A business budget is key to running a profitable small business. A budget takes a bit of time to set up and calculate but is important for financial management and business growth. With the right template, this process can easier and faster than you might imagine. We’ve researched the financial information needed to create a budget along with free templates available for download. Read on for comprehensive information you need to know.
What is a Business Budget?
The SBA website has the best description of a business budget that we’ve read:
“In its simplest form, a budget is a detailed plan of future receipts and expenditures.”
A small business budget should:
- Show sales you need to cover your business costs
- Figure out how much you can put back into your business
- Reveal when you can hire additional employees
Why is it Important to Set and Track Your Business Goals?
A budget gives you control by putting you in the driver’s seat. Review your next quarter’s budget to anticipate ups and downs so you can determine when to purchase inventory or hire. It’s also a helpful way to schedule marketing initiatives to spark growth.
Simple Tips to Help you Create a Budget Plan
- Gather historical information
Look at three to four years of historical data. These numbers will show seasonal revenue and expense fluctuations.
- Estimate sales and set profit goals
No one can predict revenue flawlessly. To estimate sales and set profits, make connections between sales and expenses. Look at past patterns to come up with a reasonable estimate. If your records are appropriately organized, you’ll have an easier time. Reach out to a financial professional if you’re having trouble.
- Determine fixed and variable costs
Fixed costs can include rent payments, equipment costs and payroll. Variable costs may include utilities, inventory costs and travel expenses.
- Calculate your profit margin
Profit margin is a profitability ratio calculated as net income divided by revenue, or net profits divided by sales. For a comprehensive description of this ratio, visit Investopedia. You’ll learn the important components and how to calculate your business profit margin.
- Adjust your budget over time
The SBA suggests that if your budget is going to work for you, you should plan on revisiting it on a monthly basis. You may discover indicators that you need to adjust your budget to stay profitable. Your expenses, staffing needs and inventory purchases might need to be tweaked.
Three Budget Templates to Download
Why go it alone when you can take advantage of existing templates? We’ve researched various kinds of budges and the best way to track. Below are several free downloads you can use from Capterra, Google and accounting pro Seth David.
Killer Small Business Budget Template
Fundera features a business budget template designed by Seth David. David provides consulting and training services in Accounting and productivity based software. Read the full article (linked above) and watch the video for clear and detailed information about how to use the template.
Capterra Free Small Business Budget Template
This site gives the following scenario:
“Imagine going into a month having no idea what you were going to spend or how much money you were going to make. Maybe you’re spending five nights at the Ritz, but maybe you’re eating Taco Bell for dinner every night. If you’re interested in having money in your bank account at the end of the month, you might want to start thinking ahead.”
Once you’ve solidified your small business budget, you might have determined that low-cost funds benefit your business. Your best bet is to consider a low-cost SBA loan that can be used for working capital, high interest debt refinance, real estate purchases and more. SmartBiz Loans has a new tool to help you discover if you’re qualified for a low-cost loan before you apply. The new SmartBiz Advisor™ is an online, educational tool to help you learn how you can get your business SBA or bank loan ready before you apply – no cost involved. You can assess key criteria banks consider and where your business stands on each.
* The information provided through SmartBiz Advisor, including the Loan Ready Score, is for educational purposes and is not the same as scores used by lenders for credit decisions. SmartBiz Advisor is not a financial or legal advisor as defined under federal or state law. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.