The best small business owners know that it’s important to create a budget. A budget is a plan of action that helps you manage your business, track your expenses and profits, and stay on track with your goals. For many small businesses, creating a budget can be overwhelming. However, with the right tools and resources at hand, you can easily develop your own small business budget in just a few hours per month—while still maintaining control over your finances!
What is a budget?
A budget is a plan for your business that helps you to set goals and make decisions. It can be used to see how well you are doing, manage your business finances, and plan for the future.
A budget helps small businesses owners by:
- Giving them an idea of how much they need to spend on running their company each month/year so they don’t go over their financial limits.
- Encouraging them not to spend more than they have available in case something unexpected happens like losing an employee or having equipment break down unexpectedly (this happened with one of our clients recently).
Who needs a budget?
You need a budget if you have a small business.
A budget helps you plan and manage your business, stay in control of your financial affairs, make better decisions, and save money.
When to create a business budget
- When you start a business:
- As soon as your business starts making money, it’s important to put a budget in place. You need to know how much money is coming in and going out of the company so that you can make sure that everything is running smoothly. If there are any problems with cash flow, it’s best to address them before they become too big.
- When expanding your business:
- It’s also important for small business owners who are growing their companies (and therefore increasing their expenses) to create budgets so they don’t get caught off guard by unexpected costs or other costs such as increased taxes on profits made from investments with losses during previous years which may require additional funds for tax payments when filing returns at year end (April).
How much does it cost to create a budget?
How much does it cost to create a budget?
Depending on the size and complexity of your business, creating a budget can be expensive. Business owners who want to track their spending in detail may need software with extra features like inventory management or payroll management. You can find some free online tools that allow you to set up simple budgets without investing in software right away–but if you have multiple employees who need access to the same information at once, it might be worth paying for something more robust. Ultimately though, no matter what kind of budgeting system you choose (or whether or not one is even necessary), making sure that everyone knows how much money is coming in and going out is crucial for staying profitable as an entrepreneur!
The four sections of your small business budget.
A budget is a plan for your business. It’s how you know what to expect and what to do next. Your small business budget should include these four sections:
- Projection – This is where you’ll put in all the projected expenses and income for the next three months, six months and year.
- Expenses – This section includes everything from rent or mortgage payments to office supplies and marketing costs. You might also have separate categories for payroll taxes and health insurance premiums if those are expenses that aren’t included in other categories on your income statement (the part of the budget where you list all expenses).
- Income and cash flow projection – Here’s where we take our projections from above and calculate how much money we need each month just so we can pay ourselves! The goal here is to make sure our cash flow covers both fixed costs (like rent) as well as variable costs such as payroll taxes before considering anything else like new equipment purchases or marketing campaigns.”
A projection is a financial forecast. It’s useful for small business owners to create projections so they can see how much money they will receive and spend in the future, which helps them make better decisions about their business.
A good projection includes:
- A summary of cash flow–how much money you expect to have on hand at any given time during the year (monthly or quarterly). This includes all income sources, such as sales and services provided by your company; plus all expenses related directly to running your business operations, such as payroll costs or rent payments on office space; plus any other regular costs such as advertising campaigns or licensing fees that aren’t part of normal operations but occur regularly over time because they’re part of doing business under certain conditions (like paying taxes).
You need to determine the expenses of your business. What are the costs of doing business? You can categorize these expenses into three categories: fixed, variable and discretionary.
Fixed costs are those that remain constant regardless of how much revenue you generate or what you sell. For example, rent on office space or equipment leasing are examples of fixed costs because they don’t change with sales volume or product mix. Variable expenses increase as sales volume increases but decrease when there is a decline in sales volume (e.g., advertising). Discretionary expenses are those that can be changed at any time without affecting operations (e.g., salaries).
Income and cash flow projection
Once you have a handle on your expenses and income, it’s time to project how much money you expect to make in the coming months. This is where many small business owners get tripped up because they’re not sure how to go about estimating their income and expenses.
In order for this step of the process to work well, it’s imperative that you use a spreadsheet or some other type of software that allows you to easily track your actual income and expenses as they happen throughout the month. You can use these figures as inputs when creating your projections for future months (and years).
You may also want to consider using an accounting software package such as QuickBooks Online if available; however in my experience this can be overkill for most small businesses because most don’t generate enough revenue at first-year stages where these tools are really needed most: reporting taxes with ease!
You can’t manage what you don’t measure.
Measurement is the first step in establishing a baseline for your business. It’s important to measure your progress because it gives you the ability to understand what is working and what isn’t in your business, which will help inform future decisions.
Measurement allows you to see the big picture of where each aspect of your company stands at any given time, so that if something needs attention or correction, then it can be addressed immediately rather than waiting until later when it becomes more difficult or expensive (or both). In addition, measuring gives small businesses owners an idea of how much money they have left over after paying all their bills–so they know whether they’re making enough profit!
A budget is a tool that helps you manage your business. It allows you to see where your money goes and plan ahead so that you can avoid spending too much on certain things, while still being able to afford others. By creating a budget, you’ll be able to make better decisions about how much money should be spent on each expense category each month or year (depending on how often). This will help ensure that your business stays profitable throughout its life cycle!