How to Create a Simple Business Budget

November 11, 2016

If you’ve ever taken the time to sit down and figure out where all of your money goes, you may find yourself cringing at some of those unnecessary expenses. The truth is that all businesses have a bit of “extra” at first, things that need to be shaved down to a minimum. Creating a budget is the best way to ensure every penny your business earns is going to the right place.

If you want to know how to create a simple business budget, follow the steps below:

Step 1: Figure out Fixed Costs

Many people will tell you to figure out how much you’re earning first, but we like to calculate expenses first. That way, we can ensure our income is covering our expenses.

First off, the fixed costs, things like:

Utilities
Salaries
Government and bank fees
Website hosting
Legal/accounting/insurance fees
Rent or mortgage
These costs will remain the same from month to month, so they’re the foundation of your budget.

Step 2: Include Changing Expenses

Next, figure out your added expenses, the ones that tend to change from month to month. This includes:

Materials
Contractor wages
Advertising
Commissions
Transportation
Travel
Events

Even if you don’t expect these expenses to occur every month, it’s a good idea to factor them into the budget. It’s much easier to set aside $100 per month for your annual business trip than try to scrounge up $1,000 when the time comes. Always set aside money in advance of the expenses, and you’ll never be caught flat-footed.

Step 3: Determine Income

Now it’s time to determine your business income. You need to not only look at the income of your product or services, but you need to examine things like:

Investment income
Savings
Loans
Additional income from secondary jobs
All of these things will help you to figure out how much of the previous two elements you can cover easily, and how much you’re missing to be “in the black”.

Step 4: Include Single-Occasion Expenditures

There are always going to be “one time” expenses:

New furniture for the office
Special software to improve productivity
Equipment upgrades or replacements
Office supplies
Gifts

These expenses are no less important, but nearly impossible to predict. It’s vital that you set aside a monthly sum for these expenses. That way, when they do crop up, you’ve got the money to cover it.

Step 5: Adjust as Necessary

Your budget doesn’t have to remain the same from year to year. In fact, given the changes in the economy, it’s important for you to adjust your budget on a regular basis. Examine your budget for pockets of money that are sitting dormant and could be put to better use, or for expenses you’re not quite covering properly. Adjust your budget regularly to keep up with the changes in your company as well.