How To Use a Budget Template

It’s a new year and that means new business goals!

With new goals, we need an organized plan to take us there.

A budget is a financial tool that can help you plan where you’ll be spending your money to help your business grow. Additionally, it can help you understand how much you are spending in each area of your business. However, as first-time small business owners, it’s not always obvious how many expense categories actually affect us…and how much they cost your business.

Our TrulySmall budget template can help guide you in your financial planning.

In our budget template, we’ve included common income and expense categories that small businesses typically deal with. Helping you avoid the guesswork and start planning right away.

How to use a budget template

Using a budget template is a helpful exercise to plan your business’ finances. However, it’ll only be helpful to you if you use it properly. Here are some things to consider when using a budget template:

Use real data

At the start, you may need to do some guesswork. Especially if you work with clients, it’s hard to predict how many new clients you’ll have each month. However, over time, it’s important to look at past invoices and bank statements to see how much you actually made and spent. Your business will only grow if you accurately track your income and spending using real data.

Pro Tip: Be sure to record the actual numbers. Don’t be scared of thinking about what you might see. You’re building a budget, it’s going to be ok.

Add your logo

We’ve included a section at the top for your logo and company name. This is a budget for your business, after all, time to make it personal and official.

Budget, Actual & Difference

We’ve included three columns in our budget template: budget, actual, and difference. The first column is for the amount that you budgeted for, the second for what you actually spent/made and the third for the difference between the two.

It doesn’t matter which column you fill in first, i.e. budget and actual. Depending on the budgeting technique you use, it may be easier to input your actual spend first and then build a budgeted amount for the next month. Instead, just ensure that your numbers are in and the difference between what you planned for and what you actually spent is tracked.

Pro Tip: Keep a close eye on the difference in each category month-to-month. This can uncover some profitable opportunities you may have missed.

Use categories as guides, but make it your own

We’ve included the most common categories small businesses typically use. However, your business is unique and it may have different income sources and expenses than others. Adjust the categories as you need and customize them to your business.

Review your budget once a month

The main side-effect of using a budget template is to build good, financial habits. Reviewing your budget once a month can help you gain clarity in your business and understand how much money you’re making.

Income

You want to start creating your budget by recording all of the ways you make money i.e. your income sources. In the Sales section of the budget template, we’ve included space for multiple income sources as each business model will vary. If you only have one client, you’ll only need one cell. However, for those who have multiple clients, revenue streams or even payment terms, it’s important to track and label every single one of them.

Non-operating income is a section for all the sources of revenue your business receives that are unrelated to your core business activities, e.g. investment interest, dividends, etc. Typically when you’re starting out, a small business is not likely to have non-operating income. If you do have some, be sure to note it down.

Now that we have all of your income sources noted down, record actual numbers from your client invoices. At the bottom of the section, add up all the numbers and you’ll have your Total Income for the time-period.

With your Total Income sorted, it’s easier to say how much money your business can comfortably spend while still growing.

Expenses

Having a good grasp of your business expenses will save you money in the long run. One of the common reasons why a business will fail is overspending. Using our budget template we aim to help you identify key categories where you may be overspending. There are key components of the Expenses section: fixed costs, variable expenses, and non-recurring expenses.

Fixed costs

Let’s start off with our fixed costs. Fixed costs are expenses that have the same value each month. It doesn’t matter if you sold more products or took on more clients that month, you will still pay the same price for this expense. This makes them easier to track.

We’ve included the most common categories for fixed costs: rent, phone, internet, insurance, and payroll.

Some other typical fixed costs to consider include software subscriptions, car insurance, and bank fees.

Pro tip: It may help to consider your emergency fund as a fixed cost to help you automatically save for a “rainy day.”

Variable expenses

Variable expenses are expenses that will change month-to-month. Depending on how much you sell or don’t sell could change how much you spend on expenses each month.

We’ve included common categories such as marketing, research and development (R&D), utilities, office supplies, travel, and meals/entertainment. Some additional categories to consider are packaging, shipping, and transaction fees.

If you sell physical products, some other common variable expenses include the cost of goods sold (COGS), i.e. the sum of individual parts it takes to make the product.

Pro tip: Small businesses usually struggle to track all of their variable expenses. This leads to overspending. With the budget template, you can identify specific categories where you are overspending. This gives you the opportunity to investigate further and see if that was a necessary or unnecessary expense.

Non-Recurring Expenses

Non-recurring expenses may not happen often but are still important to track. You may be on a budget in other expense categories but that one big purchase could really push back your plans.

Typical non-recurring expenses include purchases of equipment, computers, and furniture.

Pro tip: It is easier to allocate money from other business areas for big non-recurring purchases when our fixed costs and variable expenses are already tracked.

Track Your Budget Monthly

As an important atomic habit, you should revise your budget once a month. It’s not good enough to just set a budget, you need to make sure that you’re actually sticking to it.

After all, goals can only be achieved if you track them.

What you want to do is record how much you actually made and spent in each business category. How much did you make from each client? How many products did you sell? On the opposite side, how much did you spend on office supplies, coffee, marketing, etc.? Did you make any non-recurring purchases?

Don’t be afraid of the results, part of being an entrepreneur is about being able to pivot.

Pro Tip: Budgeting is not a one-time exercise. If you set a budget and it’s not working for you, note down the actual differences and reset it for the next month.

Best Practices

We wrote a guide on budgeting best practices here, but there are two main points from it that we want you to consider when using a budget template.

Review your budget once a month

It’s essential to keep track of your actual income and expenses each month. The budget will help guide your decision-making but as we know there are times when we make more or less revenue than we expected. Track the actual difference and make sure that you are operating within your budget.

Set it, evaluate it and reset it

“But, I spent so much time setting a budget in the first place and you want me to just throw it away?”

That’s not what we’re saying. It’s about being flexible.

Chances are you’ll most likely overspend in a few categories causing you to go over budget in certain months. Evaluate the categories that you are overspending in and reset the budget for next month with a more accurate value.

Now, review your budget next month and see if you’re staying within it.

Pro Tip: Oftentimes we set budget amounts that aren’t realistic for our business. Then we overspend again the next month and we try to move money around from the wrong categories. Set it, evaluate it and reset it. Nobody gets it right the first time.