How To Create A Budget Template For Your Small Business

Every business needs a budget. This valuable document lets you track revenue and expenses, and it can lead to better decisions. You also may need to show your business budget when you’re getting small business financing.

However, generic budget templates can feel like they are missing something special. Instead of using a basic budget template, you can customize your document so it’s relevant to your business. This guide will unveil how to create a budget template for your small business.

Why personal budget templates may fall short

It’s pretty reasonable for business owners to start with standard budget templates that cover budgeting basics. However, these templates can feel restrictive as you create more detailed budgets. These are some of the reasons why standard budget templates may fall short.

Common limitations of generic budget templates

Generic budget templates are good starting points, but they lack customization that some companies need.

The standard templates don’t show industry-specific expense categories and attempt to be a one-size-fits-all solution. Some of those categories are essential for financial reporting, and you will need a more advanced budget template for those items.

A standard budget template also doesn’t account for business cycles. It may be better to group your quarters in different time frames compared to the traditional four seasons. That’s why some companies have fiscal years that end before or after December 31. If your company’s fiscal year deviates from a traditional year, it may require a different template.

Benefits of a customized budget template

It takes more time to create a customized budget template, but after the hard work is done, you get to tap into a bunch of benefits. These are some of the advantages that come with a customized template:

• Better alignment with your specific business goals: You can monitor your income and expenses to see if you are on track with key goals and your financial plan.
• More accurate financial forecasting: A customized budget template makes it easier to display critical information first, which can lead to more reliable forecasts.
• Improved tracking of business-specific metrics: You can focus on key metrics and highlight important parts of the budget template instead of leaving it generic.
• Greater flexibility as your business evolves: Customized budget templates are easier to change than their generic counterparts.

Essential components of an effective small business budget template

Creating your own small business budget template will give you more flexibility, and it can be an enjoyable experience. Including all of these components in your template can make it more reliable and prone to fewer changes.

Income section structure

The income section includes your company’s core revenue segments. Each dollar you earn should be categorized into one of those segments. However, a budget doesn’t only contain your current income numbers. It also sets income projections based on business cycles, seasonality, product demand, and other factors.

A good way to set realistic projections is to compare your company’s performance year-over-year. If your company’s revenue grew by 20% year-over-year, you can expect a similar result if everything stays the same. However, any new projects, changes to consumer behavior, and other factors can cause projections to be raised or lowered.

Many publicly traded corporations set modest expectations each quarter instead of establishing sky-high revenue projections, and it’s a wise policy for many business owners to do the same.

Expenses categories that matter

The expenses section lets you see how your company currently allocates its income. This part of your budget template should consist of a few key categories within your industry. Business owners can use the “Other” category for smaller purchases that don’t fit in one of the company’s key categories.

When you create a customized budget template, you can get more granular with your numbers. Business owners can distinguish which expenses are one-time costs and which ones are recurring. Seeing individual expense items can help business owners anticipate their monthly costs and determine if any expenses can be removed.

Business owners should also include a tax payment schedule in their expenses. Taxes represent a business owner’s biggest expense. Allocating a percentage of every dollar you earn toward tax payments can leave you more prepared for tax season.

Profit and loss calculation design

If you create a small business budget in a spreadsheet like Excel, you can create formulas that let you conduct critical profit and loss calculations within seconds. Spreadsheets can go deeper than a template by offering monthly, quarterly, and annual breakdowns of fluctuations in your revenue and expenses.

Small business owners can create charts and graphs with this data to visualize how their money moves. It’s also possible to use this information to create forecasts for future earnings.

Step-by-step guide to building your custom budget template

Building a custom budget template is pretty straightforward. All you have to do is follow a few simple steps.

1. Select the right platform

You will need a spreadsheet like Excel, Apple Numbers or Google Sheets to create a custom budget. You can input revenue streams, categorize your expenses, and include formulas that let you conduct important calculations in a matter of seconds.

Spreadsheets are a good starting point, and some business owners are happy enough with this approach. However, other business owners prefer to invest in budgeting software tools like QuickBooks and Scoro. You will have to do more research for software and assess the pros and cons before deciding which one is right for your business.

Solo business owners typically don’t need anyone else to access their budgets. However, large companies often have multiple people reviewing budget items, and collaboration will become more essential. Google Sheets makes it easier for multiple people to modify the same budget spreadsheet, and some accounting software tools enable this feature as well.

2. Create your template structure

Once you have decided on the right budgeting tools, the next step is to create a template structure that categorizes revenue streams and expenses. Business owners have to decide if they want to track monthly, quarterly, or annual figures. You can also track all three of these financial data points if you organize your template structure sufficiently.

The template structure should include formula calculations. That way, you won’t have to pull out a calculator to figure out how fluctuations in your income and expenses will affect your profit. Spreadsheets and accounting software tools can automatically perform these calculations for you if you provide the numbers.

A customized template can also include bars and charts that allow the business owner and collaborators to visualize the budget and its impact on the bottom line.

3. Populate with your business data

Once the template is complete, the final step is to fill in your business data. Customized budgets are live documents that go through regular changes, so you will have to review this resource regularly. You will have to regularly gather the latest revenue sources and expenses so they show up in the budget.

This information can help you make more accurate and reasonable revenue and net income forecasts. You can use those forecasts to set business goals and determine the key action items that will let you meet or exceed expected earnings.

Setting up forecasts makes it easier to use variable tracking to see if big projects are over budget or under budget. Business owners can review these projects with more scrutiny to determine why obstacles are getting in the way or what’s going right.

Making your budget template work harder

You can create a simple budget that lets you calculate your company’s revenue and expenses. However, you can make your budget template stand out with a few key additions.

Building in financial ratios

Financial ratios help business owners gauge their progress with covering financial obligations and if the current model is sustainable. These are some of the popular financial ratios you can consider:

• Quick ratio: This ratio measures the sum of your current assets and inventory against current liabilities.
• Current ratio: This ratio measures your current assets against your current liabilities.
• Debt-to-income ratio: This ratio measures your monthly debt payments as a percentage of your monthly income. You can create a calculator or use a pre-built calculator like the one below.

Adding cash flow forecasting

Not all revenue sources arrive in your bank account right away. This group of income streams, known as accounts receivable, drip into your bank account over time. While it can feel like a pleasant surprise when these funds finally reach your bank account, an advanced budget template can include accounts receivable.

Small business owners can plan their expenses over when they expect to receive their accounts receivable. It’s also possible to discover potential cash crunches before they happen. For instance, if a few projects won’t pay out in a few months, you may want to consider a working capital loan to cover your finances during the slower months.

Using your budget template effectively

Maximizing your budget template can help you make better financial decisions and achieve meaningful business goals. These quick tips can get you on the right path.

Regular review schedule

Checking your budget every day, week, or month allows you to see what is happening in your business. Frequent reviews make it easier to adjust as market conditions change and gauge your progress with forecasts.

While some reviews will just involve looking over the numbers, it’s good to include quarterly assessments. These assessments allow you to make bigger adjustments to your forecasts and how you track financial transactions.

You can also see significant variances between your expected budget and your actual spending. Any unfavorable variances can prompt a business owner to take a deeper look at expenses and look for ways to keep costs under control. Sometimes, costs go up solely due to inflation instead of poor money management. In that case, a business owner should adjust their expectations based on these types of variances.

Turning budget insights into action

Templates let you access financial data points quicker, and that can result in more efficient decision-making. Those decisions allow you to take data-backed actions that can lead to new growth opportunities and better profit margins.

Small business owners can communicate their findings with stakeholders to win approval for ambitious projects. A customized budget template also makes it possible to set realistic but challenging financial goals and get everyone on the same page.

Bottom line

A customized budget template is a great resource for business owners that enables better decision-making. Companies get to stay on top of their finances. Not having a good budget risks overextended expenses and missing out on compelling opportunities.

It may take some time to create the right template for your budget. However, it gets much easier to manage and update this living document once you have established your preferred budget template.

Frequently asked questions

• How can I make my own budget planner?
  

  You can start by listing your income and expenses in a spreadsheet. Then, it’s a matter of reviewing the document from time to time and making any appropriate adjustments.

• How do I create a personal budget spreadsheet?
  

  There are many ways to go about creating a personal budget spreadsheet. After choosing a resource like Excel, Numbers, or Google Sheets, you can list the months of the year in the columns. Then, you can use the rows to list individual revenue streams. You can also track expenses by duplicating the same columns but then listing expense categories instead of revenue streams.

• Does Excel have a budget template?
  

  Yes. Excel lets business owners choose from several budget templates. You can customize these templates so they align with your preferences.