Create a Small Business Budget in 5 Simple Steps

Want to protect the financial health of your small business? You need a business budget. Here’s how to create one.

When you build a business, there are a lot of things to stay on top of, from marketing and finding new clients to building a website and establishing your digital presence.

But there’s one element that you want to stay on top of from the very beginning—and that’s your business budget.

Having a detailed and accurate budget is a must if you want to build a thriving, sustainable business. But how, exactly, do you create one?

Let’s take a look at how to create a small business budget in five simple, straightforward steps.

What’s a Business Budget—and Why Is It Important?

Before we jump into how to create a business budget, let’s quickly cover what a business budget is—and why it’s so important for your small business.

A business budget is an overview of your business’ finances. It outlines key information on both the current state of your finances (including income and expenses) and your long-term financial goals. Because your budget will play a key role in making sound financial decisions for your business, it should be one of the first tasks you tackle.

And, as a financially savvy business owner, you’ll also want to have a budget in place to help you:

Make sound financial decisions. In many ways, your business budget is like a financial road map. It helps you evaluate where your business finances currently stand—and what you need to do to hit your financial goals in the future. Identify where to cut spending or grow revenue. Your business budget can help you identify areas to decrease your spending or increase your revenue, which will increase your profitability in the process. Land funding to grow your business. If you’re planning to apply for a business loan or raise funding from investors, you’ll need to provide a detailed budget that outlines your income and expenses.

Now that you understand why business budget creation is so important, let’s jump into how to do it.

Step 1: Tally Your Income Sources

First things first. When building a small business budget, you need to figure out how much money your business is bringing in each month and where that money is coming from.

Your sales figures (which you can access using the Profit & Loss report function in FreshBooks) are a great place to start. From there, you can add any other sources of income for your business throughout the month.

Your total number of income sources will depend on your business model.

For example, if you run a freelance writing business, you might have multiple sources of income from:

Freelance writing projects A writing course you sell on your website Consulting with other writers who are starting small businesses

Or, if you run a brick-and-mortar retail business, you may only have one source of income from your store sales.

However many income sources you have, make sure to account for any and all income that’s flowing into your business—then tally all those sources to get a clear picture of your total monthly income.

Step 2: Determine Fixed Costs

Once you’ve got a handle on your income, it’s time to get a handle of your costs—starting with fixed costs.

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