How to Write a Business Budget

Unfortunately, many small business owners neglect the crucial step of creating a clearly defined budget before spending money on behalf of the business. Without a budget the business is in danger of either overspending or spending on the wrong things because there are no limitations. A good budget will give the business owner a clear idea of how much money is available to spend, where to allocate the money, and when adjustments need to be made to the budget and the business model as a whole.

How to Write a Business Budget

Use historical data from your business from prior years to estimate your business budget for the upcoming year. This will help you decide on the total amount of money that you should be working with for your overall budget as well as the more specific categories that you will list in your budget. If this is a new business, look at the annual reports of other businesses that are similar to yours to see how much these companies spend annually. Then scale the numbers up or down to be consistent with your own business.

  • List the general categories for your budget in an Excel worksheet (column A). Common categories for a business budget include marketing, research and development, employees and independent contractors, office supplies, and equipment or tools. Add your own categories depending on your business type. Write this business budget in Microsoft Excel because it allows you to do automatic calculations.
  • Break each general category of your budget down to more specific classes. For instance, under marketing, you would divide this into advertising, promotions, trade shows and website expenses. You can further subdivide your advertising budget into online ads, radio ads and newspaper ads.
  • Create five new columns in your spreadsheet—four columns for each quarter and one final column that will total your budget for the entire year.
  • Estimate the amount of money to be allocated to each category based on the factors that are most important to your business and your historical data. Break these numbers down by quarter and enter the amount in the appropriate column.
  • Make adjustments where there is room for improvement. For instance, if you noticed that last year you did not spend enough on online advertising, add more to that category. If you spent a lot of money on product development but it yielded little to no results, scale back on that category. Your budget will be highly dependent on the type of business that you run. For example, if you run a billboard rental company, you might need to allocate a large amount of your budget toward equipment maintenance costs.
  • Total everything at the bottom of your spreadsheet for each quarter. Total everything for the year in the last column of your spreadsheet so that you can get an idea of your yearly expenditures on each category in your budget. Finally, total that last column so that you can get the total spending for the year. Make sure that you are meeting your total expenditure limit as determined in step one. Make adjustments as necessary.
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The Objectives of a Business Budget

A business budget is one of the essential tools for properly directing a business. Business budgeting involves forecast sales, expenses and revenue. Not having a budget is the equivalent of getting on any airplane and telling any pilot “Take me anywhere you are going.” You’re not going to necessarily wind up in a good place for your business if you don’t have a business budget. By understanding the objectives of a business budget, you can more effectively operate your business.


  • According to the site QFinance, budgeting helps a company accurately and efficiently plan and track revenues, expenditures, cash flows, capital and investments. Significant financial problems can result without proper control. For example, if the underlying assumptions used to project cash flow are inaccurate, a company may not be able to pay its suppliers or, if it needs to borrow money to make these payments, the cost of capital is greater than if the company had used internally generated funds.


  • In the case where a company does not have enough money to undertake all of the projects wanted, budgeting helps prioritize how money will be spent, according to the site QFinance. For example, if a company is deciding between funding a new market entry, a new product or geographic expansion, budgeting can help to forecast the profitability of each alternative considering such expenses as financing, personnel and marketing. Also in the case there are company needs to reduce expenses, a budget will assist in deciding which expenses should be reduced.


  • Budgeting also supports the corporate planning process. For example, when a personnel department and affected department managers plan for the addition of new employees, budgeting helps others see the financial impact of adding staff. The positive financial impact of staff positions is sometimes difficult to quantify, but line positions such as sales positions can be more easily quantified as in projecting expected sales.Budgeting also helps gain acceptance from financial institutions, owners and stockholders for additional resources. For example, if a manufacturing company forecasts more sales but needs to carry additional inventory to support sales, a budget can clearly show why additional inventory carrying costs are required.

Operational Efficiency

  • A budget also provides for operational efficiency according to the Asian Development Bank. One example is the coordination of the purchasing department with the manufacturing department. From an efficiency perspective, Just in Time manufacturing provides for the delivery of raw materials to a manufacturing facility right when it is needed and not sooner. This approach improves operational efficiency because inventory carrying costs can be reduced.
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Project Management Quality Tools

Quality improvement business processes use clear goals and measurable objectives to allow managers to make the decisions necessary to grow their businesses. If you work in production, you can use project management quality tools to give you accurate feedback about your business. Quality improvement processes also allow you to demonstrate your management accomplishments to your supervisors or board.

Customer Surveys

  • Customer surveys are the baseline tool on which you will build you project management quality plan. To implement a quality project management process for your business, you will need to start with a clear understanding of your customer’s expectations. Use a survey to determine what standards your customer requires from your product. Ask about preferred delivery times, costs, and any other measurable variables that are required to produce a successful product.

Quality Plan

  • Your quality plan is a tool to set and communicate clear, timely and measurable goals for your business processes. Review the results of your customer survey with your line staff and fellow managers to decide on specific standards to track. Since quality improvement requires regular tracking and evaluation, you will need to design a plan that is practical and easy to document. For example, it is simpler to count the the number of products produced correctly than it is to document the levels of customer satisfaction.

Quality Control

  • Once you have agreed on a quality plan, you will use quality control tools to evaluate your progress. Quality control tools include process checklists, safety checklists, product evaluations, and production records. You can choose the quality control tools that best fit your business model, but you will need to apply those tools on a regular basis.

Performance Reporting

  • The final tool of project quality management is performance reporting. This tool provides the feedback link to ensure that your quality data is applied to improve production. You can choose to use statistical spreadsheets, narratives, or whatever format is most effective in communicating your results to administration and workers. Based on your performance reporting, you will decide on changes in your production processes to continue to grow your business.
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Business Analysis Tools

Business analysis is the process of reviewing company operations and production methods to determine how well the company generates profits. Managers use different tools when analyzing their companies, depending on the size and scope of their operations; the tools also vary based on the type of information needed to analyze the company. As managers review information specific to each department or business operation, the information helps them make important decisions regarding operations.
Business Analysis Tools

SWOT Analysis

  • SWOT is an analysis term that stands for strengths, weaknesses, opportunities and threats. This analysis tool reviews and gathers internal and external information related to the company, and managers use SWOT analysis to determine how well their company can operate in the current economic environment. Each section of the SWOT analysis contains specific information that helps managers evaluate their company’s overall performance.Strengths can include patents, company reputation, cost advantages and production methods or supply chains. Weaknesses may be things such as high material costs from poor purchasing power, little to no customer reputation or a lack of a strong market niche or resources. Opportunities may be new technologies, few government regulations or unmet consumer needs in the marketplace. Threats are changes in consumer demand, competitors with substitute goods or lower-price goods and new government regulations.

Balanced Scorecard

  • The balanced scorecard is an analysis tool that measures a company’s financial, customer, business and growth processes. It includes an internal and external review for each of these areas, measuring both objective and subjective processes. The financial part of the scorecard measures operating income, capital financing processes and the overall economic return of the company. Customer measurements include customer satisfaction and retention as well as total market share of the company. Business processes are such things as production costs, product quality and procurement methods. Growth processes represent the internal analysis of employee training and retention and hiring individuals with proper skill sets. The balanced scorecard is a useful analysis tool that reviews all aspects of a company for areas of improvement.


  • Benchmarking is a statistical type of analysis that measures a company’s strengths and weaknesses based on financial and operational ratios. Comparisons to major competitors or the industry standard ratios are imperative when using benchmarking. While this approach may be a simple analysis method, it can provide very important information regarding a company’s financial performance. Typical ratios used in benchmarking include liquidity ratios, capital finance ratios and operational ratios. Liquidity ratios measure a company’s ability to pay bills; capital finance ratios determine how well the company finances its assets and uses debt; and operational ratios determine how well the company moves inventory and improves its operations.
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The Disadvantages of a Business Budget

A business budget can be a useful tool for helping you plan for future business expenditures. However, business income and expenses can be unpredictable, so a strict budget can turn into more of a liability than an asset if it limits your ability to deal with unforeseen circumstances. Think of a business budget as a tool, rather than a strict prescription.

The Purpose of a Business Budget

  • The purpose of a business budget is to provide a financial framework to help you anticipate and meet future business obligations. A business budget is essentially a map of your expected income and your expected obligations. The process of setting up a business budget provides you with the opportunity to make assessments and choices about how you will use the money that you expect to have on hand. When preparing a business budget, you make preliminary determinations about the constraints that your business will probably face, and you propose potential financial solutions.

Unpredictable Income

  • One major difficulty presented by the process of preparing a business budget is the unpredictable nature of business income. Unless your business operates by fulfilling a predetermined set of contracts, you cannot precisely anticipate how much your business will earn. Business income is subject to variables such as weather, general economic climate and consumer perception of your segment of the economy. For example, if you own a fast food restaurant and there have been well-publicized incidents of food-borne illnesses associated with other fast food restaurants, your business sales could suffer. Conversely, your business may benefit from unforeseen publicity, giving you more working capital than you anticipated.

Unpredictable Expenses

  • All businesses face unforeseen expenses at some point. You cannot predict when your equipment will break or when you will be forced to pay an expensive customer damage claim. Preparing a business budget can limit the flexibility you need to strategize and creatively come up with ways to pay for these surprise expenses when they occur.

Unanticipated Opportunities

  • From time to time, your business will encounter unanticipated opportunities that involve expenditures that you have not written into your business budget. You may have a chance to buy a truckload of materials at a reduced cost or you may be offered a special opportunity to break into a new market with an endorsement that you could not have foreseen. If you are committed to sticking to a strict budget, you may be unable to shift gears and earn more money by using these opportunities to your optimum advantage.
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How to Create an Office Supply Budget

The office supply budget is a breakdown of costs that can serve as a spending plan. In written form, the budget specifies how the company will spend funds designated for supplies used in office operations. The plan should be realistic so it can be easily understood and adhered to. The office supply budget is a necessary tool for gauging a business’ overall expenses. Preparing a budget will allow you to manage costs efficiently and maintain a reasonable operating expenditure range that will not exceed business revenues. The basic office supply budget generally includes only the expenses which are absolutely required for operating a business effectively. The budget can be increased over time, as needed, while the business grows.

How to Create an Office Supply Budget

  • Review the office supply items that are essential to running the business. Create a spreadsheet to list items such as pens, various kinds of paper, markers, pencils, printer ink, staplers and staples, paper clips, file folders, mailing supplies, envelopes and tape. Be sure to include items that are specific to your particular business. For example, if you provide data backup or deal with media storage, you will need CDs or DVDs and other specialized supplies and equipment.
  • Review the cost of the items and get a monthly quantity total for each item. Document the calculations on the spreadsheet. Add all of the individual numbers for each item together for the monthly budget total. Then multiply the monthly total by 12 for the annual office supply budget amount. Add an additional 10 percent for expansion.
  • Research the various office supply vendors to find the most cost effective prices. Create a separate spreadsheet to compare data from various vendors for the items you use regularly to conduct business. Independent vendors will often supply quotes for you to consider. Calculate the vendor estimates for the approximate monthly average cost. Include this data plus 10 percent on the spreadsheet.
  • Compare the total vendor estimates to your current and original estimate. Create a copy of the original estimate spreadsheet from Step 1 to use in considering price changes. Use the new spreadsheet as the template for your current budget. Adjust pricing for items found for less at different vendors. Note the vendor, price and date on the spreadsheet for future tracking. Consider each item on the list and eliminate those which are not absolutely required.
  • Evaluate and review the budget on a monthly basis. Try using a budget tool such as the one offered by Microsoft to manage office supply finances. Develop a system for monitoring the office supply budget consistently. Regularly adjust and review pricing and supply usage. Adjust the budget according to new findings and trim whenever possible. If overspending occurs, take steps to find reductions in other ways by taking advantage of sales and other vendor offerings.
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6 Best Personal Budget Tools

6 Best Personal Budget Tools – Personal money management tools are resources available to help you create a budget and assist you in staying on track in meeting your budgeting plans. Budget planning might include using hard copy, computer software, online and mobile applications financial management tools such as expense trackers and budget calculators.

6 Best Personal Budget Tools

Online Programs

A number of Internet-based budget templates and worksheets are available to help you account for both your income sources and expenses. You can also view most of the data stored on the online budget websites from your cell phone, which gives you greater mobility with accessing budget data. is an example a free online money management service.

Budget Spreadsheets

If you prefer simple spreadsheets rather than online and computer-based software programs, Microsoft provides several free budget spreadsheet templates. More than 30 free budget templates can be downloaded into Microsoft Excel templates directly from the Microsoft website. This includes general personal budget templates to project specific budgets, such as a wedding budget template.

Computer-based Software

In addition to online budgeting tools, computer-based software applications such as You Need a Budget, or YNAB, is an example of a budget software designed to assist you in managing your money. A free trial download of the YNAB software is available to help you learn about the program’s features, such as an assortment of quantitative charting features.

Custom Calendars

Budget calendars help you keep track of when your bills are due and the exact day your income sources will be delivered to you. Online budget calendars generally include calendar tickler systems that can be customized to send you reminders about upcoming bills via email or text message.

Budget Calculators

A budget calculator tabulates your monthly savings, monthly expenses, annual expenses and income. Input the information into the budget calculator to automatically obtain a budget review. For example, the You Can Deal With It online budget calculator rounds up the information you input to let you know whether you are under or over budget. Bookmark a budget calculator to use as a resource to quickly run alternative budget scenarios.

Expense Trackers

Expense tracking involves accounting for your individual purchases to ensure you do not go over your monthly budget. An expense tracker tool becomes particularly important if, for example, your food expense includes meals from restaurants and frequent snack costs. In such cases, a mobile application, such as Buxfer and BillMonk, is a suitable tool to keep track of daily expenses.

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