Download a Budget Template (Excel) - FormFactory

Download a Budget Template (Excel)

What is a budget?

In short, a budget is a financial plan. It is a financial document used by individuals or companies to project future income and expenses.

A budget is a vital business tool as it determines the profitability of a company by controlling and monitoring expenses, revenue and cash flow. If the company’s costs are more than the income it can generate then the business is running at a loss. If the income outweighs the costs the business is profitable.

If a profit is projected on the budget the company can choose to expand the business or invest. On the other hand, if a budget predicts a loss, a company may have to look at cutting some costs.

When starting a new business, a budget is an essential part of the business plan. A budget should also be included in a marketing plan, business proposal and many other business documents. Existing businesses should ideally budget monthly for at least a year and quarterly for at least three years. At the very least, existing businesses should budget annually.

The purpose of a business budget

To monitor the performance of a company it is essential to budget. Primarily, a budget is used to plan and control the financial future of the company. It can also be reviewed against actual sales and expense figures to address problems before they become a catastrophe.

There are many reasons why a company needs to budget, including:

  • To calculate how much start-up capital the business needs for the business plan to be executed.
  • To determine how much the business can afford to pay out on salaries.
  • To apply for a business loan from financial institutions and banks.
  • To seek funding from investors.
  • To determine how much profit a business needs to make to cover expenses.
  • It drives important business decisions (such as hiring staff, cutting expenses, increasing marketing, etc.).
  • To set financial targets and achieve business objectives.
  • To motivate staff.
  • To minimise risk to the company.
  • To allocate appropriate resources to projects.
  • To anticipate potential financial problems.
  • To determine a gross profit margin.

How to create a business budget

It is best that the owner(s) of the company draft the budget as he/she best understands the business’ needs and environment. It is, however, also wise to seek the guidance of an accountant to ensure that the profit margin is appropriate.

A budget can be created on financial software (preferably) or manually on a spreadsheet. You can download a business budget template for Excel from Microsoft. Your budget template should include a blank column for recording actual results in real time. This will help you monitor the performance of the company and make adjustments to the budget if necessary.

The format of a business budget is based on the mathematical equation “sales – expenses = net profit/loss”. The budgeting process for a new business is entirely different than that of an existing business.

Existing business New business
  • The main purpose of the budget is to determine the projected profit or possible loss for a budget period.
  • The main purpose of the budget is to determine start-up capital and operating costs.
  • The average costs and sales can easily be determined by looking at the company’s financial history.
  • Figures are based on research and assumptions as no historical data exists.

A good place to start when creating a budget is to determine the target sales and profit amounts. It will help you decide how to distribute funds to cover the costs. Be as realistic and accurate as possible – leaning to the conservative side. New businesses must base these amounts on research into other similar companies.

There are three types of business costs:

  • Fixed costs are independent of sales revenue. Examples of fixed costs include rent or mortgage payments, insurance, loan repayments, vehicle and equipment leases, and fixed utility amounts (like internet costs).
  • Variable costs increase or decrease in correlation to sales volumes. For example, raw materials, freight, commissions and running utilities (like electricity, gas or water).
  • Semi-variable costs are fixed costs that can be influenced by sales amounts. Salaries and advertising are examples of semi-variable costs.