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Business budget template with magnifying glass and calculator

Free Business Budget Template for Your Business (Excel) + How to Create

Starting a business is an exciting adventure that gives you the chance to be your own boss, bring your entrepreneurial vision to life, and control your financial future. However, to avoid being one of the 20% of small businesses that fail within their first year, you’ll want to take every precaution to ensure that your business is sustainable for the long term.

Budgeting is a process that allows you to see how your business will perform into the future and will help you to make better capital budgeting decisions in relation to a future investment project. Knowing how your business is managing its cash flow — cash inflows and cash outflows — you allows you to easily see if your returns on invested capital or your initial investment are going to give you the internal rate of return (IRR) that you are hoping for.

Therefore, creating a business budget is an excellent first step for any new business owner. By taking a closer look at your assets, expenses, capital invested, and financial goals, you can craft a better plan for the future of your booming business. And ideally, you can reap some of the monetary benefits

Let’s take a closer look at how to create a budget that will bring your business idea to life. We’ll also discuss the benefits of budgeting and the capital budgeting process. You will even find some helpful resources and a small business budget template (Excel) that you can leverage moving forward. With the right tools and processes, you can use business budgeting to your advantage.

What is a business budget?

A business budget is a summary of a company's revenue, expenses, and profit for a specific period, usually monthly, quarterly, or yearly. An effective business budget designates a specific use for each dollar earned, such as paying bills, investing in growth opportunities, covering daily operational costs, and providing salaries for employees and the owner.

Business budget templates definition

Solid business budget planning will provide a road map for spending and earning. It’ll create a lens into your organisation’s financial future and facilitate better decisions all around. 

Once you’re ready to get your business idea off the ground, you’ll need to consider startup costs. Are you wondering if you can or should purchase new equipment this year, even if you can get it at a discount rate? Refer to your business budget plan.

Perhaps you are seeking methods to reduce costs. By examining your business budget, you can gain insight into your financial well-being, including areas where you may be overspending and could potentially save. By having a better understanding of your financial situation, you can enhance your business's performance and increase profits in the previous quarter or year.

Budget template small business owners stat

Benefits of a budget for your business

The benefits of budgeting may be obvious to some. But a chilling statistic suggests that not all business owners are completely convinced. 

63% of small business owners contribute personal funds to their business at least once per year. This is a clear indication that business owners are not budgeting accurately or at all.

“A business budget is a financial road map to success, a vision of where you want to take your business for the upcoming 12 months,” the FDIC says. What’s more, research has suggested that business budgets offer the following benefits:

  • Budgeting gives business owners more freedom to run their organisations with confidence.
  • Budgeting allows business owners to identify cash flow and spending problems.
  • Budgets empower business owners to have a greater sense of control and insight when dealing with financial challenges.
  • Budgets help business owners and decision-makers predict cash flow and identify trends.
  • Business budgets demonstrate positive money management to lenders and investors.
  • Budgeting gives business owners the chance to identify and rectify problem areas quickly.

Bottom line: Consider a detailed budget for one of your key business needs.

What’s included in a business budget?

A business budget takes into account an organisation’s total revenue and expenses to reveal net profit (or loss). The FDIC says the best business budgets comprise the “nuts and bolts” of everyday revenue and expenses like:

  • Average order amount
  • Number of product orders per month
  • Billable hours
  • Average payroll costs
  • Material expenses
  • Rent, mortgage, and utilities

When creating a business budget, it is important for business owners to remember that the resources put into it directly influence the results. Therefore, it is crucial to gather precise data when handling the company's finances. Even a small mistake in calculations or typing could result in misunderstandings or uninformed choices regarding finances.

How to create a budget for a business

Now you know what a business budget is, why it’s important, and the essential components. Let’s now take a look at the steps you need to take to create one.

1. Calculate all forms of income

Whether you’re optimising your personal spending or building a business budget, your first step should be aggregating all of your forms of income. Your net income determines how much you can afford to spend. It also indicates your take-home pay and whether your business performance is growing or stagnating.

To find out how much money your business is bringing in, refer to your profit and loss statement or income statement. Depending on your business model, you may have several income sources, so be sure to include any and all revenue streams in this section.

2. Subtract your fixed expenses

After combining all of your company's earnings, you can deduct the fixed expenses. These costs are consistent throughout the year and have a set amount regardless of whether they are paid monthly, weekly, or annually. They are easily estimated and can be easily incorporated into your budget. On the other hand, one-time expenses or variable costs are more unpredictable — we'll discuss this further in a moment.

Examples of fixed expenses include:

  • Commercial rent or mortgage
  • Operational utilities
  • Loan payments over a certain payback period
  • Insurance bills
  • Employee salaries

Once you’ve tallied up your fixed expenses, you can subtract that number from the total income you calculated in step 1.

3. Subtract your variable expenses

In addition to your fixed costs, you might anticipate monthly operating expenses that may not always be the same amount. These variable expenses may be harder to predict, but you can refer to old receipts and invoices to estimate them.

Examples of variable expenses include:

  • Material costs
  • Commissions
  • Billable staff wages (freelancers, outsourced work, etc.)

After identifying your variable expenses and estimating how much they cost each month, subtract the amount from your income.

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4. Prepare for emergency and one-time expenses

Life is full of unexpected circumstances. As a business owner, you’re likely familiar with unexpected expenses. New equipment, hiring expenses, and unplanned events can add up, so it’s wise to plan ahead as much as you can. You can’t predict when you’ll need to pay for an emergency expense or how much it might cost, but you can set aside a cash reserve to lessen the burden.

5. Create a profit and loss statement

You’ve accounted for your income and fixed, variable, and emergency expenses. Now, you can better understand your business finances by creating a profit and loss (P&L) statement. A P&L statement is a high-level overview that shows whether your organisation is profitable or in the red.

When you add up all of your income and then subtract your total expenses, you should have a positive or negative number. This is commonly referred to as the net present value NPV. A positive number indicates that you’re in the black and, therefore, making money. A negative number indicates that you’re in the red and, therefore, burning a hole in your pocket.

Your P&L statement serves as a baseline for creating your business budget. You can access your profit and loss statement, track trends, monitor invoices, and more from your QuickBooks account.

Keep in mind that your profit and loss statement may not always show you the results you want. But with better business budgeting and forward-thinking, you can set yourself up for a brighter and more profitable future.

6. Draft your business budget

After reviewing your P&L statement, you’ll have a better idea of where you’re spending your money—and if you’re spending responsibly. With this data in mind, you’re ready to draft your business budget for the next year, quarter, or month. Most businesses opt for quarterly budgets.

A fundamental budget provides a breakdown of your expenses and sets boundaries for each within a specific timeframe. It can assist in determining if your income and expenses are in line with your capabilities. By using QuickBooks, you can gain an understanding of your spending habits and evaluate the financial status of your business.

Small business budget customisation

Every small business has a niche, workflow, and financial goals. So, it’s important to remember that there’s no one-size-fits-all approach to business budgeting. As you learn how to build a business budget and experiment with the strategies you’ve learned, consider the following:

  • Seasonality may affect customer buying behaviours, depending on your business type. Consider these fluctuations in profit and expenses as you plan your budget.
  • If you run an e-commerce business, beware of hidden costs like shipping fees, business website upgrades, and point-of-sale expenses.
  • Budgeting for a startup can be especially challenging because they’re typically much more limited on data and performance history. However accurate accounting software and conservative estimates can help you improve your business budget year after year.

If you run a service-based business, you’re working with more estimates than a product-focused business. Keep an eye on trends to make sure your budget has plenty of wiggle room.

Budgeting best practices for business 

A great business budget creates a clear connection between your day-to-day operations and financial resources. It can help you navigate tough business decisions and even help you identify areas for growth. But an effective budget doesn’t happen overnight. As you create and reflect on your business budget, keep these small business budget best practices in mind:

  • Consider how every change in expenses or income will trickle down to your budget. Hiring a new employee doesn’t just mean you’re adding another salary but can also translate to changes in payroll taxes, benefits, and other expenses. Any time you adjust your business budget, consider the consequences.
  • Make sure that you’re budgeting for all expense categories, including fixed, variable, and emergency expenses. Anticipating these costs can help you balance your business budget and plan ahead. You can track your business expenses effortlessly and accurately using QuickBooks.
  • View your business budget as a living document. Financial circumstances change, and the unexpected happens. Your business should always be prepared to weather the storm. Review your financial statements regularly, reconsider your costs and spending, and refine your business budget as necessary.
  • Set goals, but avoid wishful thinking. Use your bookkeeping records to determine what might transpire over the next month, quarter, or year. But ultimately, it’s a better idea to be conservative with your budget than to expect the best-case scenario. You may experience a period of discounted cash flow that may affect your ability to cover your expenses.

Look out for ways to cut costs and create growth. As a business owner, it’s up to you to position your business for greatness. Break down your finances into areas of success and room for improvement. Spotting opportunities to improve your business finances can make your organisation more profitable and sustainable in the long run. Using capital budgeting methods will also help you determine whether an investment you’ve been thinking about will give you adequate returns.

Free business budget templates

If you’re just getting started with budgeting for your business, this budget template (small business) is a great medium for learning the process. Create copies, download, edit and print this business budget template.

Business budget template for Excel

Use our free Excel business budget template to develop a budget for your business.

How to use the Excel business budget template

Follow the steps below to create a business budget using our Excel budget template.

1. Enter prior year information

Input the year-end total income and expenses into your Excel template to find the previous year's net income.

You can also refer to last year's financial reports, such as the income statement or balance sheet, to find this information.

2. Create a budget income statement

Look at your various sources of operating and non-operating income to approximate your total income. Make sure to include this in the budget column. When you have actual data, you can input that into the actual column to compare the difference. This will help inform any future budgets and financial plans.

3. Create a budget expense statement

Input all of your expenses, including operating, variable and non-recurring expenses, to approximate your total expenses. When you have actual data, you can input that into the actual column to compare the difference. For some expenses, such as your variable expenses, you may have to make an educated guess.

4. Determine total net income

To determine your estimated pre-tax net income, subtract your approximate expenses from your approximate income. Then, deduct an estimated income tax to arrive at your projected net income. It may be helpful to create multiple budgets based on different scenarios, taking into account various sources of income and expenses. To ensure accuracy, remember to update the "actual" column with data from the reporting period to see if you were over or under budget, and use this information to improve your next budget.

Business budgeting with QuickBooks

Building a business budget can feel like an overwhelming process, but it’s an essential one if you want to have an edge over the competition, maintain financial stability, and move your business forward.

QuickBooks features tools like automated future cash flow forecasting, financial reporting, and bank integrations, making it easy to manage your business finances. 

For the best Excel budget templates and other free accounting and business tools and templates, check out our tools and templates hub to find the resources and templates to suit your needs and help your business thrive. You can also use QuickBooks’ convenient expense tracker to help with your budgeting needs.


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