no specifics, it was a welcome addition to the budget for the Muslim community.

"It was very happy news for me," said Abdullah Mohiuddin, who has already taken out an Islamic, or halal, mortgage to purchase a home in the Edmonton area. He said he welcomed the government's announcement that it would be finding a way to increase access to a financial product he believes his community needs.

Several firms in various Canadian provinces offer halal mortgages. Halal is an Arabic word that translates in English to "permitted" or "allowed" under Islamic law.

These mortgages are deliberately structured to adhere to both Canadian law and the belief systems of many Muslims. Interest, which is referred to in many Islamic texts as " riba ," is forbidden.

Although interest isn't charged, there are still costs associated with halal mortgages. In many cases, the costs are higher than those associated with conventional mortgages, and the mortgages are often not available at the branches of mainstream financial institutions.

"It seems like it's a little bit expensive," Mohiuddin said, adding he believes the lack of established legal definitions for a halal mortgage in Canada is behind the higher costs. 

Announcement boosts credibility

Muslims looking for a halal mortgage are still going to be paying carrying costs for a loan to purchase their home.

Providers in the industry said these costs can be higher because while there is demand, there are fewer providers — and some halal mortgage providers are unable to foreclose due to religious restrictions, which can increase what some financiers assess as risk.

• Budget 2024 is pitching a long list of new laws
• Interest-free, but not without charges: Islamic mortgages hit the Canadian housing market

That could be changing with the federal announcement, say executives with Islamic mortgage provider Eqraz Inc., based in Oakville, Ont. The company has said there's already a positive impact just from the five sentences in the federal budget regarding halal mortgages.

"I'm already seeing traction in our favour," said Zuhair Naqvi, the firm's founder and CEO, adding he believes that a mention in high-profile federal policies leads to credibility.

"It allows me to go to the banks and the lenders and powers that be and tell them, 'Look, guys, the government is supporting this, so please don't be worried or anxious about participating in this,'" Naqvi said.

Mortgage providers who have worked with Eqraz echo his sentiment. "With the federal government coming in, this really encourages myself and excites me. And my phone is ringing off the hook," said Naveed Malik, a mortgage agent with Dominion Lending Centres.

• It's not just a label for meat: halal investments target Islamic customers

Naqvi said this is not about elevating Islamic mortgages above non-religious financial products or those that target members of other faiths.

"Halal mortgages do not provide a privilege to us," Naqvi said, adding it's about "being equal to non-Muslims."

Fewer providers, higher costs

Malik said he estimates that the cost of halal mortgages is currently about four per cent higher than a conventional mortgage.

Islamic mortgage companies have previously speculated that with wider availability, costs could drop as more providers compete for business, and risk is lessened with a wider pool of lenders.

Many of the discrepancies in cost are due to what Islamic finance experts and industry players say are not just legal differences but basic structural anomalies in the mortgage.

Some types of arrangements more closely resemble a "rent-to-own" system, where the mortgage provider is also an owner of the home.

• Halal financing program helping Alberta Muslims become homeowners
• Al Rashid Mosque cuts ties with Edmonton-based halal mortgage company

There are also some agreements where fees are charged instead of standard interest payments.

However, the lack of legal definitions specific to the interest-free nature of Islamic mortgages has often meant many mortgage insurance providers do not insure them — in particular because each halal provider may structure their mortgage differently, and uninsured mortgages can sometimes be more expensive.

Halal mortgages help fill the gap for Muslim homebuyers

A 2010 report for the Canada Mortgage and Housing Corporation  said Islamic financial products should not "present any particular difficulties" under Canadian accounting standards, but years later they are still far from widespread.

There have been legal issues, such as who is registered on land titles and whether a rent-to-own contract is subject to landlord and tenant legislation in various provinces.

ABOUT THE AUTHOR

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Anis Heydari is a senior business reporter at CBC News. Prior to that, he was on the founding team of CBC Radio's "The Cost of Living" and has also reported for NPR's "The Indicator from Planet Money." He's lived and worked in Edmonton, Edinburgh, southwestern Ontario and Toronto, and is currently based in Calgary. Email him at [email protected].

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South Carolina Senate wants accelerated income tax cut while House looks at property tax rebate

South Carolina Senate Finance Committee Chairman Harvey Peeler, R-Gaffney, talks about the Senate’s budget plan on Thursday, April 18, 2024, in Columbia, S.C. (AP Photo/Jeffrey Collins)

South Carolina Senate Finance Committee Chairman Harvey Peeler, R-Gaffney, right, talks to Quentin Hawkins on the committee about the Senate’s budget plan on Tuesday, April 23, 2024, in Columbia, S.C. (AP Photo/Jeffrey Collins)

South Carolina Sen. Mike Fanning, D-Great Falls, prays before the start of the Senate session on Tuesday, April 23, 2024, in Columbia, S.C. (AP Photo/Jeffrey Collins)

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COLUMBIA, S.C. (AP) — The South Carolina Senate started debating a budget Tuesday that accelerates a planned income tax cut instead of the House plan to use $500 million to give homeowners a one-time property tax rebate.

Once the spending plan passes the Senate, a group of three House members and three senators — likely including the leaders of each chamber’s budget committee — is going to have to sort out the differences over the next month or so with the tax break and other items in South Carolina’s $15.4 billion spending plan for next budget year.

Republican Senate Finance Committee Chairman Harvey Peeler has called the competing tax breaks a wonderful problem to have in the 2024-25 fiscal year budget, which again left lawmakers with a substantial pot of additional money to spend.

But Peeler has left little doubt he thinks spending $100 million to knock the income tax rate most people pay in the state from 6.3% to 6.2% is the right move, saying it lasts forever compared to a one-year drop in property tax. The state is in the middle of a five-year effort to cut its top income tax rate from 7% to 6%.

The money involved comes from an account meant to provide property tax relief. Sales tax goes into the fund, and a boom in spending during and after the COVID-19 pandemic has left the account flush with cash.

The House budget suggested giving the money back as a property tax rebate. But county officials worry property tax bills will snap back next year and homeowners will be angry at them.

Along with $100 million in income tax cuts, the Senate plan spends the $500 million on roads and bridges, local water and sewer system repairs, and other items.

Another item the budget conference committee will have to resolve is how much of a raise state employees get. The Senate plan would give state employees making less than $50,000 a raise of $1,375 a year. Workers making more than that would get a 2.75% boost in pay. The House plan gives a $1,000 raise to workers making less than $66,667 and a 1.5% raise to those who make more.

Last year, there was a monthlong showdown over the differences in the budget about how much money should be given to start work on a new veterinary school at Clemson University. It led to a tense meeting and accusations of who cared about people and education more before a compromise was reached in early June.

One point both chambers agreed on is raising teacher pay. Both spending plans set aside about $200 million. Every teacher would get a raise and the minimum salary for a starting teacher would be increased to $47,000 a year. The budget also would allow teachers to get a yearly raise for each of their first 28 years instead of their first 23.

Other items in the Senate plan include $36 million to the Department of Juvenile Justice for security and prison improvements, as well as $11 million to put technology to find unauthorized cellphones in maximum security prisons and have providers block those numbers likely being used by inmates.

There is $175 million to finish work on the new school for veterinary medicine at Clemson University and $100 million for a new medical school at the University of South Carolina.

Senators set aside nearly $5 million for a forensic audit and other help to determine where $1.8 billion in a state Treasurer’s Office account came from and where it was supposed to go.

There is $11.5 million to protect the integrity of the 2024 election and $12.5 million to upgrade election systems.

The Senate budget is “balanced not only in arithmetic; it’s balanced on the needs of the state of South Carolina,” Peeler said. “First tax relief, second public education and third infrastructure.”

What is Sling TV?

How much is sling tv.

• What channels can you stream?
• Is there a free plan?
• What devices are supported?

What is Sling TV like to use?

Is sling tv worth it, the bottom line, sling tv review: essential cable channels for cord-cutters on a budget.

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Sling TV is one of the best live TV streaming services you can sign up for without breaking the bank. With plans starting at $40 a month, it's an excellent midrange option with a healthy assortment of popular channels and features that cord-cutters crave. 

But Sling isn't the only live TV option out there, and there are some areas where it falls behind more expensive services. To help you decide if Sling TV is the right choice for you and your household, we've broken down everything you need to know, including our thoughts on what it's like to use and how it stacks up to its main competitors.

For just the essentials without any extra fluff, Sling TV is the streaming service you're looking for. It's more customizable than other plans, with three options you can choose from, so you pay for only what you need. New members get their first month for $25 off.

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Two affordable base plans to choose from
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Options with sports or local networks
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Up to three simultaneous streams
• con icon Two crossed lines that form an 'X'. Certain channels are exclusive to Orange or Blue
• con icon Two crossed lines that form an 'X'. Gets pricey once you start adding extra channel packages
• con icon Two crossed lines that form an 'X'. Local channels limited to select cities and no option to get CBS

Sling is a live TV streaming service that offers access to many popular cable and satellite channels via an internet connection. That means no bulky cable boxes or tricky contracts, and you can get Sling for a fraction of the cost of most traditional pay-TV providers. 

The service offers two primary plans geared toward different types of programming: Sling Orange leans toward sports, and Sling Blue toward news and entertainment. You can also combine both plans to get access to all of their channels, and there are add-on packages you can buy to unlock even more networks and premium stations, like Starz and Showtime.

Sling TV offers three primary plans, with prices starting at $40 a month. All Sling plans include 50 hours of DVR storage, but members can pay $5 a month extra to unlock DVR Plus with 200 hours. 

Here's how much each of Sling TV's three main plans cost:

*Sling Blue and Orange + Blue pricing and total channel offerings vary depending on location. Local NBC, Fox, and ABC stations are only available in select cities. Members must pay an extra $5 in areas that include all three local stations.

What channels come with Sling TV?

Both Sling Orange and Blue start with the same selection of 25 channels, including popular cable networks like CNN, HGTV, Food Network, and more. But in addition to this base lineup, each plan has its own unique assortment of additional channels.

Orange has seven exclusive sports and family channels, including ESPN, Disney Channel, and Freeform. Meanwhile, Blue has 17 exclusive news and entertainment channels, including Discovery Channel and TLC, and local stations from ABC, Fox, and NBC in supported markets. On the downside, there is no option to stream your local CBS channel. 

Sling TV also offers several add-on packages that you can purchase for an additional cost to unlock even more channels. Bundles like Sports Extra, Entertainment Extra, News Extra, and Kids Extra cost an extra $6 to $11 a month, each including anywhere from six to 14 additional channels. The Sports Extra add-on, for example, includes ESPNU, MLB Network, NBA TV, and more for $11 a month.

Many of these extra channels are included with base offerings from more expensive competitors like YouTube TV , Hulu + Live TV , and Fubo , but some viewers may prefer how Sling TV lets you save money by offering these networks as optional add-ons.

Check out our Sling TV channels guide for a full breakdown of networks and features included with each plan and add-on.

Does Sling TV offer a free plan?

Sling TV does offer a free streaming option called "Freestream" that anyone can watch without an account. Though this plan does not include any traditional cable or local networks, it does feature access to over 400 ad-supported live internet TV channels. 

Some of these stations are offshoots of major networks that broadcast select content from their libraries. For instance, you can watch channels like AMC Thrillers and VH1 I Love Reality.

These free internet channels aren't a substitute for true cable or satellite TV offerings, but they're a nice option for cord-cutters who aren't ready to commit to a paid subscription.

How do I stream Sling TV?

The Sling TV app is supported on several media players and mobile products, including all of the best streaming devices from Apple, Roku, Fire TV, and Chromecast, as well as iOS and Android phones, Xbox Series X|S, web browsers, and more. The app is also available directly through many of the best TVs from brands like Samsung, LG, Sony, Hisense, Vizio, and TCL. 

Check out a full list of every supported device on the Sling website .

After testing Sling on a web browser, smart TV, and Roku Ultra, we found the service to be intuitive and easy to use, an important characteristic for subscribers making the switch from cable. In our experience, streaming is stable and without interruption, but your results may differ based on your network connection quality. 

Sling's interface lets you access a traditional channel guide where you can sort channels by their name or genre, and you can see which networks you've most recently watched. Once you choose a program and start watching live TV, you can press down on your remote to toggle an overlay on the bottom of the screen, which lets you see details about the program or jump into other content. 

You can also press up on your remote to easily return to the full-screen guide from any live channel. The program you were watching keeps playing on a small pop-up screen in the lower right corner until you select another channel.

Outside the guide, Sling has a menu on the left side of the screen that lets you access a homepage with content recommendations, your DVR recordings, on-demand content, and settings. This is all simple to navigate, and there are no glaring omissions. 

Sling is an excellent live TV streaming option for viewers who don't want to spend much money but still want more than the bare minimum. It lacks some perks that come with Hulu's pricier live TV service, like unlimited DVR and a complimentary Disney Plus subscription, but it includes some key networks that cheaper services, like Philo , are missing.

One of Sling's most attractive features is how it lets you choose between two affordable base plans to keep costs low. If you don't care about watching sports on ESPN networks, opting for Sling Blue at only $40 a month saves you a great deal of money compared to signing up for a service like Fubo, which costs double the price and forces you to pay for channels you might not want. Sling Blue even includes local channels in big cities, which is something that Philo's less expensive service lacks.  

However, if you're looking for a live TV streaming solution to suit a big household with varied viewing needs, Sling may not be for you. Though you can customize a comprehensive plan with options for many different tastes by subscribing to Sling Orange + Blue and tacking on packages like the Sports Extra plan and DVR Plus, the cost adds up quickly. To get a fully inclusive Sling TV package with a channel selection and set of features that rivals Hulu + Live TV or YouTube TV's base offerings, you'll end up paying about the same or, in some cases, even more than those services charge.

Sling is ultimately best for people who just want an Orange or Blue plan to get the essentials of cable TV but don't want to pay extra for all the other channels that come with more expensive services.

Starting at $40 a month, Sling TV is a competitive option for subscribers who want an affordable live TV streaming service that provides popular news, sports, entertainment, and family programming. 

It's considerably cheaper than most competing live TV streaming services, and it offers more sports and news channels than Philo, Sling's top budget competitor. Though Philo is even cheaper at just $25 a month, Sling has plans that include stations like ESPN, NFL Network, CNN, ABC, NBC, and Fox, which are all missing from Philo.  

Ultimately, Sling TV cements itself as a unique midrange option that rests between Philo's true budget pricing and the more common $65-$75 starting prices of other live TV services. Options like Hulu + Live TV remain a better fit for people willing to pay more for additional channels and extra perks like unlimited DVR, but in an age of rising prices, Sling TV's lower costs provide a nice streaming solution for first-time cord cutters switching over from cable or satellite TV.

You can purchase logo and accolade licensing to this story here . Disclosure: Written and researched by the Insider Reviews team. We highlight products and services you might find interesting. If you buy them, we may get a small share of the revenue from the sale from our partners. We may receive products free of charge from manufacturers to test. This does not drive our decision as to whether or not a product is featured or recommended. We operate independently from our advertising team. We welcome your feedback. Email us at [email protected] .

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Americans could be in for nasty tax surprise if this Joe Biden plan goes through

Joe biden's budget proposal for 2025 includes what is being called the largest capital gains tax seen in 100 years..

• Updated Apr 26, 2024, 2:35 PM IST

Even as the political firestorm over inheritance tax in India unfolds, Americans could be in for a nasty surprise if President Joe Biden gets another shot at the White House in the November elections.

Biden's budget proposal for 2025 includes what is being called the largest capital gains tax seen in 100 years. 

Related Articles

• 50% wealth tax row explodes: FM Sitharaman says Congress aims to 'hit middle and aspirational classes'
• Top Economists Debate The Pros And Cons Of Inheritance Tax For Economy & Aam Aadmi

The proposal, released last month, notes that the administration wants to increase the top marginal rate on long-term capital gains dividends up to 44.6 percent, which would make the tax rate exceed 50 percent in states like California, New Jersey, New York and others.

The idea has already been panned by critics who say it will disincentivize investing and massively hurt industries such tech. 

More than just a heartburn

Since capital gains are not indexed to inflation, the actual rate that many will pay if Biden's tax plan materialises will be painfully higher.  The proposal targets high earners with taxable income of more than $1 million and an investment income of more than four hundred thousand dollars.

In comparison, the capital gains tax in India ranges from 10% for long-term investments to 32% for short-term investments.

  When was the last time tax rates were this bad?

The last time capital gains tax was even close to this high was in the late 1970s under Democratic President Jimmy Carter when the rate topped out at 40 percent. Capital gains are profits made from selling assets like stocks, businesses, homes and other investments. With this proposal, some states will see capital gains tax zoom beyond 50%.

Why is Joe Biden doing this?

The Biden administration argues that the tax is only targeted at the rich and will add more than 5 trillion dollars to the US economy in the next 10 years. But critics are not convinced, According to Tax Foundation, an economic think-tank, the move will reduce US GDP by 220 basis points in the long run, trim wages by 160 basis points and make over 700 thousand jobs go, adding that the new laws make the US tax code more complex.

Wait, there's more...

-- Biden's proposal plans on hiking corporate tax rate to 28% from the current 21%.

-- All deductions on salaries of over a million dollars a year will be removed.

-- The wealthiest in the US, with assets of over 100 million dollars, will have to pay a 25 per cent minimum tax.

-- It proposes to remove exemptions on gifts and estate taxes.

-- The estate tax, which is levied on the death of a person, will go up to an effective 60 to 80%.

The announcements have surprised US businesses in an election year. Republicans argue that the new taxes could spell disaster for small businesses and entrepreneurs as well as hurt innovation and growth.  

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