Small Business Budget Tips and Strategies for Success

Running a small business is hard work; without sound financial planning, unexpected expenses or other surprises can make things even more challenging.

Luckily, budgeting for small business overhead, inventory, labor, and equipment is relatively simple once you grasp the basics of how it’s done.

Here are the fundamentals of small business budgeting, including key types of budget calculations and how to create a standard small business budget from scratch, step by step.

Why Do Business Owners Need a Budget?

Creating a budget is essential to accurately estimate the costs of running a business. By carefully mapping out projected expenses against expected income, business owners can make better financial decisions associated with expanding operations, hiring new employees, and ensuring sustainable profitability in the future.

Without properly budgeting small business expenses, costs can quickly begin to take an increasing share of revenue, which can stifle growth and threaten the long-term stability of your company. Unless you track and manage costs regularly, your business could encounter numerous financial obstacles that could lead to downsizing, layoffs, or even bankruptcy.

What Are the Essential Steps of Building a Business Budget?

Before creating a budget for your small business, ensure that all your financial records are readily accessible and in order. After collecting all the necessary information, including income statements, employee pay stubs, invoices, and vendor orders, you can start building a yearly budget.

While it’s possible to simply create a budget from scratch using an Excel spreadsheet, you may be able to save some time by searching online for a ready-made business budget template.

Follow these critical steps to build a comprehensive budget you can depend on to keep your business running smoothly.

Evaluate All Your Sources of Revenue

Start by adding revenue streams associated with your business. This should include gross sales of products and services rendered online or in the physical store. Other revenue sources include subscriptions for customer memberships and convenience fees for financial transactions.

Your income statement will vary depending on sales volume each month, so you’ll want to examine revenue from a quarterly or year-to-date standpoint to get an accurate idea of how much your business is making.