How to Use Your Business Budget
Your business will reap the benefits of budgeting if you update the budget monthly, using your expenses and income from the prior month as your guide, while also keeping in mind your firm’s financial goals or targets for the year. Additionally, work with any other business stakeholders to see if they have information on upcoming issues that could impact the budgeted sales and expenses, either positively or negatively. This enables you to adjust your budget and financial expectations as you go. Your company’s monthly budget review may indicate where efforts to meet business targets have been successful. For example, if you switch health insurance carriers to obtain lower-cost coverage, you can see how that change has affected your bottom line. A monthly business budget review can also help you spot potential problems. For example, if you have a retail business, you may realize you need to ramp up your advertising spend in the fall to take advantage of the holiday shopping season. Or, if you’ve made changes that could have tax implications for your company, you may need to increase your budgeted accountant expense in anticipation of the extra work required. The following worksheet lays out the income statement line items you can use to set up a basic business budget. Depending on your business, you may include additional types of income or expenses. This worksheet is designed to give you a general idea of items you should include in your business budget. An Excel Spreadsheet works well for this task. However, even if this is the case, consider drafting a basic budget, like the one on this worksheet. Even the best-established business can run into problems with its supply chain, or face a sudden, unexpected expense like a substantial rent increase. A budget will also reveal additional areas where you could shave costs to increase profits. The more data your business can record and track, the better off you’ll be. Having a budget in place, even if it’s rudimentary and only updated once per year, allows you to plan for those eventualities and be more prepared when they happen.
