🍦How to Write a Simple Business Budget

Hey friend —

As a small business owner or entrepreneur, managing your finances can sometimes feel overwhelming. Between chasing your goals and keeping the lights on, it’s easy to lose track of where your money is going. That’s where a business budget comes in – a straightforward way to take control of your finances and avoid overspending. Let’s break it down into simple, manageable steps.

Step 1: Know Your Income

Start by identifying how much money your business brings in each month. This includes payments for your sales invoices or even your deposits coming in from Stripe, GoCardless or other payment collection platforms. If your income varies a lot from month to month, use an average based on the past 6 months for your projections.

Step 2: List Your Expenses

Make a list of all your business expenses. Break these into two categories:

Fixed Expenses: Costs that stay the same each month, like rent, salaries, insurance, and software subscriptions.

Variable Expenses: Costs that fluctuate, such as marketing spend, raw materials, or utilities.

Be as thorough as possible to ensure you’re not caught off guard by unexpected expenses.

Step 3: Separate the Essentials from the Extras

Not all expenses are created equal. Highlight the costs that are essential to keeping your business running. Then, identify non-essential expenses, like that extra software you rarely use or a subscription you could cut back on. This will help you prioritise when funds are tight. A term I came across recently is SNUP = Serves No Useful Purposes. If you are looking at any of your expenses and feeling like it fits SNUP either look to use it and make the most out of it or get rid of it and make space for something else.

Step 4: Set Spending Limits

Review your income and expenses to set realistic spending limits. This ensures you’re not spending more than you’re earning. If your outgoings exceed your income, look for areas to trim costs or consider ways to increase revenue.

Step 5: Plan for the Unexpected

Building a buffer for unforeseen expenses is crucial. Aim to set aside a portion of your income each month. I like to think of this as an abundance fund and something that you can grow to have peace of mind and security but whether you call it a contingency fund or a rainy day fund, the principle is teh same. It will give you peace of mind and prevent financial stress when the unexpected happens.

Step 6: Track and Adjust

A budget isn’t a “set it and forget it” tool. Regularly review your budget to see how you’re doing and adjust it as your business evolves. Tracking your spending will also help you spot trends and opportunities to save. It’s useful to have it to hand on a Google Sheet or within an app or piece of software so that you can refer to it at least each month and just sense check if you’re on the right track.

Final Thoughts

Creating a simple business budget doesn’t have to be complicated. By following these steps, you can take charge of your finances and focus on growing your business without the worry of overspending.

Need help getting your finances in order? Cone Accounting specialises in helping small businesses just like yours. Let’s work together to achieve your goals.

Written and edited by Ben Nacca