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How to Master the Fine Art of Business Planning and Budgeting
Updated on: 5 January 2023
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Starting a business is a challenging thing: you have to work hard and do your best to ensure its success. However, the work doesn’t end even when your business actually becomes operational. You still have to do so much more to ensure that it will keep on track.
Of course, it could be hard, especially for the beginners. It seems that you have to keep an eye on so many things and focus on so many urgent tasks every day that there isn’t any time left for business planning and budgeting. However, it is very important to find that time, because business planning and budgeting are actually one of the most important things for business success.
Why so? Because a plan allows you to get a better understanding of how you see your business, how you want to develop it, and so on. When you create a plan, you set targets that you want to achieve as well as define the ways of evaluating the success of your business.
Basically, planning gives you all the necessary tools that you can use to improve your business in the nearest future. However, this happens only when planning is done correctly.
What to Include in Your Annual Plan?
If you want to create a perfect business plan, you have to know what has to be included in it and how big it will be. Of course, there are no strict limitations to a size of a business plan as each business is different. However, if you are doing it for the first time, I recommend starting with a yearly plan: it is not too big and not too short.
A good annual plan has to include the following things:
- an executive summary
- a list of products and services you offer (or plan to offer this year)
- a detailed description of your target market
- a financial plan
- a marketing plan as well as a sales plan
- milestones and metrics
- a description of your management team
In order to write it in the best way possible, you need to spend some time thinking about the current status of your company as well as how it should look like by the end of the year. Describe your target market, think about the goals that have to be achieved this year, about the products and services that have to be launched.
Visualize the information to make it easier for you to see the whole picture (this is especially important for those, who don’t have much experience in planning). You can use charts, and different diagram types such as mind maps to visualize and organize your ideas and plans.
Try choosing a few main goals for your company and add them to the annual plan being as specific as possible: for example, if you want to increase your earnings, you should specify by how much (10%, 15%, etc.). It’s also good to think about the obstacles you might face and come up with some ways to minimize the potential risks that could occur.
Remember that while a business plan has to be specific and detailed when you write it, it shouldn’t remain static by the end of the year. No business is predictable enough for this to happen: you should understand it and prepare to act quickly, adding changes to a business plan if something unexpected happens.
Business Planning Cycle
As I said, typical business planning isn’t a static thing – actually, it’s a cycle that usually looks like this:
- You take some time to evaluate the effectiveness of your business. In order to do so, you should compare its current performance with the last year’s one – or with targets set earlier this year.
- Then you have to think about opportunities that might appear as well as the threats you might face.
- Remember about both successes and failures your business experienced throughout last year. Analyze them and think what can be done to repeat/avoid them.
- Think of the main business goals you would like to achieve and be sure to add them to the new annual plan (or edit the old one according to them).
- Create a budget.
- Come up with budget targets.
- Complete the plan.
- Be sure to review it regularly (every month, every three months, etc.), making changes if necessary.
Repeat the whole cycle.
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Business Planning and Budgeting
When a business is still small and growing, it might seem unnecessary to plan its budget. However, it’s crucial if you want to avoid financial risks and be able to invest in opportunities when they appear.
Moreover, with the rapid growth of your business, you might find yourself in a situation where you aren’t able to control all the money anymore. Expansion of the business usually includes the creation of different departments responsible for different things – and each of these departments needs to have its own budget.
As you see, the bigger your business becomes, the more complicated it gets. While it’s okay to not control every cent by yourself, it is still up to you to make sure that your business keeps growing instead of becoming unprofitable. That’s why it’s so important to create a budget plan that allows you to understand the exact income your business brings by the end of the month and the amount of it, you are able to save or spend on different things.
It is important to remember that a business plan is not a forecast in any way. It doesn’t predict how much money you’ll make by the end of the year. Instead, it’s a tool for ensuring that your business will remain profitable even after covering all the necessary expenses.
Moreover, a business plan also ensures that you’ll have the opportunity to invest money into future projects, fund everything that has to be funded this year, and meet all of the business objectives.
Benefits of a Business Budget
The whole budget planning has a lot of benefits:
It allows you to evaluate the success of your business: when you know exactly how much profit your business gave you at the beginning of the year, you are able to compare it with the profit by the end of the year, understanding whether your financial goals have been met or not.
It allows managing money effectively: for example, if you save money for predicted one-time spends, you won’t be caught by surprise by them.
It helps identify the problems before they actually happen: for example, if you evaluate your budget and see that the income left after covering all the expenses is quite small, you’ll understand that you need to make more profit this year.
It helps make smarter decisions, by only investing money that you can afford to invest.
It allows you to manage your business more effectively, allocating more resources to the projects that need them the most.
It helps in increasing staff motivation.
Basically, when you have a budget plan ready, you have your back covered.
How to Create a Budget?
There are so many articles written on how to create a perfect business budget, but most of them narrow down to these 5 simple things:
- Evaluate your sources of income. You have to find out how much money your business brings on a daily basis in order to understand how much money you can afford to invest and spend.
- Make a list of your fixed expenses. These ones repeat every month and their amount doesn’t change. Some people forget to exclude the sum needed to cover these expenses from the monthly income, but it’s important to do so in order to get a clear understanding of your budget.
- Don’t forget about variable expenses. These ones don’t have a fixed price but still have to be paid every month. Come up with an approximate sum you’ll have to pay and include it in your budget.
- Predict your one-time expenses. Every business needs them from time to time, but if you plan your budget forgetting about these expenses, spending money on them could affect it greatly and not in a positive way.
- When you list all the income and expense sources, it’s time to pull them all together. Evaluate how much money you’ll have each month after you cover all these expenses. Then think of what part of that sum you could afford to invest into something.
While a whole process of budget creation might seem too complicated, you still should find time to do it. It’s totally worth the effort – moreover, such a plan could help you not only throughout the next month but also throughout the next year (if your expense and income sources won’t change much).
Of course, it’s still important to review it from time to time, making changes when necessary. However, the review process won’t be as complicated as the creation of a budget plan from scratch.
Key Steps in Drawing up a Budget
If you’ve never created a budget plan before, you could make some budgeting mistakes . However, when it comes to financial planning, the smallest mistake could have a negative impact. The following tips can help you easily avoid most mistakes, making your budget plan more realistic.
- Try to take it slow
The more time you spend on budgeting, the better it is for you. It’s hard to create a flawless budget plan quickly: there’s a big chance you might miss something. That’s why it’s vital to make sure that you’ve listed all the sources of your income and expenses, and are prepared well.
- You can use last year’s data
Last year’s data could help you see the whole picture better: you can compare it with this year’s data, finding out whether your income has increased or decreased. However, you should use it only for comparing and as a guide. You have new goals and resources this year, and the environment you’re working in has changed too, so your current planning and strategies should differ from the ones you used last year.
- Make sure that a budget is realistic
The most important thing about a budget plan is that it has to cover not only predictable expenses but also less predictable ones. Of course, making predictions is hard but using previous data along with some other business plans as examples could make the whole process easier.
A budget also has to be detailed: the information it contains has to allow you to monitor all the key details of your business, be it sales, costs, and so on. You could also use some accounting software for more effective management.
- It’s okay to involve people
If your business is big enough, you probably have some employees responsible for a part of the financial operations. It’s good to involve them in a budget creation process too, using their knowledge and experience to predict some expenses, for example. If the people you involve are experienced enough, the combination of their professionalism and your knowledge will make a budget more realistic and effective.
- Visualizing helps
Various charts and diagrams are so popular in business for a reason: they allow tracking your incomes and expenses easily. For example, you can create one chart based on your plan and another chart based on an actual budget and compare them during planned revisions to see whether your budget plan works just as expected or not.
As I mentioned above, it’s easier to control finances when you are running a small business. Such business needs only one budget that is created for a certain period – in most cases, for a year. Larger businesses, however, require something else. They have various departments, so it is better to create several budgets at once, tailoring each of them to a certain department’s needs.
Don’t Forget to Review!
I’ve already mentioned that a review is an important process of every business planning and budgeting. No matter how good your plan is, it is impossible to predict everything with 100 percent accuracy. Your business will grow and the environment around it will change, so the quicker you’ll react to such changes, the better it is for you.
That’s why you should schedule budget reviews from time to time. I recommend starting with reviewing it every month and then switching to a more comfortable schedule. Every month review can help you notice the flaws of your plan (which is especially important if you don’t have much experience in this kind of thing) as well as understand how stable your business is.
If you see that you don’t have to make changes often, you could start reviewing your plan every three or six months (however, I recommend doing it more often).
You can use various common diagrams to help you . The best thing about diagrams is that they help visualize data well, which is very important when you need to see the whole picture more clearly – and this happens often during budget planning. For example, a diagram or a chart of your company’s income can show you how much your finances have grown during a certain period. Moreover, if you notice certain downfalls in a chart (that aren’t predicted), you’ll be able to react to it quickly, fixing things that went wrong.
What do you need to consider during the whole review process? First, your actual income. Probably it will be different each month: every business has its own peak sales periods and drop sales ones, and you have to find them and remember them for more effective planning next year. It is important to check whether the income matches the one you predicted or not: if not, you have to find out why it happened.
Second, you have to evaluate your actual expenses. See if they differ from your budget, how much do they affect it, why they exceed your expectations (if they do), and so on.
Probably the best thing about reviewing is that it allows you to react to all the unexpected situations quickly, saving your business from the potential troubles and downfalls. So be sure not to skip it.
As you see, writing a business plan is a complex process. You have to be very attentive, to plan everything, starting with your goals and ending with your expenses, to consider so many things and to involve other people in planning if possible. Moreover, you also have to learn all the time, reviewing your plans, making changes, finding the ways to react to unexpected situations.
But while this might look like a tough thing to do, it is very convenient for everyone who wants to manage their business successfully. The planning takes a lot off your shoulders and makes the whole business running process easier. You are able to evaluate the effectiveness of your business by looking at the monthly income increase, at the goals you wanted to achieve, and so on. You are also able to predict the potential downfalls of your business and to use the tools you have to minimize all the risks.
You are able to evaluate the effectiveness of your business by looking at the monthly income increase, at the goals you wanted to achieve, and so on. You are also able to predict the potential downfalls of your business and to use the tools you have to minimize all the risks.
I hope that this guide will help you create strong and realistic budget and business plans, and successfully implement them in running your business. If you have some tips on business and budget planning that you want to share, please do so in the comment section below!
Author’s Bio:
Kevin Nelson started his career as a research analyst and has changed his sphere of activity to writing services and content marketing. Apart from writing, he spends a lot of time reading psychology and management literature searching for the keystones of motivation ideas. Feel free to connect with him on Facebook , Twitter , Google+ , Linkedin .
Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.
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What’s the difference between a plan, a budget, and a forecast?
Budgeting & forecasting.
Updated: September 29, 2023 |
Jake Ballinger
FP&A Writer, Cube Software
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Jake Ballinger is an experienced SEO and content manager with deep expertise in FP&A and finance topics. He speaks 9 languages and lives in NYC.
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“Remind me, what’s the difference between the plan and the forecast?” is something we often hear from executives looking for clarity.
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So...are they interchangeable? No.
In fact, financial forecasting, budgeting , and planning each serve a unique purpose. A plan serves as the foundation, a budget guides how to allocate cash, and a forecast projects the financial future of the business.
CFOs understand that each is a standalone piece of the company’s financial puzzle.
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Financial planning: explained
Generally, a financial “plan” aims to define the financial direction and vision of the organization within the context of a broader business plan.
Leaders ask themselves how the business will stack up in the next 1, 5, or even 10 years. The “plan” answers that question by outlining the company’s operational and financial objectives. Executives build out teams and infrastructure based on this plan and the defined goals.
Colloquially, the “plan” is sometimes used interchangeably with the most recent budget or forecast, and can be broadly considered the budget or forecast that is the most likely “version of truth”.
Because of the long-term nature of a financial plan, it allows for more flexibility and creativity. In the case of a financial plan (versus a budget, for example), the means are less important than the end. Ultimately, a good financial plan provides a top-down operational framework to explore various scenarios.
Because an organization's future is undefined, financial planning is a perpetual process. Despite this, a plan is more static—more of a roadmap than a document updated daily. The plan relies on historical performance data and subjective financial analysis, so it can never be fully accurate.
Budgeting: explained
Businesses, but most commonly, the Finance team, compile a budget to determine how the company will spend its capital during the next period—a month or quarter, but typically a fiscal year.
The budget’s primary goal is determining what resources to allocate to each part of the company, from salaries to office supplies. The focus of a budget revolves around cash position, including expected revenues and expenses, to create specific financial goals for the foreseeable future.
Most businesses create a budget annually and implement it from the start of the fiscal year. The budget is also commonly considered “unmovable” and is used to gauge performance of actuals or forecast data versus the planned budget.
A thorough budget offers clear guidance on how a company should be spending its resources by providing a line item for any expense imaginable. Budgets also create accountability for departmental spending because overages are apparent and gaps in appropriate funding become clear as the year unrolls.
Teams should review the budget regularly and compare it with actuals, making each department responsible for any variances that occur.
A budget aligns expectation with reality when it comes to revenue and expenses.
Budgeting can be a difficult process because of the kind of involvement it takes across departments, including meetings and negotiations with department leaders to determine the amount of cash they will need to accomplish business goals over the budget. Since budgets are generally made to last an entire year, a budget might constrain necessary spending (or saving) if any unexpected situations in cash flow arise.
Essentially, expense allowances are built not to exceed budget limits, while income projections are the minimum needed to balance the budget. Financial analysts need to calculate the variances between the two figures to evaluate the budget's efficacy and the organization's fiscal health.
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Forecasting: explained
A forecast is a financial snapshot of the future as it is best understood today. When creating a forecast , teams must examine possible financial outcomes based on the most up-to-date drivers and assumptions . The result is a view of how the business is trending so that the leaders can determine whether or not adjustments should be made to the existing budgets or plans.
For example, the budget might assume that the business will hit a $10M revenue target, but the forecast shows that the business is on target to only achieve $8M. Given the difference between the forecast and the budget, the business might adjust the variable costs associated with lower revenue, while simultaneously adjusting the expense plan in order to hit cash targets.
A company’s financial forecast is updated regularly, such as monthly or quarterly. The forecast’s undefined nature allows it to be used for both short- and long-term projections and adapt to recent performance data. In this way, executives can make changes in real-time, adjusting their operations, such as production, marketing approach, and staffing.
Forecasting can be a time-consuming process that not all businesses are able to stay on top of regularly. Because of this, many businesses update their forecast data periodically, such as quarterly or biannually. It’s considered a best practice to build a rolling (ongoing) forecast to make these adjustments in real-time.
Conclusion: Plan vs. budget vs. forecast
All three terms reflect expectations and estimates of financial objectives. Financial planning lays the foundation for budgeting, suggesting that a financial plan must precede the budget so that company leaders have an idea of what they are budgeting for. Meanwhile, a forecast projects how far over or under expectations a company may be.
A financial plan is a strategic, long-term tool, while a budget is tactical and short-term. A financial forecast is an updated reflection of the future. In a way, the forecast bridges the gap between the business plan and the budget.
The most financially disciplined businesses leverage all three tools in planning and operations. Financial modeling software like Cube can help companies build multiple plan scenario types, including budgets, forecasts, and even what-ifs, in a way that allows leaders to visualize data, analyze past performance, and calculate how decisions may affect future goals.
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Budgeting and business planning
Once your business is operational, it's essential to plan and tightly manage its financial performance. Creating a budgeting process is the most effective way to keep your business - and its finances - on track.
This guide outlines the advantages of business planning and budgeting and explains how to go about it. It suggests action points to help you manage your business' financial position more effectively and ensure your plans are practical.
Planning for business success
The benefits, what to include in your annual plan, a typical business planning cycle, budgets and business planning, benefits of a business budget, creating a budget, key steps in drawing up a budget, what your budget should cover, what your budget will need to include, use your budget to measure performance, review your budget regularly.
When you're running a business, it's easy to get bogged down in day-to-day problems and forget the bigger picture. However, successful businesses invest time to create and manage budgets, prepare and review business plans and regularly monitor finance and performance.
Structured planning can make all the difference to the growth of your business. It will enable you to concentrate resources on improving profits, reducing costs and increasing returns on investment.
In fact, even without a formal process, many businesses carry out the majority of the activities associated with business planning, such as thinking about growth areas, competitors, cashflow and profit.
Converting this into a cohesive process to manage your business' development doesn't have to be difficult or time-consuming. The most important thing is that plans are made, they are dynamic and are communicated to everyone involved. See the page in this guide on what to include in your annual plan.
The key benefit of business planning is that it allows you to create a focus for the direction of your business and provides targets that will help your business grow. It will also give you the opportunity to stand back and review your performance and the factors affecting your business. Business planning can give you:
- a greater ability to make continuous improvements and anticipate problems
- sound financial information on which to base decisions
- improved clarity and focus
- a greater confidence in your decision-making
The main aim of your annual business plan is to set out the strategy and action plan for your business. This should include a clear financial picture of where you stand - and expect to stand - over the coming year. Your annual business plan should include:
- an outline of changes that you want to make to your business
- potential changes to your market, customers and competition
- your objectives and goals for the year
- your key performance indicators
- any issues or problems
- any operational changes
- information about your management and people
- your financial performance and forecasts
- details of investment in the business
Business planning is most effective when it's an ongoing process. This allows you to act quickly where necessary, rather than simply reacting to events after they've happened.
- Review your current performance against last year/current year targets.
- Work out your opportunities and threats.
- Analyse your successes and failures during the previous year.
- Look at your key objectives for the coming year and change or re-establish your longer-term planning.
- Identify and refine the resource implications of your review and build a budget.
- Define the new financial year's profit-and-loss and balance-sheet targets.
- Conclude the plan.
- Review it regularly - for example, on a monthly basis - by monitoring performance, reviewing progress and achieving objectives.
- Go back to 1.
New small business owners may run their businesses in a relaxed way and may not see the need to budget. However, if you are planning for your business' future, you will need to fund your plans. Budgeting is the most effective way to control your cashflow, allowing you to invest in new opportunities at the appropriate time.
If your business is growing, you may not always be able to be hands-on with every part of it. You may have to split your budget up between different areas such as sales, production, marketing etc. You'll find that money starts to move in many different directions through your organisation - budgets are a vital tool in ensuring that you stay in control of expenditure.
A budget is a plan to:
- control your finances
- ensure you can continue to fund your current commitments
- enable you to make confident financial decisions and meet your objectives
- ensure you have enough money for your future projects
It outlines what you will spend your money on and how that spending will be financed. However, it is not a forecast. A forecast is a prediction of the future whereas a budget is a planned outcome of the future - defined by your plan that your business wants to achieve.
There are a number of benefits of drawing up a business budget, including being better able to:
- manage your money effectively
- allocate appropriate resources to projects
- monitor performance
- meet your objectives
- improve decision-making
- identify problems before they occur - such as the need to raise finance or cash flow difficulties
- plan for the future
- increase staff motivation
Creating, monitoring and managing a budget is key to business success. It should help you allocate resources where they are needed, so that your business remains profitable and successful. It need not be complicated. You simply need to work out what you are likely to earn and spend in the budget period.
Begin by asking these questions:
- What are the projected sales for the budget period? Be realistic - if you overestimate, it will cause you problems in the future.
- What are the direct costs of sales – i.e. costs of materials, components or subcontractors to make the product or supply the service?
- What are the fixed costs or overheads?
You should break down the fixed costs and overheads by type, e.g.:
- cost of premises, including rent, municipal taxes and service charges
- staff costs –e.g. wages, benefits, Québec Parental Insurance Plan (QPIP) premiums, contributions to the Québec Pension Plan (QPP) and to the financing of the Commission des normes du travail (CNT)
- utilities – e.g. heating, lighting, telephone
- printing, postage and stationery
- vehicle expenses
- equipment costs
- advertising and promotion
- travel and subsistence expenses
- legal and professional costs, including insurance
Your business may have different types of expenses, and you may need to divide up the budget by department. Don't forget to add in how much you need to pay yourself, and include an allowance for tax.
Your business plan should help in establishing projected sales, cost of sales, fixed costs and overheads, so it would be worthwhile preparing this first. See the page in this guide on planning for business success.
Once you've got figures for income and expenditure, you can work out how much money you're making. You can look at costs and work out ways to reduce them. You can see if you are likely to have cash flow problems, giving yourself time to do something about them.
When you've made a budget, you should stick to it as far as possible, but review and revise it as needed. Successful businesses often have a rolling budget, so that they are continually budgeting, e.g. for a year in advance.
There are a number of key steps you should follow to make sure your budgets and plans are as realistic and useful as possible.
Make time for budgeting
If you invest some time in creating a comprehensive and realistic budget, it will be easier to manage and ultimately more effective.
Use last year's figures - but only as a guide
Collect historical information on sales and costs if they are available - these could give you a good indication of likely sales and costs. But it's also essential to consider what your sales plans are, how your sales resources will be used and any changes in the competitive environment.
Create realistic budgets
Use historical information, your business plan and any changes in operations or priorities to budget for overheads and other fixed costs.
It's useful to work out the relationship between variable costs and sales and then use your sales forecast to project variable costs. For example, if your unit costs reduce by 10 per cent for each additional 20 per cent of sales, how much will your unit costs decrease if you have a 33 per cent rise in sales?
Make sure your budgets contain enough information for you to easily monitor the key drivers of your business such as sales, costs and working capital. Accounting software can help you manage your accounts.
Involve the right people
It's best to ask staff with financial responsibilities to provide you with estimates of figures for your budget - for example, sales targets, production costs or specific project control. If you balance their estimates against your own, you will achieve a more realistic budget. This involvement will also give them greater commitment to meeting the budget.
Decide how many budgets you really need. Many small businesses have one overall operating budget which sets out how much money is needed to run the business over the coming period - usually a year. As your business grows, your total operating budget is likely to be made up of several individual budgets such as your marketing or sales budgets.
Projected cash flow -your cash budget projects your future cash position on a month-by-month basis. Budgeting in this way is vital for small businesses as it can pinpoint any difficulties you might be having. It should be reviewed at least monthly.
Costs - typically, your business will have three kinds of costs:
- fixed costs - items such as rent, salaries and financing costs
- variable costs - including raw materials and overtime
- one-off capital costs - purchases of computer equipment or premises, for example
To forecast your costs, it can help to look at last year's records and contact your suppliers for quotes.
Revenues - sales or revenue forecasts are typically based on a combination of your sales history and how effective you expect your future efforts to be.
Using your sales and expenditure forecasts, you can prepare projected profits for the next 12 months. This will enable you to analyse your margins and other key ratios such as your return on investment.
If you base your budget on your business plan, you will be creating a financial action plan. This can serve several useful functions, particularly if you review your budgets regularly as part of your annual planning cycle.
Your budget can serve as:
- an indicator of the costs and revenues linked to each of your activities
- a way of providing information and supporting management decisions throughout the year
- a means of monitoring and controlling your business, particularly if you analyse the differences between your actual and budgeted income
Benchmarking performance
Comparing your budget year on year can be an excellent way of benchmarking your business' performance - you can compare your projected figures, for example, with previous years to measure your performance.
You can also compare your figures for projected margins and growth with those of other companies in the same sector, or across different parts of your business.
Key performance indicators
To boost your business' performance you need to understand and monitor the key "drivers" of your business - a driver is something that has a major impact on your business. There are many factors affecting every business' performance, so it is vital to focus on a handful of these and monitor them carefully.
The three key drivers for most businesses are:
- working capital
Any trends towards cash flow problems or falling profitability will show up in these figures when measured against your budgets and forecasts. They can help you spot problems early on if they are calculated on a consistent basis.
To use your budgets effectively, you will need to review and revise them frequently. This is particularly true if your business is growing and you are planning to move into new areas.
Using up to date budgets enables you to be flexible and also lets you manage your cash flow and identify what needs to be achieved in the next budgeting period.
Two main areas to consider
Your actual income - each month compare your actual income with your sales budget, by:
- analysing the reasons for any shortfall - for example lower sales volumes, flat markets, underperforming products
- considering the reasons for a particularly high turnover - for example whether your targets were too low
- comparing the timing of your income with your projections and checking that they fit
Analysing these variations will help you to set future budgets more accurately and also allow you to take action where needed.
Your actual expenditure - regularly review your actual expenditure against your budget. This will help you to predict future costs with better reliability. You should:
- look at how your fixed costs differed from your budget
- check that your variable costs were in line with your budget - normally variable costs adjust in line with your sales volume
- analyse any reasons for changes in the relationship between costs and turnover
- analyse any differences in the timing of your expenditure, for example by checking suppliers' payment terms
Original document, Budgeting and business planning , © Crown copyright 2009 Source: Business Link UK (now GOV.UK/Business ) Adapted for Québec by Info entrepreneurs
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How to Create a Business Budget for Your Small Business
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A business budget estimates future revenue and expenses in detail, so that you can see whether you’re on track to meet financial expectations for the month, quarter or year. Think of your budget as a point of comparison — you run your actual numbers against it to determine if you’re over or under budget.
From there, you can make informed business decisions and pivot accordingly. For example, maybe you find that your expenses are over budget for the quarter, so you may hold off on a large equipment purchase.
Here’s a step-by-step guide for creating a business budget, along with why budgets are crucial to running a successful business.
» MORE: What is accounting? Definition and basics, explained
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How does a business budget work?
Budgeting uses past months’ numbers to help you make financially conservative projections for the future and wiser business decisions for the present. If you’ve had a few bad months and predict another slow one, you can prepare to minimize expenses where possible. If business has been booming and you’re bringing in new customers, maybe you invest in buying more inventory to satisfy increased demand.
Creating a business budget from scratch can feel tedious, but you might already have access to tools that can help simplify the process. Your small-business accounting software is a good place to start, since it houses your business’s financial data and may offer basic budgeting reports.
To create a budget in QuickBooks Online , for example, you break down your estimated income and expenses across each area of your business. Then, the software calculates figures like gross profit, net operating income and net income for you.
You can then compare actual versus projected figures side by side by running a Budget vs. Actuals report. Businesses that need more in-depth features, like cash flow forecasting or the ability to use different projection methods, might subscribe to business budgeting software in addition to accounting software.
If your small business doesn’t have access to these features or has simple financials, you can download free small-business budget templates to manually create and track your budget. Regardless of which option you choose, your business will likely benefit from hiring an accountant to help manage your budget, course-correct when the business gets off track, and make sure taxes are being paid correctly.
Why is a business budget important?
A business budget encourages you to look beyond next week and next month to next year, or even the next five years.
Creating a budget can help your business do the following:
Maximize efficiency.
Establish a financial plan that helps your business reach its goals.
Point out leftover funds that you can reinvest.
Predict slow months and keep you out of debt.
Estimate what it will take to become profitable.
Provide a window into the future so you can prepare accordingly.
Creating a business budget will make operating your business easier and more efficient. A business budget can also help ensure you’re spending money in the right places and at the right time to stay out of debt.
How to create a business budget in 6 steps
The longer you’ve been in business, the more data you’ll have to inform your forward-looking budget. If you run a startup , however, you’ll want to do extensive research into typical costs for businesses in your industry, so that you have working estimates for revenue and expenses.
From there, here’s how to put together your business budget:
1. Examine your revenue
One of the first steps in any budgeting exercise is to look at your existing business and find all of your revenue sources. Add all those income sources together to determine how much money comes into your business monthly. It’s important to do this for multiple months and preferably for at least the previous 12 months, provided you have that much data available.
Notice how your business’s monthly income changes over time and try to look for seasonal patterns. Your business might experience a slump after the holidays, for example, or during the summer months. Understanding these seasonal changes will help you prepare for the leaner months and give you time to build a financial cushion.
Then, you can use those historic numbers and trends to make revenue projections for future months. Make sure to calculate for revenue, not profit. Your revenue is the money generated by sales before expenses are deducted. Profit is what remains after expenses are deducted.
2. Subtract fixed costs
The second step for creating a business budget involves adding up all of your historic fixed costs and using them to reliably predict future ones. Fixed costs are those that stay the same no matter how much income your business is generating. They might occur daily, weekly, monthly or yearly, so make sure to get as much data as you can.
Examples of fixed costs within your business might include:
Debt repayment.
Employee salaries.
Depreciation of assets.
Property taxes.
Insurance .
Once you’ve identified your business’s fixed costs, you’ll subtract those from your income and move to the next step.
3. Subtract variable expenses
As you compile your fixed costs, you might notice other expenses that aren’t as consistent. Unlike fixed costs, variable expenses change alongside your business’s output or production. Look at how they’ve fluctuated over time in your business, and use that information to estimate future variable costs. These expenses get subtracted from your income, too.
Some examples of variable expenses are:
Hourly employee wages.
Owner’s salary (if it fluctuates with profit).
Raw materials.
Utility costs that change depending on business activity.
During lean months, you’ll probably want to lower your business’s variable expenses. During profitable months when there’s extra income, however, you may increase your spending on variable expenses for the long-term benefit of your business.
4. Set aside a contingency fund for unexpected costs
When you’re creating a business budget, make sure you put aside extra cash and plan for contingencies.
Although you might be tempted to spend surplus income on variable expenses, it’s smart to establish an emergency fund instead, if possible. That way, you’ll be ready when equipment breaks down and needs replacing, or if you have to quickly replace inventory that's damaged unexpectedly.
5. Determine your profit
Add up all of your projected revenue and expenses for each month. Then, subtract expenses from revenue. You may also see the resulting number referred to as net income . If you end up with a positive number, you can expect to make a profit. If not, that’s a loss — and that can be OK, too. Small businesses aren’t necessarily profitable every month, let alone every year. This is especially true when your business is just starting out. Compare your projected profits to past profits to confirm whether they’re realistic.
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6. Finalize your business budget
Are the resulting profits enough to work with, or is your business overspending? This is your opportunity to set spending and earning goals for each month, quarter and year. These goals should be realistic and achievable. If they don’t line up with your projections, make sure to establish a strategy for making up the difference.
As time goes on, regularly compare your actual numbers to your budget to determine whether your business is meeting those goals, and course correct if necessary.
» MORE: Ways your small business can spend smarter
A business budget projects future revenue and expenses so you can create a smart, realistic spending plan. As the year progresses, comparing your actual numbers against your budget can help you hold your business accountable and make sure it reaches its financial goals.
A business budget includes projected revenue, fixed costs, variable costs and the resulting profits. You can also factor in contingency funds for unforeseen circumstances like equipment failure.
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What Is the Difference Between Planning, Budgeting and Forecasting?
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The relationship between planning & organizing, difference between a budget & other financial statements.
- Operating Budget vs. Activities Based Budget
- What Are the Ways Accounting Data Is Used to Make Business Decisions?
Businesses require a lot of strategic planning and numbers-crunching. Companies make use of planning, budgeting and forecasting to map out the present and envision the future. Although all three of these functions have their place in running a small business and help owners guide the operations, they each play distinct roles.
Planning in Business
Planning is usually the first step in setting up a small business, and continues to be used as goals progress. Planning could be something simple like building your daily agenda, or long-range enough to envision where you want to see your business in five or 10 years. Some planning is done by the seat of the pants, with little more raw data than your vision for the business.
But as more information is available, the planning focus sharpens, according to Free Management Library . Once the business idea takes shape, you might put together a more formal business plan to outline who your customers are, where you plan to make your money and how you intend to attract new customers. Planning ultimately helps your business more efficiently use resources and set the optimal trajectory for future operations.
Budgeting in Business
Businesses set up how they will spend money with a budget. Budgets determine how existing financial resources are allocated. Budgets are usually set by how previous money was spent and expected income. The budgets often dictate how much is spent toward payroll, supplies and advertising expenses.
Budgets tend to be closer to real-life action. While a plan or forecast can be wrong, an error-ridden budget invites financial disaster. Most companies set their budgets at the beginning of a calendar or fiscal year, and many leave some room for adjustment as revenues increase or decrease. Planning and budgeting go hand in hand.
Forecasting in Business
Once you get an idea of how much money you're making through your business, you can start long-term forecasting to determine what you might be able to do in the long term via a budgeting and forecasting process. A forecast is based on past and current business numbers, according to Pak Accounting .
Forecasts are rarely set in stone, though, so a budgeting and forecasting example would hardly do justice from one business and economy to the next. The forecast might be inaccurate, so it would be a mistake to base a budget on that. Far from being an exercise in futility, though, forecasting acts to serve as a basis for further planning. For the most accurate forecasting, you should consider factors external to your business, such as general industry trends and overall economic projections.
Using All Three
Budgeting, planning and forecasting are all useful tools when you run a business. It takes a plan to get things off the ground. The plan continues to serve through the life of the business. Budgeting works close to the operating side and determines how things will run in the present and immediate future. Forecasting, while every bit as uncertain as the future, can help clarify things far in advance for more effective and accurate planning.
- Pak Accountants: What is the Difference Between Budgeting and Forecasting?
- Free Management Library: Basic Overview of Various Strategic Planning Models
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Planning, budgeting and forecasting is typically a three-step process for determining and mapping out an organization’s short- and long-term financial goals.
- Planning provides a framework for a business’ financial objectives — typically for the next three to five years.
- Budgeting details how the plan will be carried out month to month and covers items such as revenue, expenses, potential cash flow and debt reduction. Traditionally, a company will designate a fiscal year and create a budget for the year. It may adjust the budget depending on actual revenues or compare actual financial statements to determine how close they are to meeting or exceeding the budget.
- Forecasting takes historical data and current market conditions and then makes predictions as to how much revenue an organization can expect to bring in over the next few months or years. Forecasts are usually adjusted as new information becomes available.
The process is usually managed by a chief financial officer (CFO) and the finance department. However, the definition can be expanded to include all areas of organizational planning including: financial planning and analysis , supply chain planning , sales planning , workforce planning and marketing planning .
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Basic business accounting practices date as far back as the 1400s, when Venetian investors kept track of their Asian trade expeditions using double-entry bookkeeping, income statements and balance sheets. The word “budget” is from the old French word “bougette,” meaning “small purse.” The British government began to use the phrase “open the budget” in the mid-1700s, when the chancellor presented the annual financial statements. Businesses began to regularly use the term “budget” for their finances by the late 1800s.
Modern business forecasting began in response to the economic devastation of the Great Depression of the 1930s. New types of statistics and statistical analyses were developed that could help business better predict the future. Consulting firms emerged to help companies use these new prediction tools.
Accounting and forecasting were difficult in the early 20th century because they depended on laborious hand-written equations, ledgers and spreadsheets. The emergence of mainframe computers in the 1960s and personal computers in the 1980s sped up the process. Software applications such as Microsoft Excel became widely popular for financial reporting. However, Excel programs and spreadsheets were prone to input errors and cumbersome when various departments or individuals needed to collaborate on a report.
By the start of the 2000s, companies gained access to ever-growing operational data sources, as well as information outside corporate transaction systems — such as weather, social sentiment and econometric data. The vast amounts of available data for forecasting created a need for more sophisticated software tools to process it.
Numerous planning software packages emerged to handle this data complexity, making planning, budgeting and forecasting faster and easier — both for processing and collaboration. With predictive insights drawn automatically from data, companies could identify evolving trends and guide decision making with foresight, not just hindsight.
Today, cloud-based systems are becoming the standard, providing more flexibility, security and cost savings — helping organizations generate accurate predictions and budgets with fewer errors.
But despite these advancements, businesses are still quite dependent on traditional spreadsheets. 1 Seventy percent of businesses say they rely heavily on spreadsheet reporting, with only 16 percent using on-premise specialist software — and only ten percent using cloud software for planning.
Many businesses still base their strategy on annual plans and budgets, which is a management technique developed over a century ago. But in today’s more competitive environment, organizations are realizing that plans, budgets and forecasts need to reflect current reality — not the reality of two, three or more quarters ago. Continuous planning and rolling forecasts are becoming widely used methodologies to update plans, budgets and forecasts frequently throughout the year, on a quarterly or even monthly basis. These approaches help managers spot trends before their competitors — helping them make better informed, more agile decisions about pricing, product mix, capital allocations and even staffing levels.
Creating and implementing a sound planning, budgeting and forecasting process helps organizations establish more accurate financial report and analytics — potentially leading to more accurate forecasting and ultimately revenue growth. Its importance is even more relevant in today’s business environment where disruptive competitors are entering even the most tradition-bound industries.
When companies embrace data and analytics in conjunction with well-established planning and forecasting best practices, they enhance strategic decision making and can be rewarded with more accurate plans and more timely forecasts. Overall, these tools and practices can save time, reduce errors, promote collaboration and foster a more disciplined management culture that delivers a true competitive advantage.
Specifically, companies are able to:
- Quickly update plans and forecasts in response to new threats and opportunities, identifying risk areas early enough to rectify issues before they are serious.
- Identify and analyze the impact of changes as they occur.
- Strengthen the links between operational and financial plans.
- Better plan and predict cash flows.
- Improve communication and collaboration among plan contributors.
- Consistently deliver timely, reliable plans and forecasts, plus contingency plans, for a range of possible events.
- Analyze variances and deviations from plans and promptly take corrective action.
- Create a budget specifically for growth and having confidence in how much can be spent.
- More accurately manage sales pipelines while tracking performance against targets.
- Make more confident strategic decisions based on hard data, instead of hopes or guesswork.
- Provide evidence of an organization’s future trajectory to potential investors and lending institutions based on multiple data sources and sophisticated analysis.
Budgeting, planning and forecasting software can be purchased as an off-the-shelf solution or as part of a larger integrated corporate performance management (CPM) solution.
Advanced software solutions enable organizations to:
- Measure and monitor performance through interactive, self-service dashboards and visualizations.
- Examine root-causes with high-fidelity analysis of dimensionally rich data.
- Evaluate trends and make predictions automatically from internal or external data.
- Perform rapid what-if scenario modelling and create timely, reliable plans and forecasts.
Planning is easier and more effective when practitioners follow well-established best practices. Software solutions that support these practices can enhance the timeliness and reliability of information and increase participation by key people throughout the organization; especially those at the front lines.
Leading companies have moved to solutions that address the full planning cycle — data collection, modeling, analytics and reporting — on a common planning platform with lean infrastructure requirements. Such platforms can handle a diverse range of business functions, from budget-focused finance tasks to, for example, supply chain-focused planning for retail environments with thousands of SKUs (stock keeping units).
Companies like IBM offer holistic, integrated software solutions to streamline the planning, budgeting and forecasting process. The logic is that to adapt to today's quickly changing business conditions, an organization needs one solution that creates a single source of truth and visibility into all its data. These solutions can extend well beyond the financial aspects of the business, becoming a powerful forecasting engine across the enterprise. With these agile planning and exploratory analytics software solutions — whether in the cloud or on-premises — companies can perform planning, budgeting and forecasting with greater speed, agility and foresight.
Evaluating and selecting planning, budgeting and forecasting software is a complex task. It requires careful consideration of the software’s functionality, its value to the planning process and its ability to support planning best practices. There are also factors such as vendor reliability and support, user community connections and commitment to customer success once the sale is complete.
IBM Analytics recently published a guide to help organizations evaluate planning, budgeting and forecasting software — identifying key qualities to look for:
- Adaptive . Can you rapidly change models and re-forecast frequently, based on input from business units? Can you update plans as often as necessary?
- Timely . Is your information always current because users contribute directly to a central planning database? Are your consolidations and rollups done automatically to easily meet deadlines?
- Integrated . Do your planning, analysis, workflow and reporting functions reside on one common platform, reducing the need to maintain “shadow” planning systems?
- Collaborative . Is your solution web-based? Does it enable participation anytime, from anywhere with a secure connection?
- Self-service . Are users able to access data and perform complex analysis without the assistance of IT? Are you able to use a familiar spreadsheet interface for faster user adoption and accelerate time to value?
- Enterprise-scale data capacity . Is your solution capable of handling very large data volumes without limiting cube size? Some solutions do not handle “data sparsity” well — forcing data to be split into multiple cubes for analysis, causing version control issues.
- Efficient . Are your managers able to spend less time managing data and more time managing the business?
- Relevant . Do you have the ability to customize views for different user roles, to help increase adoption and process ownership? Do you have formula capabilities that enable modeling of all relevant business drivers?
- Accurate . Do your plans contain errors because of broken links, stale data, improper rollups and missing components?
The key is not just evaluating product features and capabilities, but also evaluating how those features will be implemented by different users within the organization. It’s important to test any planning solution that will be used by a large variety of stakeholders such as finance, operations, HR and sales.
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1 The Future of Planning, Budgeting and Forecasting Global Survey, Workday and FSN, 2017 (link resides outside ibm.com)
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What Is a Business Budget?
Definition & Examples of a Business Budget
Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.
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How a Business Budget Works
Do i need a business budget, example of a business budget template.
A business budget estimates an organization's revenue and expenses over a specific period of time.
Learn more about how a business budget works and get an example of one.
A business budget provides an accurate picture of expenditures and revenues and should drive important business decisions such as whether to increase marketing, cut expenses, hire staff, purchase equipment, and improve efficiencies in other ways. It also outlines your organization's financial and operational goals, so it may be thought of as an action plan that helps you allocate resources, evaluate performances, and formulate plans.
The basic process of planning a budget involves listing your business's fixed and variable costs on a monthly basis and then deciding on the allocation of funds to reflect goals.
Businesses often use special types of budgets to assess specific areas of operation. A cash flow budget, for example, projects your business's cash inflows and outflows over a certain period of time. Its main use is to predict your business's ability to take in more cash than it pays out.
Most businesses have fixed costs that are independent of sales revenue, such as:
- Building or office eases or mortgage costs
- Loan payments (if using debt financing )
- Vehicle leases (or loan payments if the vehicle is purchased)
- Equipment (machinery, tools, computers, etc.)
- Payroll (if employees are on salary)
- Utilities such as landline phone and internet charges
Variable costs increase or decrease according to the level of business activity. Examples include:
- Contractors ' wages or commissions (for salespeople)
- Utilities such as electricity, gas, or water that increase with activity
- Raw materials
- Shipping and delivery costs
- Advertising (can be fixed or variable)
- Maintenance and repair of equipment
It is important to be realistic with your budget projections. If in doubt, be conservative and overestimate your expenses and underestimate your revenues. It is particularly difficult if you are starting a new business and have no previous year's budget figures to guide your estimates. In this case, it is typically much easier to estimate expenses than revenues.
As the budget year progresses the estimates should be updated monthly with actual figures, enabling you to check the accuracy of your forecasts. Note that there often are radical differences between actual and projected revenues and expenses due to unforeseen business circumstances and/or changing business and economic cycles, such as:
- Gaining or losing a major client
- Having to purchase or replace expensive equipment
- An increase in rent
- Hiring employees
- An increase in competition
- Changes in the tax code
If you own a business, then you need a budget.
A budget is an essential part of a business plan and is necessary for starting a new business . It plays an important role in determining your start-up and operating costs. Once your business is established, budgeting becomes a regular task that normally occurs on a quarterly or annual basis.
Without a budget, you may not know how your business is performing.
Having a comprehensive budget is a requirement for obtaining business loans from financial institutions or seeking equity funding from investors .
A simple business budget template includes expenses common to most small businesses. You can use and modify a template as required to suit your own business, filling out your own information where applicable. Your completed budget might look something like this:
1st Quarter Sales | $34,300.00 | $35,000.00 | -$700.00 |
2nd Quarter Sales | $35,250.00 | $35,000.00 | $250.00 |
3rd Quarter Sales | $31,300.00 | $30,000.00 | $1,300.00 |
4th Quarter Sales | $27,100.00 | $25,000.00 | -$900.00 |
Interest | $650.00 | $600.00 | $50.00 |
Other | $1020.00 | $500.00 | $520.00 |
Rent | $12,000.00 | $12,000.00 | - |
Insurance | $2,500.00 | $2,500.00 | - |
Electricity | $1,150.00 | $1,100.00 | $50.00 |
Gas | $1,250.00 | $1,100.00 | $150.00 |
Internet | $600.00 | $600.00 | - |
Phone | $2,200.00 | $1,900.00 | $300.00 |
Travel | $2,300.00 | $2,100.00 | $200.00 |
Salaries, Wages, and Benefits | $66,000.00 | $60,000.00 | $6,000.00 |
Advertising | $1,200.00 | $1,000.00 | $200.00 |
License Fees | $500.00 | $500.00 | - |
Office Supplies | $430.00 | $500.00 | -$70.00 |
Shipping and Delivery | $850.00 | $1,000.00 | -$150.00 |
Maintenance and Repairs | $1,100.00 | $1,500.00 | -$400.00 |
Other | $800.00 | $1000.00 | -$200.00 |
Smartphones | $1,800.00 | $2,000.00 | -$200.00 |
Tablets | $1,500.00 | $2,000.00 | -$500.00 |
Many budgets also include actual figures going back several quarters or years as a comparison for what is being projected for the upcoming quarter or year. Most accounting software has options for budgeting/forecasting.
Key Takeaways
- A business budget estimates an organization's revenue and expenses over a specific period of time and drives important business decisions.
- Businesses often use special types of budgets to assess specific areas of operation.
- Budgets help companies understand start-up and operating costs and track performance.
- Most budgets include fixed and variable income and expenses.
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What Is a Business Plan?
Understanding business plans, how to write a business plan, common elements of a business plan, the bottom line, business plan: what it is, what's included, and how to write one.
Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
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A business plan is a document that outlines a company's goals and the strategies to achieve them. It's valuable for both startups and established companies. For startups, a well-crafted business plan is crucial for attracting potential lenders and investors. Established businesses use business plans to stay on track and aligned with their growth objectives. This article will explain the key components of an effective business plan and guidance on how to write one.
Key Takeaways
- A business plan is a document detailing a company's business activities and strategies for achieving its goals.
- Startup companies use business plans to launch their venture and to attract outside investors.
- For established companies, a business plan helps keep the executive team focused on short- and long-term objectives.
- There's no single required format for a business plan, but certain key elements are essential for most companies.
Investopedia / Ryan Oakley
Any new business should have a business plan in place before beginning operations. Banks and venture capital firms often want to see a business plan before considering making a loan or providing capital to new businesses.
Even if a company doesn't need additional funding, having a business plan helps it stay focused on its goals. Research from the University of Oregon shows that businesses with a plan are significantly more likely to secure funding than those without one. Moreover, companies with a business plan grow 30% faster than those that don't plan. According to a Harvard Business Review article, entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don't.
A business plan should ideally be reviewed and updated periodically to reflect achieved goals or changes in direction. An established business moving in a new direction might even create an entirely new plan.
There are numerous benefits to creating (and sticking to) a well-conceived business plan. It allows for careful consideration of ideas before significant investment, highlights potential obstacles to success, and provides a tool for seeking objective feedback from trusted outsiders. A business plan may also help ensure that a company’s executive team remains aligned on strategic action items and priorities.
While business plans vary widely, even among competitors in the same industry, they often share basic elements detailed below.
A well-crafted business plan is essential for attracting investors and guiding a company's strategic growth. It should address market needs and investor requirements and provide clear financial projections.
While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.
Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.
The length of a business plan can vary greatly from business to business. Regardless, gathering the basic information into a 15- to 25-page document is best. Any additional crucial elements, such as patent applications, can be referenced in the main document and included as appendices.
Common elements in many business plans include:
- Executive summary : This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
- Products and services : Describe the products and services the company offers or plans to introduce. Include details on pricing, product lifespan, and unique consumer benefits. Mention production and manufacturing processes, relevant patents , proprietary technology , and research and development (R&D) information.
- Market analysis : Explain the current state of the industry and the competition. Detail where the company fits in, the types of customers it plans to target, and how it plans to capture market share from competitors.
- Marketing strategy : Outline the company's plans to attract and retain customers, including anticipated advertising and marketing campaigns. Describe the distribution channels that will be used to deliver products or services to consumers.
- Financial plans and projections : Established businesses should include financial statements, balance sheets, and other relevant financial information. New businesses should provide financial targets and estimates for the first few years. This section may also include any funding requests.
Investors want to see a clear exit strategy, expected returns, and a timeline for cashing out. It's likely a good idea to provide five-year profitability forecasts and realistic financial estimates.
2 Types of Business Plans
Business plans can vary in format, often categorized into traditional and lean startup plans. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.
- Traditional business plans : These are detailed and lengthy, requiring more effort to create but offering comprehensive information that can be persuasive to potential investors.
- Lean startup business plans : These are concise, sometimes just one page, and focus on key elements. While they save time, companies should be ready to provide additional details if requested by investors or lenders.
Why Do Business Plans Fail?
A business plan isn't a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections. Markets and the economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All this calls for building flexibility into your plan, so you can pivot to a new course if needed.
How Often Should a Business Plan Be Updated?
How frequently a business plan needs to be revised will depend on its nature. Updating your business plan is crucial due to changes in external factors (market trends, competition, and regulations) and internal developments (like employee growth and new products). While a well-established business might want to review its plan once a year and make changes if necessary, a new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.
What Does a Lean Startup Business Plan Include?
The lean startup business plan is ideal for quickly explaining a business, especially for new companies that don't have much information yet. Key sections may include a value proposition , major activities and advantages, resources (staff, intellectual property, and capital), partnerships, customer segments, and revenue sources.
A well-crafted business plan is crucial for any company, whether it's a startup looking for investment or an established business wanting to stay on course. It outlines goals and strategies, boosting a company's chances of securing funding and achieving growth.
As your business and the market change, update your business plan regularly. This keeps it relevant and aligned with your current goals and conditions. Think of your business plan as a living document that evolves with your company, not something carved in stone.
University of Oregon Department of Economics. " Evaluation of the Effectiveness of Business Planning Using Palo Alto's Business Plan Pro ." Eason Ding & Tim Hursey.
Bplans. " Do You Need a Business Plan? Scientific Research Says Yes ."
Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."
Harvard Business Review. " How to Write a Winning Business Plan ."
U.S. Small Business Administration. " Write Your Business Plan ."
SCORE. " When and Why Should You Review Your Business Plan? "
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February 27, 2024
How to create a business budget: 8 simple steps.
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No matter the size of your business, a business budget is vital to planning and guiding your business’s growth. By understanding the fixed expenses of a company and accounting for the ebb and flow of work, a proper business budget can help your business maintain itself through the year and create protection around unplanned expenses through well allocated funds. In this guide, we'll walk you through the process of creating a business budget, outlining essential steps to help you manage your finances effectively.
What Is a Business Budget?
A business budget is a financial plan outlining projected revenues and expenses for a business during a specific period of time (most typically a year, though there are often monthly or quarterly reexaminations). Although there are variables throughout the year, a complete and accurate budget will serve as a blueprint for businesses in managing income and expenditures, guiding decision-making processes, and ensuring financial stability.
What Should a Business Budget Include?
A comprehensive business budget’s purpose is to provide a business a holistic view of their financial health. When looking through bank statements, take note of those expenses that reoccur throughout the year and note those—as well as those unexpected expenses your company should instead anticipate. Key components to include are:
- Revenue Forecast: Anticipated income from sales, services, or other sources after deducting costs, taxes, and other fees.
- Fixed Operating Expenses: Costs associated with running the business, such as rent, utilities, salaries, and supplies.
- Capital Expenditures: Investments in assets like equipment, machinery, or property.
- Debt Service: Payments towards loans, credit lines, or other forms of debt.
- Taxes: Estimated tax liabilities, including income tax, sales tax, and payroll taxes.
- Contingency Funds: Reserves set aside for unexpected expenses or emergencies.
- Profit Targets: Desired levels of profitability, indicating the financial performance you aim to achieve.
Why Is Budgeting Important to a Business?
Budgeting plays a crucial role in the financial management of a business for several reasons:
- Resource Allocation: Helps allocate resources efficiently to prioritize essential activities and investments.
- Financial Control: Provides a framework for monitoring and controlling expenses to prevent overspending.
- Performance Evaluation: Facilitates performance measurement against predetermined targets, enabling timely corrective actions.
- Decision Making: Guides decision-making processes by providing insights into the financial implications of various options.
- Risk Management: Identifies potential risks and allows for proactive mitigation strategies to safeguard financial stability.
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How Does Budgeting Help a Business?
Effective budgeting contributes to the success and sustainability of a business in numerous ways:
- Improved Cash Flow Management: Helps maintain adequate cash reserves to meet financial obligations and fund growth initiatives.
- Enhanced Profitability: Enables businesses to identify opportunities for revenue growth and cost optimization, leading to higher profitability.
- Better Resource Utilization: Ensures optimal utilization of resources by aligning expenditures with strategic priorities and operational needs.
- Increased Financial Transparency: Provides stakeholders with a clear understanding of the company's financial health and performance.
- Long-term Planning: Facilitates long-term planning by forecasting future financial requirements and setting achievable goals.
How to Create a Business Budget
Now that we’ve gone over the importance of a business budget, it’s time to understand the steps you need to take in order to create a comprehensive plan.
Gather Financial Information
Start by compiling relevant financial data, including past income statements, balance sheets, and cash flow statements. Analyze historical trends to identify patterns and make informed projections for the upcoming period.
Determine Your Financial Goals
Define clear, measurable financial goals aligned with your business objectives. Whether it's increasing revenue, reducing costs, or improving profitability, setting specific targets will provide a roadmap for your budgeting process.
Identify Revenue Sources
Identify all potential sources of revenue, including sales, services, investments, and other income streams. Estimate the expected revenue for each source based on market trends, historical data, and sales forecasts.
Estimate Expenses
Next, list all anticipated expenses, categorizing them into fixed and variable costs. Fixed expenses, such as rent and salaries, remain constant regardless of business activity, while variable expenses, like supplies and utilities, fluctuate based on demand.
Factor in Contingencies & Emergency Funds
Allocate a portion of your budget for contingencies and emergency funds to cover unforeseen expenses or revenue shortfalls. Building a financial cushion will provide stability and resilience during challenging times.
Balance Your Budget
Balance your budget by ensuring that projected revenues exceed estimated expenses. If there's a deficit, identify areas where you can reduce costs or increase revenue to achieve equilibrium.
Monitor & Track Your Budget
Regularly monitor and track your budget against actual financial performance to identify variances and deviations. Use accounting software or spreadsheets to update your budget and make adjustments as needed to stay on course.
Review & Adjust Budget Regularly
Review your budget periodically, ideally on a quarterly or annual basis, to assess its effectiveness and relevance. Adjust your budget as necessary based on changing market conditions, business priorities, and performance trends.
Contact Mowery & Schoenfeld for Help with Business Budgeting
Creating and managing a business budget requires expertise and strategic planning. At Mowery & Schoenfeld, we specialize in helping businesses develop robust financial strategies to achieve their financial goals. Contact us today to learn how our team of experienced professionals can assist you with business budgeting and financial management.
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Budget And The Budgeting Process
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Written by True Tamplin, BSc, CEPF®
Reviewed by subject matter experts.
Updated on February 27, 2023
Fact Checked
Why Trust Finance Strategists?
Table of Contents
Budget: definition.
A budget is a detailed plan showing the financial consequences of an organization’s operating activities for a specific future period. A budget acts as a financial model that summarizes future operations.
Budgets are usually viewed as a core component of an organization’s planning and control system .
Budgeting Process
The procedures and activities that are undertaken to develop a budget are known as the budgeting process.
Explanation
The budget is a formal quantitative expression of the goals of management. The act of preparing a budget is called budgeting. The use of a budget to assist management in the controlling process is called budgetary control .
However, in the budgeting process, these three terms are sometimes used interchangeably.
Therefore, through the process of budgeting, management specifies the events that must take place to ensure that target profit and other objectives will be achieved.
A budget is usually drawn up for an annual period. The first step in the preparation of a budget is to look at actual expenditure and revenues for the previous year.
With a good accounting system, expenditure for the prior year will be broken down and reported in considerable detail.
Since many expenditures tend to vary with sales or volume of production, estimating these elements may be the most sensitive part of the entire budget.
A good manager will base his entire budget on the advice received from his sales and marketing people.
Also, budgets should contain enough information presented in an orderly manner so that its purpose is communicated to the user. Too much information or too little information clouds the accuracy of the budget.
Purposes of the Budgeting Process
The budgeting process can serve five primary purposes. However, it should be noted that not all purposes are served by all budgeting systems.
For example, in some small businesses, planning and resource allocation may be the only intended purposes of the budgeting system.
The most obvious purpose of a budget is to set out a plan of action. The budgeting process forces the individuals within a business to plan .
For example, in formulating a quarterly budget for a five-star hotel, the hotel manager and reservations manager must collaborate to plan the staffing and supplies needed to meet anticipated demand for the hotel’s services.
Facilitating Communication and Coordination
For a business to plan operations effectively, communication and coordination must be effective between all managers. Significantly, the budgeting process provides a formal mechanism to enable this to take place.
For example, to plan pricing structures and the number of ticket sales, the sales manager for Virgin Blue or Qantas airlines must know the flight schedules developed by the airline’s route manager.
The budgeting process pulls together the plans of each manager in an organization.
Allocating Resources
Generally, a firm’s resources are limited and budgets provide one way of allocating resources among competing uses.
A large retailer, such as Coles Mayer, would use the budgeting process to consider the many alternative uses that could be made of its limited resources.
For example, managers running the company’s supermarkets would be competing for resources against managers operating its department stores and specialty stores.
The budgeting process provides a forum for evaluating the uses of limited resources.
Controlling Profit and Operations
The budget can serve as a benchmark to allow comparison against actual financial results at all levels of a business.
For example, within a sales department, actual sales against budgeted sales may be reported on a weekly basis to help sales staff exercise some control over total sales .
Also, the budgeted costs of a customer service department may be compared with actual costs each month to point to areas where greater cost control is required.
As part of the budgeting process, standard costs are often developed for major production inputs (e.g., direct materials used in production) or activities.
These ideal cost benchmarks help managers to control financial resources.
Evaluating Performance and Providing Incentives
Comparing actual results with budgeted results also helps managers evaluate the performance of individuals, departments, divisions, or the entire company.
Since budgets are used to evaluate performances, they can also be used to provide incentives for people to perform well.
For example, hotel managers at the Australian hotel chain All Seasons Hotels participate in a profit-sharing scheme that provides them with incentives to meet or exceed their budgeted profit goals.
Budget And The Budgeting Process FAQs
What is a budget.
A budget is an estimate of income and expenditure over a specified period, typically used to plan spending and manage finances.
How Can I Set Up A Budget?
Creating a budget involves analyzing your current financial situation, setting goals for spending and saving, tracking income and expenses, and making changes as needed to stay within the limits you have set.
Are There Different Types Of Budgets?
Yes, there are several different types of budgets including cash management budgeting, zero-based budgeting, line item budgeting, performance-based budgeting, incremental budgeting, and more.
What Are The Benefits Of Budgeting?
Budgeting helps you to track your spending and make sure that your income is being used most effectively. It can also help you plan for unexpected expenses, set financial goals, and save money.
How Do I Stick To My Budget?
Sticking to a budget requires discipline and commitment. Start by monitoring your spending regularly and making adjustments when needed. Additionally, create an emergency fund for unexpected expenses to avoid going over budget. Finally, assess your budget periodically to ensure that it still meets your needs.
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About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .
Related Topics
- Basic Principles of an Effective Budget
- Budget as an Operating Plan
- Budget Period
- Budgeted Income Statement
- Budgeted Statement of Financial Position (Balance Sheet)
- Cash Budget
- Discretionary Budget
- General and Administrative Expense Budget
- Implementation of Budget
- Limitations of Budgeting
- Manpower Budget
- Manufacturing Cost Budget
- Operating Budget
- Performance Budgeting (PB)
- Production Budget
- Profit Planning
- Project Budget
- Revenue and Cash Budgets
- Sales Budget
- Selling Expenses Budget
- Zero-Based Budgeting (ZBB)
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Part 1: Tell Us More About Yourself
Do you own a business, which activity is most important to you during retirement.
- Giving back / charity
- Spending time with family and friends
- Pursuing hobbies
Part 2: Your Current Nest Egg
Part 3: confidence going into retirement, how comfortable are you with investing.
- Very comfortable
- Somewhat comfortable
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- Very confident
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What is your risk tolerance?
How much are you saving for retirement each month.
- None currently
- Minimal: $50 - $200
- Steady Saver: $200 - $500
- Serious Planner: $500 - $1,000
- Aggressive Saver: $1,000+
How much will you need each month during retirement?
- Bare Necessities: $1,500 - $2,500
- Moderate Comfort: $2,500 - $3,500
- Comfortable Lifestyle: $3,500 - $5,500
- Affluent Living: $5,500 - $8,000
- Luxury Lifestyle: $8,000+
Part 4: Getting Your Retirement Ready
What is your current financial priority.
- Getting out of debt
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- Protecting my wealth
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Budgeting vs. Forecasting: A Comparison
![budgeting vs business plan Maddy Osman](https://53.fs1.hubspotusercontent-na1.net/hub/53/hubfs/Maddy-Osman.png?width=48&height=48&name=Maddy-Osman.png)
Updated: July 22, 2024
Published: March 12, 2023
Budgeting and forecasting are two essential tools in a business owner’s toolbox. Together they help you set financial goals, figure out how you’re going to achieve them, and track progress along the way.
![budgeting vs business plan Budgeting vs. forecasting](https://www.hubspot.com/hs-fs/hubfs/HUBSPOT_2021Q1_257-min.jpg?width=595&height=400&name=HUBSPOT_2021Q1_257-min.jpg)
However, they each function differently and have distinct roles in financial planning. Understanding the process for each will help entrepreneurs prepare their business for growth and weather the down times.
What is budgeting?
Budgeting is the process of setting your financial goals for a specific period, often for one year. Budgets serve as road maps that guide the company’s direction.
A basic business budget would express annual financial goals such as:
- Debt reduction
- Sales volume
Budgets are set at the beginning of the year to put forth the ideal direction of the company. At the end of the period, business owners can compare the budget to actual results to see which goals were achieved.
What is forecasting?
Financial forecasting refers to using your company’s past performance data and assumptions to predict future results. These projected outcomes (forecasts) can be for the long or short term. They’re usually updated regularly, sometimes in real time.
For instance, a business owner might update sales volume, cash flow, and revenue forecasts every quarter. They can use information from Q1 sales to inform and adjust their predictions for Q2 and onward.
Business forecasts are based on estimates of future performance metrics, including:
- Revenue growth rate
- Conversion rates
These estimates are typically based on assumptions around your existing data. For instance, if you are estimating future sales volume, you can start with last year’s volume. Then, you make an assumption about what it will do in the next year: increase, decrease, or stay the same.
Budgeting vs. forecasting difference
In business, the budget outlines the direction the management wants the company to go in, while the financial forecasts are used to track progress toward the goals defined in the budget.
Furthermore, budgets are often set for a single period, such as a year. Financial forecasts, on the other hand, can be used for various periods (annually, quarterly, monthly) and are updated regularly.
However, budgeting and forecasting usually work together. Typically, management will start by creating an annual budget based on business goals for the year. Then, they can use financial forecasts to visualize different scenarios for achieving their budget goals.
Your budget is your goal, and your forecasts are your road maps for reaching that goal.
Let’s say you have an annual budget goal of increasing revenue by 10%. There are a few different ways to achieve that — you could increase sales to your existing market, target a new market, or raise prices.
You can create forecasts for different tactics to see how well you would need to perform to reach the 10% revenue increase. Then, as the year progresses, forecasts serve as a way to monitor progress and see if the company is on track.
For example, you may want to increase revenue by 2.5% each quarter to meet the goal of 10% annual growth. But at the end of Q1, you’ve only increased revenue by 2%. You can adjust your forecasts to see that, at the current rate, you’ll only reach 8% growth. To achieve your original goal of 10% growth, you now need to average 2.7% growth in Q2 through Q4.
Planning vs. budgeting vs. forecasting
In addition to budgeting and forecasting, management also uses planning to keep the organization moving in the right direction. A business plan typically outlines the company’s overall vision and goals for a longer time frame (such as 3-5 years).
A basic business plan will include information about your company’s key information and strategies, such as:
- Description of products or services
- Definition of target customer
- Industry and competitive analysis
- Relative strengths and weaknesses
- Threats and opportunities
- Marketing strategies
- Financial planning (including budgets)
The business plan is the big picture, while a budget focuses on specific financial objectives for a period of time. From there, forecasting tells you how well you’re tracking along with your budget.
Budgeting vs. forecasting examples
Businesses use budgets to determine how to meet goals, such as increased profit. For instance, you can increase profit by generating more revenue, reducing costs, or both. If your plan relies on more revenue, then you should project higher revenue in your budget.
Once the budget is set, financial forecasts can be created and updated to help management see if they’re on track to achieve their goals.
Budget example
Say a SaaS company made $3m in revenue last year. This year, its budget includes a goal to increase revenue by 20%, bringing it to $3.6m.
Here’s what a sample budget for the upcoming year might look like:
![budgeting vs business plan Screen Shot 2023-01-27 at 6.41.11 PM](https://www.hubspot.com/hs-fs/hubfs/Screen%20Shot%202023-01-27%20at%206.41.11%20PM.png?width=1140&height=624&name=Screen%20Shot%202023-01-27%20at%206.41.11%20PM.png)
In this budget template, you’ll see the total revenue goal of $3.6m, plus details about smaller goals in different services (e.g., basic tier vs. premium tier).
The budget also outlines goals for operating expenses, which add up to $2.8m. If you meet both revenue and expenses targets, your operating income will be $0.2m.
The “Actual” column stays blank until the year-end when you review performance. Filling in those numbers will allow you to see whether you achieved your target.
Forecast example
After you have a budget in place, say you want to create a forecast and find out whether it’s feasible to reach $3.6m in revenue.
To forecast this year’s revenue, gather information about your previous performance and make assumptions.
Let’s say that by the end of last year, your revenue was increasing at a rate of 2% month-over-month (MoM), and in your last month, you made $250k in revenue.
If you assume that this growth rate will continue in the next year, then your financial forecast would be as follows:
Projected monthly revenue based on 2% MoM growth rate
![budgeting vs business plan Screen Shot 2023-01-27 at 6.42.30 PM](https://www.hubspot.com/hs-fs/hubfs/Screen%20Shot%202023-01-27%20at%206.42.30%20PM.png?width=1130&height=792&name=Screen%20Shot%202023-01-27%20at%206.42.30%20PM.png)
This forecast tells you that if you keep the same 2% MoM revenue growth, you’ll achieve a total revenue of $3.42m, falling short of your $3.6m goal.
Your management team can use this information to see that you’ll need more than 2% MoM growth. Using forecasts to help with decision-making, you can look at different strategies for increasing that growth rate, such as:
- Increasing prices
- Improving sales conversion rates
- Generating more leads at the top of the sales funnel
Since forecasts are updated regularly, these initial projections aren’t set in stone. Say that in March and April you experience 3% MoM growth instead of your predicted 2%.
You can update the remaining predictions (May through December) to reflect 3% MoM growth and see what that does to your total revenue projection.
Forecasting methods
The forecasting process above relies on the straight-line method , which assumes your company’s historical growth rate will stay the same.
There are several financial forecasting methods , and each may give different results.
Here are three additional financial modeling techniques commonly used to predict business performance:
- Moving average method : Uses an average (or weighted average) of the previous period to predict the next to provide a rolling forecast. For instance, it may use the last three months’ average revenue to predict the next month’s revenue.
- Simple linear regression (SLR): Predicts financial performance based on a related variable. For instance, a utility company may use temperature data to predict revenue from electric usage.
- Multiple linear regression (MLR): Predicts financial performance based on multiple related variables. For example, a shipping company may use gas prices and interest rates together to project expenditures for a future period.
If you want to explore more complex forecasting methods (such as regression), then using sales forecasting software can streamline and automate the process.
Tips for improving budgets and forecasts
Here are some best practices that can help you get the most out of your budgeting and financial processes.
Create a budget
According to a survey by Clutch , only 54% of small businesses created an official budget in 2021 — meaning many entrepreneurs don’t have an outline for annual financial goals.
If you don’t have a designated chief financial officer (CFO), you can use a business budget template to get started or work with a financial consultant to create one.
Use accurate data
Forecasts are only as good as the information you input. If you’re using incorrect data in your forecasts, you won’t get much value from them.
Be careful of manual data entry errors and typos. Double-check inputs and update data often so you have the most recent information.
You can also use accounting and bookkeeping software to automate data tracking and reduce the chances of human error.
Learn from previous forecasts
Tom Miller, CMO of strength sports publication Fitness Volt, recommends business leaders “reduce errors systematically by determining where past projections went wrong.”
For instance, let’s say you’re a SaaS company that launched a new premium pricing tier. You assumed this tier would have the same conversion rate as your basic tier. But in reality, the conversion rate was lower because the cost was higher and the product was new.
This assumption may have led to overestimated revenue projections.
To correct it, you can explore a couple different revenue scenarios, including ones based on more conservative assumptions. This way, you’ll be able to understand what happens to your budget even if you fall short of ideal performance.
Improving your ability to make financial assumptions over time will help you create more accurate projections.
Consider qualitative data
Small businesses and startups that don’t have much historical data to use in forecasts can look at qualitative data such as surveys or research reports.
For instance, if you haven’t launched your product yet, you can survey customers to estimate how many people would buy and at what price. That information can be used in revenue and sales forecasting .
Do your research
Your company doesn’t exist in a vacuum. When making budgets and creating forecasts, don’t ignore what’s happening in the economy and your industry.
Walter Lappert, president of drone company Triad Drones notes, “Always do your market research and err on the side of overestimating variable costs.”
You can’t always predict when market conditions like supply chain problems or inflation will result in a rise in costs. So, you want to avoid relying solely on best-case scenario forecasts. Instead, use conservative estimates to give yourself financial buffers.
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Budgeting vs. Forecasting for Your Business
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Business budgeting and forecasting are highly useful practices in businesses of all sizes. While they're both important tools for business management and strategy, it's common for business owners to confuse budgeting and forecasting.
The purpose of a business budget is primarily to provide your company with a short-term spending plan for the upcoming year (or another set financial period)… First, you need to gather your financial records. Then use the information to reasonably estimate what your revenue will be for the upcoming financial period. If you've shown a trend of growth or… If your SMB struggles to keep its back office in order, then outsourced bookkeeping, accounting, and CFO services might be right for you. These services cost a fraction of the price… |
So, what's the difference between business budgeting and forecasting and how can you use budgeting and forecasting in your business?
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Budgeting vs. Forecasting: What's the Difference?
What is a budget.
Budget Definition: A business budget is an outlined plan for income and spending. The budget contains individual line items for each of the company's projected (expected) revenue and expenses over a set period of time. Businesses typically have annual budgets that are created once a year. The budgets are then compared to the company's actual numbers and adjusted, as needed, throughout the year.
What Is a Budget Deficit and What Is a Budget Surplus?
A budget deficit occurs when an entity's spending exceeds its income over a certain period of time. A budget deficit typically results in a negative cash flow. a Budget deficit can be remedied by accessing funds through an SBA loan for small businesses loan, a cash injection from an investor, or with the business's savings.
On the other hand, a budget surplus occurs when a business's income exceeds its spending over a certain period of time. A budget surplus can create a positive cash flow and provide a business owner with options regarding how they intend to use the surplus (reinvest in the business, put it in a savings account, or pay out dividends to investors).
While it is better to have more money than your business needs than not enough, too much of a surplus can indicate that your business is not using its resources in the most efficient way.
Read More : The Value Of An (Updated) Budget: Getting Your Business on Track for Success
The Purpose of a Business Budget
The purpose of a business budget is primarily to provide your company with a short-term spending plan for the upcoming year (or another set financial period). A business budget ensures that a company sets spending limits based on its anticipated revenue. This helps business owners understand and maintain the company's financial health within set spending guidelines .
A budget's objective is to help a business owner plan the upcoming year's expenses and business operations while maintaining a positive cash flow and healthy business
What Is a Forecast?
Forecast Definition: A financial forecast is a model that contains information intended to help a business owner understand what could be possible for their business. Forecasting can use an expert's opinion, the company's historical financial data, or a combination of both to create a possible projection for the company's future growth, cash, equity, income, valuation, etc. over a longer period of time.
Forecasts typically contain more sweeping, overarching, long-term information than a budget which looks at specific line items for the upcoming financial period.
The Purpose of a Business Forecast
Business forecasting is most commonly used to understand the future scenarios that are possible or likely for a business.
When forecasting, a CEO can apply various business models to the company's existing data or a set of aspirational financial data to determine how the business can realistically achieve its goals. Additionally, forecasting can be used to assist in the creation of a business plan or budget that is designed to handle a variety of different challenges, such as an economic recession or cash flow shortage.
Read More : Revenue Forecasting For Decision Making? Here’s How To Use It...
6 Budgeting Best Practices for Businesses
While it's good to forecast to help develop your future vision for your business and also to mitigate risk with worst-case-scenario forecasts, budgeting will help you keep your daily operations and spending on track to help you achieve those long-term goals. Use the following budgeting best practices when creating and using a budget in your SMB.
1. Know How to Create a Budget
The first step is to understand the basic process of creating a budget. First, you need to gather your financial records. Then use the information to reasonably estimate what your revenue will be for the upcoming financial period. If you've shown a trend of growth or shrinkage, be sure to take that into account. Then create a list of all your company's expenses and what you project them to be in the upcoming year. Finally, consider if you have any upcoming revenues or expenses that are unique to the year and determine how you will work these into your new budget.
2. Choose the Budgeting Method That Makes Sense for Your Business
While the broad strokes of budgeting are always the same, there are a variety of different methods that you can apply to your business's budget. Some of the most popular include zero-based budgeting, incremental budgeting, activity-based budgeting, value-proposition budgeting, and top-down budgeting.
3. Don't Work Alone
Not working alone when you make a budget for the business is essential to ensuring you don't forget about any line items or important upcoming, departmental expenses. Ask your department heads or project managers to provide you with their own budgets and projections for the upcoming year so that you can aggregate all of this information into a global budget for your business. Additionally, collecting departmental budgets will help to ensure that every part of your company is aligned with common goals that are going to support your business's long-term strategy.
3-Year Scenario Planer
A high-level vision of your financials to help you make decisions to hit profit goals.
Speak to a Business Performance Specialist to learn how to see this with your business’s own numbers.
4. Use Your Financial Forecast
While financial forecasting is a separate business activity, you can use your forecasts to create your business budget. If you have different forecasts, such as optimistic forecasts, realistic forecasts, activity-based forecasts, and worst-case-scenario forecasts, then use each of these to generate a different budget for your business. This will help ensure that you have a spending plan in place for any financial outcome.
5. Be Realistic and Conservative About Your Numbers
Business owners must be naturally optimistic, and this can sometimes make it difficult to build realistic numbers into your budget. Try not to be overly optimistic about the upcoming year's revenue growth and be realistic about the amount you'll be spending on each line item in the budget (and which expenses you can actually cut).
Additionally, remember to take inflation into account when creating the upcoming year's budget. With the kinds of inflation rates we've been experiencing recently, these rates do not represent insignificant changes. Don't forget that inflation reduces the value of your cash, resulting in increased prices.
6. Compare the Budget to Your Actual Numbers All Year
Throughout the year, you should be comparing your budget to your actual income and spending number. When you encounter budget variances, be sure to make adjustments to your budgeted spending plan so that you can continue to stay on track throughout the rest of the year .
Support Your SMB's Budgeting and Forecasting With a Solid Back Office
Both budgeting and forecasting are powerful tools for business owners. However, budgeting and forecasting require a sound back office and access to comprehensive, accurate financial data. Without a clear record of your company's past spending and revenue that enables you to identify trends, it can nearly impossible to budget and forecast accurately; predicting the future with accurate data is already tough enough.
If your SMB struggles to keep its back office in order, then outsourced bookkeeping, accounting, and CFO services might be right for you. These services cost a fraction of the price of hiring an in-house back-office team, they provide all of the benefits. With an outsourced back office, you can begin collecting data to keep your budget and spending on track with automated processes while identifying the profit drivers that can help your business turn its most optimistic forecasts into reality.
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Budget vs Forecast: Functions and Differences
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Budgets and forecasts play a crucial role in companies’ financial well-being during every stage of the business lifecycle. They help businesses achieve their financial goals and targets and prepare for potential uncertainties.
And while budgets and forecasts work in tandem, they serve distinct functions. Put simply, the budget sets out a firm’s strategic direction, while forecasts track whether it meets its financial goals on an operational level.
But that’s not the only difference between a budget and a forecast. Let’s define the concepts and juxtapose budget vs forecast.
Table of Contents:
What is a budget, what is a financial forecast, key budget vs forecast differences, how budgeting and forecasting work together, budget vs forecast: wrap up.
A budget is a financial tool for estimating financial performance over a specified period. It helps companies prepare for uncertainties and serves as a baseline to compare targets to actual results.
The main budget components include:
- Revenue and expenditure estimates
- Anticipated cash flows
- Fixed and variable costs
- Expected profit and loss
- Anticipated debt
The benefits of budgeting are numerous. This process helps companies make important financial decisions in various ways. For instance, capital budgeting allows for the adequate allocation of funds across projects.
Budgets are prepared for a particular period—typically, one year. That’s why it is usually referred to as the Annual Business Plan (ABP), which outlines the following factors (among others):
- Development standards and procedures
- Prevailing market conditions
- Relationships between the company, customers, and vendors
- Calculation methods, assumptions, and others
The primary types of budgets businesses prepare include:
- Cash flow budget
- Capital budget
- Operating budgets (sales, production, SG&A, etc.)
The final budget—also known as the Master budget —combines all of the above. Learn more about budget preparation in our dedicated article .
The following is an example of a sales budget:
Units to be sold | 5,500 | 6,500 | 7,500 | 8,500 |
Multiply: Expected price per unit | $10 | $10 | $11 | $11 |
Less: Discounts & Allowances | $1,000 | $1,500 | $1,250 | $1,500 |
Before we continue with the budgeting vs forecasting comparison, let’s define forecasting.
Financial forecasting is the process of estimating and providing insights into a company’s financial well-being and future. It relies on historical sales, purchases, expenses, and costs data, as well as pro-forma financial statements: balance sheets, cash flow statements, and income statements with projected financial data. Forecasts can also be based on position statements, industry trend analyses, and competitor trends.
The purpose of forecasting is to estimate companies’ future financial well-being and make financial decisions based on the latest available information and trends. This activity also helps businesses allocate their budgets adequately and evaluate whether the business plan is achieved.
The following table is a financial forecast for the fictional company XYZ Inc.:
Net sales | 54,000 | 62,000 | 80,000 | 94,000 |
Operating expenses | 24,000 | 24,000 | 24,000 | 24,000 |
Non-operating expenses | 29,000 | 0 | 6,000 | 20,000 |
As you can see, forecasted net sales may be the same as the budgeted (in Q1), above them (in Q4), or under them (in Q2 & Q3).
Budgeting involves creating an ABP for a specific period, including projected revenue, expenses, cash flows, and investments. It requires input from multiple departments such as sales, production, finance, marketing, etc.
Forecasting, on the other hand, projects where a company is headed based on the latest available information. While budgets are static and usually prepared for a year or longer periods, forecasts are updated monthly or quarterly.
The following budgeting vs forecasting comparison table summarizes the primary differences:
Strategic plan for financial performance | Projections based on the latest financial data and trends | |
Setting targets for a specified period | Estimating whether the overall performance achieves the targets | |
Long-term projections (one year or longer) | Short- or long-term projections | |
Rarely adjusted, static document | Frequently updated | |
Short- and long-term strategic business plans | Short-term management of operational performance |
Budgets and forecasts serve distinct purposes, catering to different needs within financial planning and management. The former provides a detailed plan for resource allocation, while the latter offers a forward-looking estimate of financial performance based on currently available information. Both tools are valuable for decision-making and financial control within an organization.
Budgeting provides a baseline for performance analysis by comparing projections with actual results to determine the variance. And forecasting helps a company estimate its financial future using historical data.
Combined, budgeting and forecasting provide a complete, comprehensive, and reliable financial plan or strategy. Through forecasting, the company can determine whether it’s on the right course and set realistic expectations.
With the help of budgets, these expectations turn into concrete goals, which are compared to reality at the end of the period. These processes allow companies to evaluate performance, adjust expectations, set realistic goals, and ultimately, grow.
Budgets and forecasts are crucial financial planning components. They help manage financial risks and develop action plans to achieve targets. The current article provides a very brief overview of their primary functions and differences.
Enroll in our FP&A: Building a Company’s Budget course to learn more about the budget and forecast preparation process. Sign up for 365 Financial Analyst and try our learning program for free.
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Budgets and forecasts
Budgets and forecasts are key to the success and growth of your business. A budget is a spending plan based on what you want to happen, while a forecast predicts what is likely to happen based on your past and present finances.
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Budgeting and forecasting comparison
Budgeting and forecasting include:
- planning financially for the year ahead
- using data to update your predictions
- predicting future financials.
Use our budgeting and forecasting infographic (JPG, 442KB) to understand the differences between budgets and forecasts and when and why to use them.
Transcript of infographic
Prepare a budget
Budgeting means outlining your expectations for the upcoming financial year. Budgets can estimate revenue, expenses and expected cash flows. They are generally updated annually and tend not to change over this time.
To set a budget, look at how much money your business spends, and how much money you can or should spend to maximise your profits.
If planned and managed well, a budget helps you to:
- monitor your sales and spending habits
- make better decisions and give you a competitive edge
- recognise how your decisions can impact business operations.
Your budget must be achievable. Work to a realistic budget that won't set you up to fail. When preparing your budget:
- use your existing financial statements to guide you
- review your business operating plan and note existing and new activities
- document assumptions such as cost of supplies (anticipating supply and demand considerations) and staffing costs
- consider working with your accountant, bookkeeper or tax agent for tailored advice.
Profit and loss budget
A profit and loss budget shows the expected revenue and expenses for your business over a period (usually 12 months) and will show if your business is running to plan. It calculates the sales targets needed to reach your profit goals.
A profit and loss budget:
- shows how much profit is likely from predicted sales
- contains non-cash items such as depreciation, creditors you have not paid, and invoices raised but for which no cash has been received
- excludes any payment of loans.
You can compile your profit and loss budget in the same format as your profit and loss statement . This will allow you to compare them later and refine future projections.
Prepare a forecast
Forecasts use actual sales and cost data to show where your finances are headed. It is an estimate of what your results and profitability will be. Forecasts are more dynamic than budgets, so update them regularly as your revenue and expenses change. It provides a basis for your financial decisions, using actual data for the financial year, and can be used to develop future budgets.
To create a forecast, use the data from your budget, along with previous and current business trends, to estimate what those profits will be.
Talk to your accountant or financial adviser for help to prepare a forecast and manage your forecasted cash flow. If you anticipate any cash shortfalls, you will need to plan how to cover your costs. These extra payments or receipts must be included in your cash flow forecast.
Review and update your forecasts at the end of each month when you compare your actual trading results with your original budgets (variance). You should then revise your forecasts for the rest of the financial year, considering where your business is heading. Your original budgets do not change.
If your business is facing uncertainty, you could create a range of forecasts based on different outcomes. This allows you to plan for every scenario and have a 'Plan B' and 'Plan C' if you don't achieve your ideal results.
Steps to prepare a forecast
Start by defining your forecast period. This could be monthly (most common), quarterly or yearly, depending on how your business handles billing. For example, if your business takes in daily sales from many different customers, create a monthly forecast. If you only bill a small number of clients quarterly, you may prefer a longer forecast period.
Base your future projections off past financial statements. There may be consistent monthly or yearly trends which allow you to accurately predict ongoing income. Adjust your forecast as trends change.
If your business is new and doesn't have a financial history, use your expected expenses. Work out how much your business is spending to know how much you need to earn to make a profit.
You may need to update your forecast throughout the period if your income fluctuates or expected sales figures change.
Remember to include all future cash inflows, even if they're not related to income or sales. This could include:
- if you are repaid a loan
- asset sales
- government grant payments.
Negative cash flow is money that is going out of your business (your expenses).
Expenses include everything from office supplies to staff salaries, administration, and fuel costs if your business owns a vehicle. Itemise your expenses as much as possible to help manage your forecast into the future.
Make sure you include other cash outflows beyond your ongoing monthly expenses. This could be the purchase of property or assets, or one-off payments.
Once you have an outline of your cash inflows and outflows, add the numbers into your forecast. You can do this as you're expense and income figures become available. Complete your projections and then add them to create your final document.
Once you've added your incoming and outgoing cash, you'll be able to estimate your closing cash balance for each period – this is the amount of cash you'll have left. This figure is then carried forward as your opening cash balance for the next period.
Once you've completed your cash flow forecast, you'll continue to use it throughout the period to review your actual cash flows against your original estimates. Review this regularly – weekly or fortnightly is recommended. Identify any differences and adjust your budget, business plan and expectations to improve your cash flow .
Review your results at the end of each month and compare these with your budget and forecast. Note any variances and keep track of whether these are either:
- for example, a contract end date has been unexpectedly delayed, meaning revenue will be generated later than anticipated
- for example, your business fails to win a contract, meaning you won't generate the revenue you forecasted.
Use this data to decide whether you need to adjust your cash flow forecasts or restructure your budget.
Cash flow forecast
A cash flow forecast is an estimate of how much money is likely to move in and out of your business over a period. It helps you predict cash surpluses or shortages and shows if your business has the cash it needs to keep running.
You can use a cash flow forecast to find out if you have sufficient available cash to pay your debts and taxes when they become due, or if you can afford to make a major equipment purchase, take on more staff or expand your business.
Set up your forecast in the same way as your cash flow statement to compare your predictions with your actual performance. This will alert you to any variances, which you can then investigate and find out why your business is under (or over) performing.
Cash flow forecasting is an estimate only, and your actual future income and expenses may vary from your original plan. You can limit these variances by being as accurate as possible when mapping out the timing of your incoming and outgoing expenses.
Use the following steps to help prepare a cash flow forecast.
You will need to estimate and record these amounts for each month.
- Total monthly cash inflow – includes sales, sales of assets, capital injections from borrowings or owners funds, interest revenue and any other sources.
- Total monthly cash outflow – includes items such as purchases, loan payments, supplies, telephone(s), electricity, wages and any other bills.
- Net cash flow – take the total outflows from the total inflows to see if there is more money in or out.
- Opening balance – record your cash available at the beginning of the month.
- Closing balance – calculate your funds available at the end of the month by adding the net cash flow to the opening balance. This will become your opening balance for the next month. Note: If your net cash flow is negative, this amount will be reduced.
Include GST when inserting amounts for some cash inflows (particularly sales) and many cash outflows (particularly purchases). Calculate the difference between total GST inflows and total GST outflows and insert this as GST payments.
Different GST requirements apply to different businesses. Seek specific advice from your tax adviser.
Also consider...
- Learn about other types of financial statements .
- Read about making your business more profitable .
- Learn about financial ratios to monitor your financial performance.
- Find out how to manage your cash flow .
- Find information, tips and resources on setting up and managing your business finances from our Mentoring for Growth mentors.
- Last reviewed: 20 Dec 2021
- Last updated: 20 Dec 2021
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Apply for and manage a grant or program for your business.
Manage your interactions with the R&D Tax Incentive program.
- Financial tools and templates
Create a budget
On this page
Why you need a budget for your business
Create your budget, monitor your budget, use your budget, understand budgeting versus forecasting.
Budgets are essential for tracking the financial health of your business. Your budget is your planned income and spending. It helps you to allocate funds for particular items and activities.
Your budget also helps you to:
- set business goals
- make good business decisions
- get finance.
Download our template to create a budget for your business.
Budget template
You need a basic bookkeeping system to keep track of your finances. Throughout the budget period, keep an eye on how you’re tracking against your budget.
Actuals – comparing actual results to budgeted amounts
Record your business’s actual income and expenses during the budget period. Calculate the difference between your budgeted amounts and your actual results.
Find out how to set up a basic bookkeeping system.
Use your budget analysis to help you make business decisions.
If you’re spending too much:
- look for ways to cut costs
- avoid spending money on anything that isn’t essential to running your business.
If you have extra funds, think about:
- ways to reduce debt
- creating a financial safety net
- growing your business.
Tip: analysing your budget will help you find seasonal patterns. You can see if decisions like changing prices or adding a new product or service are the right ones.
Your budget is your planned revenue and spending. It allows you to allocate funds. Consider preparing a budget quarterly or yearly.
Forecasts are usually more frequent, often monthly. A forecast predicts past and current trends in your financial statements. This gives you a more realistic idea of how your business is going and help you to avoid problems.
One of the most important forecasting tools for business is cash flow forecasting . It can also help you keep on top of your bills. It’s useful if you’re trying to get finance – it shows lenders you can pay them back.
Find other free financial templates.
Check our glossary of financial terms., find out how to review your business finances., was this page helpful, thanks for sharing your feedback with us..
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Rolling Forecasts: A Guide vs. Traditional Budgeting
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Steve Groccia
Head of Customer Operations
Download Our Financial Planning Blueprint
So far, the early 2020s have shined a massive spotlight on at least one trend in finance—the need to adopt a rolling forecast for planning and flexible budgeting .
No matter how solid your plan felt going into this decade, it almost certainly went out the window when the pandemic hit, or when supply chains got derailed, the mass resignation struck, inflation rose to all-time highs, or when war broke out in Europe. We can hope that these kinds of unprecedented events are once-in-a-lifetime occurrences, but the problem of inflexibility in annual planning remains.
The modern finance team has to be agile. But annual plans limit agility because they take a month to nail down and don’t adjust to changing market conditions.
Embracing the rolling forecast gives your finance team the flexibility to keep pace with business changes—but only if you have the proper infrastructure in place to support an agile planning process.
Table of Contents
What Is a Rolling Forecast?
A rolling forecast is a financial planning tool that helps organizations continuously predict their future outcomes. They typically run on time horizons of 12, 18, or 24 months, allowing finance teams to update projections monthly or quarterly based on their most up-to-date actuals.
3 Benefits of Rolling Forecasts
The main goal of a rolling forecast is to make your financial modeling, planning, and budgeting process more dynamic. There are a few main reasons why they’re well-suited to meet that goal.
1. They’re Driver-Based
Rolling forecasts hinge on operational events rather than financial outcomes alone. They work backward from operational metrics , tracking the critical KPIs that directly impact business performance and cash flow. This approach to driver-based planning and financial assumption construction leads to more accurate predictions and creates a foundation for agile forecasting.
2. They Support More Dynamic Scenario Planning
Rolling forecasts forward on a monthly or quarterly basis allows finance teams to map out scenarios in a more strategic way. As updated actuals come in, you can break the new baseline forecast into multiple scenarios for headcount planning , topline, and expenses, accounting for best-case and worst-case projections. Instead of only comparing everything back to the annual plan, you get a more dynamic, event-based view of the business.
3. They Enable Proactive Resource Allocation
Rolling forecasts provide a more actionable foundation for budget variance analysis . Getting more up-to-date insight into where your business is on target and where it’s missing on financial outcomes helps you align with department leads more effectively. Instead of reporting on how accurate your annual plan is, you can have more granular conversations about how changes in resource and budget allocation could improve performance.
At the most basic level, forecasting is about predicting future financial outcomes for your business. But the end goal of the planning process isn’t just to see whether or not you reach 95% accuracy and hit your numbers—it’s to influence business strategy.
Rolling forecasts give you the real-time perspective necessary to go from reporting on whether or not your predictions were correct to providing actionable recommendations for meeting company goals.
Rolling Forecasts vs. Traditional Budgets
The traditional budget is an annual plan you calculate for the fiscal year based on the previous year’s historical data. Compared to rolling forecasts, traditional incremental budgeting is the de facto standard for financial planning. Instead of continuously updating the plan with a rolling forecast, the traditional processes have finance teams work with individual departments to create a static view of the company’s revenue and expense projections.
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But the traditional budgeting and forecasting process has been problematic for decades. In 1995, Jack Welch , then-CEO of General Electric, called it “the bane of corporate America.”
And it’s only gotten worse 25+ years later. Now, businesses (especially high-growth startups) evolve too quickly to rely solely on a static budget that becomes obsolete almost immediately after you finalize it.
The Problem With Traditional Budgets
Two primary problems come with measuring your business only against a traditional budget:
You aren’t working with an accurate view of the business
An annual budgeting process requires non-finance leaders to forecast spending a year or 18 months ahead of time. More often than not, accuracy is wishful thinking. The further you get from the initial planning process, the more your business changes and the less accurate those projections become.
Teams start treating the budget as an end goal
Your budget is supposed to be a plan for pursuing specific financial outcomes for the business—a means to an end. But traditional budgeting incentivizes departments to sandbag the plan, requesting more money than necessary as a way to safeguard their future or spend unnecessarily toward the end of the year to hit their projected numbers.
Rolling forecasts support a continuous planning process that eliminates these concerns. But that doesn’t mean you should ditch your annual plan altogether.
Rolling Forecasts and Annual Plans Are Better Together
Even though the pandemic revealed the glaring weaknesses of annual planning, it’s important not to think about adopting a rolling forecast process as an either/or situation. Rolling forecasts and annual plans are better together because they provide a perfect balance between short-term flexibility and long-term goal setting.
The annual plan remains the cornerstone of the budgeting process. It’s the guidepost for where you want the business to go. And modern CFOs must hold themselves (and their companies) accountable to those goals even as they do rolling forecasting.
A rolling forecast gives finance teams the kind of real-time insight necessary to provide actionable, strategic insights that guide the business forward. And continuous accountability to initial assumptions in the annual plan helps build trust with business stakeholders and connect with investors during board meetings (see our guide on how to prepare your board deck for more info).
Together, they help you paint a better picture of the “why” behind your financial data instead of just reporting on the numbers. Without that complete picture of short-term accuracy and long-term strategic vision, you risk turning your strategic budgeting process into the traditional kind of process that causes frustration for finance teams and department leaders alike.
Create Accurate Rolling Forecasts with Real-Time Data
How to create a rolling forecast (without excel).
It’s easy enough for any FP&A pro to build a rolling forecast in Excel . But spreadsheet-related pain points prevent finance teams from fully embracing a more agile planning process.
The time-consuming process of continuously updating the plan and adjusting assumptions often leaves finance teams looking at stale actual results (which defeats the purpose of a rolling forecast). And because version control is such a problem in spreadsheets, you don’t have as much flexibility to plan out scenarios that provide strategic insights for business decision-making. Even if your team is able to complete the complex task, you’ve likely opened the Pandora’s box of version control issues.
Finance teams struggle to shift to agile planning and rolling forecasts when they build the process around spreadsheets and complex business intelligence tools . To make the process work, you need a more modern financial planning tool that provides real-time insight into actuals and helps you model scenarios in minutes rather than hours or days.
The Mosaic Strategic Finance Platform sets you up to follow rolling forecast best practices by:
- Making it easy to plan around value drivers. Automating the data collection and cleansing processes frees finance up to focus more on deciding which business drivers to build forecasts around. Collaborating with business partners to get a fundamental understanding of company goals, department plans, and operational metrics gives you the insight needed to choose drivers that will maximize forecast accuracy.
- Being flexible with the granularity of line items. Not every piece of the rolling forecast needs account-level granularity. But when you need to dig into the “why” behind budget variance, it needs to be easy to get deep insight into specific line items. Mosaic lets you update plans to get that granular view in a few clicks rather than forcing you to rebuild aspects of your forecast models.
- Locking in models for easy scenario planning. The best way to think about a rolling forecast is to have one active model you save from period to period. Regardless of the time horizon you choose, you always have that copy of the initial forecast. From that baseline, you can start changing components of the model, building new scenarios, and comparing forecasts side-by-side. Mosaic gives you the flexibility to make as many scenarios as you want based on the rolling forecast and annual plan you’re using as a baseline.
- Automatically pulling in actuals. In the past, bringing in actuals from your ERP and overlaying them in your model took a significant amount of time and effort. One wrong move, and your model would break. With Mosaic, actuals sync at the click of a button.
Maintaining a tight balance between annual budgets and rolling forecasts is the best way to project future performance and create a roadmap for business growth. Implementing the right infrastructure and technology is the first step to making that happen.
Make Better Decisions with a Rolling Forecast
Continuous planning, rolling forecasting, agile finance—it’s all key to better decision-making in your business.
But these have been hot-button topics in finance for years. Forcing the issue with outdated technology and processes may work for a little while. However, a rolling forecast can quickly become a mess of complexity, inaccuracy, and costly manual work without the right tools.
Mosaic is purpose-built to help you create financial plans and real-time reports to keep pace with the business. Get a personalized demo to find out how it can help you build a foundation for effective rolling forecasts.
Rolling forecast FAQs
What is the difference between a budget and a rolling forecast.
Budgets are static annual plans, while a rolling financial forecast model is regularly updated throughout the forecast period‘s time frames. Rolling forecasts are driver-based and allow for dynamic scenario planning , leading to more accurate forecasting.
What are the advantages of rolling forecasts?
Rolling forecasts can be adjusted based on recent changes and trends compared to traditional forecasting. They allow businesses to make informed, time-sensitive decisions while updating their long-term outlook.
How do you implement a rolling forecast?
The key to implementing a rolling forecast model is having the right technology. Manual processes are error-prone, time-consuming, and can be very inefficient. You can use Mosaic to create custom financial plans and rolling forecasts based on real-time data.
Related Content
- Driver-Based Planning and Forecasting: The Complete Guide
- Understanding Sales Capacity Planning and Modeling: A Comprehensive Guide with Template
- Sensitivity Analysis vs. Scenario Analysis: What’s the Difference?
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Kiplinger Special: How Businesses Should Budget for 2025
From fuel to AI software subscriptions, here's what businesses can expect to pay next year.
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What to Expect From the Economy
Corporate profit and pay, energy costs, transportation, payroll costs, travel costs, buildings and property, technology costs.
To help you understand what is going on in the business sector and the economy, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts ( Get a free issue of The Kiplinger Letter or subscribe ). You'll get all the latest news first by subscribing, but we publish many (but not all) of our forecasts a few days afterward online. Here’s the latest...
To help you prepare business budgets for 2025, here are our latest forecasts on where business costs are headed.
Expect slowing economic growth and falling inflation. Look for 2.0% GDP growth in 2025 , versus 2.6% this year, with growth picking up in the second half. By the end of 2025, the Federal Reserve will have cut short-term rates by 1.5 points, from 5.5% to 4.0%. As the Fed cuts, other short-term rates will fall — consumer lending, home equity lines of credit, auto loans and interest earned on Treasury bills. Long-term rates will likely ease, with the 10-year Treasury note dipping to about 3.7%. The 30-year mortgage rate should fall to around 6.0%, versus today’s 6.5%. When it comes to the jobs market, the unemployment rate will end 2025 at 4.2%, down slightly from 4.3% in 2024. Inflation is likely to fall to 2.4% by year-end, versus 3.0% at the end of 2024.
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Corporate profits are set to jump 14% , after a 13% increase in 2024.
Pay hikes will be more modest in 2025, rising by 3.3%, after a 3.8% rise in 2024. For small businesses, pay hikes will average 3.0%. Total benefit compensation will increase by 3.8%, boosted by an 8% rise in health insurance premiums. As usual, prescription drugs are a big part, with prices set to rise 4%, plus usage up. One in eight Americans have already used expensive weight loss drugs , for example.
Barring some oil supply shock, expect gasoline and diesel prices to behave next year, holding fairly close to this year’s levels and possibly decreasing by a tad. Even with two wars smoldering in Ukraine and Gaza, oil shipments have flowed without much interruption, while global oil demand has ticked up only modestly. That has led to lower prices at the pump in the U.S.
Gas and diesel should trend close to present levels, in 2025, or even fall a bit more if the economy slows. Geopolitical risk is the major caveat. If either of the current wars escalates or some other conflict affects oil shipments, all bets are off and prices could spike. Natural gas, already down last year, has managed to fall again this year.
To be safe, budget on a modest uptick next year vs. what you are paying now . Gas stockpiles are ample, thanks largely to relatively mild winter weather. However, demand keeps rising, both in the U.S. and abroad. New, power-hungry data centers point to even more gas being burned next year to generate power. More export capacity will also let producers ship additional volumes of U.S. gas to overseas buyers in 2025. So, we see today’s relatively low prices heading modestly higher, by about 5%-10%.
Electricity rates will be higher, but not as steep a rise as seen a couple of years ago. Figure on commercial and industrial users paying 2%-4% more than this year.
If you rely on shipping products by air, don’t expect major shifts in rates next year, says Thomas Kempf, senior director of global airfreight development at freight forwarder Flexport . On routes from Asia to the U.S., he looks for stable to slightly higher pricing. On routes to and from Europe, Kempf says, rates are back to about 2019 levels, and they figure to stay there next year, aside from modest seasonal variations — a bit higher when air travel is low and there are fewer passenger flights to haul cargo, a bit lower during the peak travel season. Rates for shipping by air in or out of the Middle East region are likely to stay near recent elevated levels after disruptions to maritime shipping in the Red Sea forced more cargo to travel by costlier air routes. In general, Kempf notes that air cargo volumes have finally surpassed 2019 levels after the disruptions caused by the pandemic, and ecommerce shipments are driving strong demand growth. Meanwhile, air freight carrying capacity growth will be limited, helping to support shipping rates in coming years.
Trucking spot rates will rise 10%, excluding fuel surcharges. Contract rates will be up 6% and rail shipping costs will also be up about 6% or so. Intermodal rates will dip, however.
Expect to see payroll taxes rising, as the $168,600 wage base goes to about $175,000.
For firms that pay pension premiums to the Pension Benefit Guaranty Corporation, there will be no change in rates, with the exception of inflation-related indexing for flat-rate premiums, which will hover around $105 per plan participant in 2025. Variable-rate premiums for underfunded plans will be $52 per $1,000 of unfunded vested benefits (subject to a $710 or so per-participant ceiling).
Budget more for insurance. Rates for commercial property insurance will rise 5%-10%, on average, for properties not exposed to natural catastrophes. For those with exposure, expect an increase of 10%. For policies with recent losses, look for an average rate hike of up to 20%.
Rates for primary casualty insurance will go up 5%-10%. Umbrella and excess liability rates are likely to jump 15%, as insurers are writing substantially fewer policies. For cyber insurance, firms renewing policies are in for a rate increase of up to 5% or even a small decline if expanding coverage. For companies with recent cyber claims or incidents, this will likely be higher, about 10%. Ask about lower premiums in exchange for a bigger investment in cybersecurity. For directors and officers insurance, more insurers entering the market means rates will fall up to 10% because of competition. Private and nonprofits will be up to 5% lower.
Legal costs will rise about 3%-5%, on average, as demand remains strong. Expect accounting costs for a typical company to increase up to 10%.
Don’t expect any relief for air travel. Ticket prices are set to rise 5%-10% as consumer demand stays high and airline capacity shortages persist in 2025. Business travel, which has lagged behind leisure since the pandemic, will pick up, further adding to capacity problems as airlines scramble to buy new planes. And in Europe, higher ticket taxes and strict emissions rules are pushing up prices. The wild card: Unpredictable jet fuel prices, which could throw a wrench in forecasts.
Hotel rooms will inch up next year, though only slightly. Rates overall will be about 2% higher, though prices will vary depending on the type of room and hotel. Economy and luxury room rates will be down 1%. All other categories, up a tad, 2.5% at most. Other good news is that rooms in all categories will be plentiful.
Car rental rates figure to edge up about 2.5% , reflecting a market that is stabilizing after three years of volatility. Larger-car classes, such as SUVs, could see bigger rate increases. Some cities are likely to see higher price bumps, too.
With vacancies still high, office rents will be up just 1% versus 2024. Rent-free months and other concessions will likely continue but not be as common.
With record-low vacancies, warehouse rents are in for a 5%-10% increase. Demand continues to be strong for stockpiling inventory and e-commerce space.
Retail space will be up 1%-2%, on average. Vacancy rates for neighborhood and community shopping centers have been falling, pushing up prices. A pullback in retail space construction makes it harder to find locations in desirable spots.
For the most part, tech and telecom costs will edge up. Mobile phones will likely rise 3%, on average, but expect bigger hikes for premium smartphones that include built-in artificial intelligence tech, which will see high demand in 2025. Specialized AI PCs and laptops will rise in price, and continue to cost 10%-15% more than non-AI models. Cell plans will cost more but with tamer increases than in 2024. Competition, including 5G and satellite, will keep business internet prices in check.
Expect higher subscription prices for generative AI tools and services.
This forecast is from The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter .
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John Miley is a Senior Associate Editor at The Kiplinger Letter . He mainly covers technology, telecom and education, but will jump on other important business topics as needed. In his role, he provides timely forecasts about emerging technologies, business trends and government regulations. He also edits stories for the weekly publication and has written and edited e-mail newsletters.
He joined Kiplinger in August 2010 as a reporter for Kiplinger's Personal Finance magazine, where he wrote stories, fact-checked articles and researched investing data. After two years at the magazine, he moved to the Letter , where he has been for the last decade. He holds a BA from Bates College and a master’s degree in magazine journalism from Northwestern University, where he specialized in business reporting. An avid runner and a former decathlete, he has written about fitness and competed in triathlons.
- Sean Lengell Associate Editor, The Kiplinger Letter
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The Kiplinger Letter For the first time in years, it may be possible to snag a good deal on a new car.
By David Payne Published 13 July 24
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The Kiplinger Letter Security experts warn that generative AI brings new risks with no clear defenses. With AI's rapid adoption, businesses are vulnerable.
By John Miley Published 12 July 24
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Will kamala harris proposed 28%tax rate change choice for business.
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CHICAGO, ILLINOIS - AUGUST 19: Democratic presidential candidate, U.S. Vice President Kamala Harris ... [+] speaks onstage during the first day of the Democratic National Convention at the United Center on August 19, 2024 in Chicago, Illinois. Delegates, politicians, and Democratic party supporters are in Chicago for the convention, concluding with current Vice President Kamala Harris accepting her party's presidential nomination. The DNC takes place from August 19-22. (Photo by Win McNamee/Getty Images)
In 2018, when former President Trump was in office, the corporate tax rate dropped precipitously from 35% to 21%, and companies celebrated. President Biden had promised early on to raise it back up, but that has proven to be a tough sell, and it still has not occurred. In the administration’s most recent budget, it was slated to be 28%. And in a recent statement, the Harris campaign has proposed raising the corporate tax rate to 28% , restating President Biden’s proposal.
The dollars are big. Some at the Committee for a Responsible Federal Budget say Harris’ proposed rate hike could reduce the U.S. deficit by over $1 trillion in a decade. The Congressional Budget Office projected that 1 percentage point increases in the corporate rate corresponds to about $100 billion over a decade.
In addition to a 28% corporate tax rate, Vice President Harris has proposed ending foreign tax shelters by taxing offshore corporate income at the same rate as domestic income. These plans would likely find resistance in Congress, but they indicate a stark difference between the parties. But how would it impact small business, and the choices that new businesses need to make?
For many years, when an individual outgrew a proprietorship, a corporation used to be the norm. But in more recent decades, the single level of tax you get with limited liability companies (LLCs) became popular for small business. But since 2018, the 21% rate for corporation triggered a second look at these issues. A 21% vs. 28% rate is likely to invite closer questions. And if you have a corporation—one you formed or inherited—should it be S or C?
All corporations are C corporations (under subchapter “C” of the tax code) unless they file for S corporation status . If you take no action, your corporation is a C corporation. Whether S or C, a corporation is entitled to limited liability. It's traditionally one reason businesses incorporate. It is also a structure people understand. A separate legal entity, it is owned by shareholders, ruled by a board of directors who elect officers to do day to day management.
Today’s NYT Mini Crossword Clues And Answers For Thursday, August 22
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But C vs. S status is all about taxes. File a one page S election with the IRS and it is taxed almost like a partnership or LLC. A corporation may be taxed as a C corporation for many years and then change to S status. Alternatively, by filing the S election upon initial formation, it will never be a C corporation. That way, it does not need to worry about the built in gain tax on conversion from C to S.
Income from a C corporation is taxed twice. The corporation pays tax on its net income—currently at 21%. Then, shareholders also pay tax on distributions. Income from an S corporation is taxed once at the shareholder level, mostly like an LLC or partnership. An S corporation can have no more than 100 shareholders, only U.S. citizens and resident aliens, generally individual shareholders, and a calendar fiscal year. If there are multiple classes of stock, only differences in voting rights are allowed. For most small businesses, these criteria are easy to meet.
If the owners are more comfortable with the corporate form than an LLC, an S corporation can be a good choice. However, the accounting rules for S corporations are complicated, and it is hard for existing C corporations to convert. An S corporation can face corporate tax if it was previously a C corporation and elected S status within the last 5 years (this is the built-in gain tax noted above). Many of these rules can be avoided if you start out with an S corporation. To do this, file your S election within 75 days of forming your corporation.
How do you weigh the pluses and minuses on your facts? Often, C corporations are not the best choice for small businesses. The main reason is the double tax on income and on proceeds of sale. Besides, if you incur losses, you want to claim them personally, favoring an LLC or S corporation. But a big reason for many small businesses like C corporations is the $10M qualified small business stock break some can get. In 2021, it looked like it might be repealed or changed significantly. But it’s still on the books, and can be a good reason to form a C corporation, even at a 28% rate.
Besides, with the wisdom of Silicon Valley, some startups are LLCs at the start so founders can get tax losses, and then flip to C corporation status if they have a shot at the QSBS exclusion. Big and small business will be watching the rate discussions, no matter what.
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How Harris’ vision for the economy is a twist on Biden’s
![budgeting vs business plan Asma Khalid photographed by Jeff Elkins/Washingtonian](https://media.npr.org/assets/img/2023/08/22/asma_khalid_sq-31441487d33a06e8fbdea03d71a13924f6ca2677.jpg?s=100&c=85&f=jpeg)
Asma Khalid
Harris is signaling her campaign's priorities. The economy could be key for voters
![budgeting vs business plan Democratic presidential candidate, U.S. Vice President Kamala Harris speaks to supporters during a campaign rally at West Allis Central High School on July 23, 2024 in West Allis, Wisconsin.](https://npr.brightspotcdn.com/dims3/default/strip/false/crop/3600x2400+0+0/resize/1100/quality/85/format/jpeg/?url=http%3A%2F%2Fnpr-brightspot.s3.amazonaws.com%2Fe1%2F96%2F81e5b0154590bd86531120e5b86b%2Fgettyimages-2162559863.jpg)
Vice President Harris speaks to supporters during a campaign rally at West Allis Central High School on July 23 in West Allis, Wis. Jim Vondruska/Getty Images hide caption
For more on the 2024 race, head to the NPR Network's elections updates page.
In January 2023, Vice President Harris gave a little-known speech about the economy in Chicago. “We are building an economy, as President Biden often puts it, from the bottom up and the middle out,” she said. “And I’ll add, from the outside in.”
That last phrase was an aside, but it was also a telling glimpse into how the vice president thinks about the economy — and her focus on wealth creation, racial equity and access to capital.
Among White House officials and economic advisers NPR spoke with for this story, there was a consensus that Harris’ economic vision is largely aligned with the Biden economic agenda, focused on strengthening the middle class and trying to lower costs. But the vice president is likely to highlight different priorities to achieve that goal. And the clearest sign of that is what she’s prioritized in the past.
What Harris is saying now that she’s the nominee
On the campaign trail, Harris talks about the economy in bold, yet broad terms.
“We believe in a future where every person has the opportunity to build a business, to own a home, to build intergenerational wealth — a future with affordable health care, affordable child care, paid leave,” Harris told a crowd in Atlanta last week, when for the first time in her nascent campaign, she put out details around her economic platform. “All of this is to say: Building up the middle class will be a defining goal of my presidency.”
She pledged on “Day 1” to take on “price gouging.”
![budgeting vs business plan Then-Democratic vice presidential candidate Sen. Kamala Harris, D-Calif., speaks during a debate, Oct. 7, 2020, in Salt Lake City, left, and Republican presidential candidate former President Donald Trump speaks during a debate, June 27, 2024, in Atlanta.](https://npr.brightspotcdn.com/dims3/default/strip/false/crop/3081x3081+779+0/resize/100/quality/15/format/jpeg/?url=http%3A%2F%2Fnpr-brightspot.s3.amazonaws.com%2F48%2F70%2F70e669264fb49e27bfbf2ca5f88d%2Fap24216604258749.jpg)
2024 Election
Abc news says harris and trump have agreed to a presidential debate on sept. 10.
In her stump speeches, she ticks through plans to lower costs that echo the administration’s existing efforts: ban hidden fees and cap unfair rent hikes and prescription drug costs.
Next Thursday, Biden and Harris are planning a joint appearance to discuss their efforts to lower costs for Americans.
Like Biden, Harris also contrasts her vision with GOP presidential nominee Donald Trump, insisting his plans would raise prices for middle-class families. Trump has multiple proposals intended to appeal to middle-class Americans, like eliminating taxes on tips and Social Security benefits. He’s also repeatedly said he would raise a variety of tariffs , which economists say would raise prices for American consumers.
Where Harris is distinguishing herself from Biden
While Harris’ economic vision is largely a continuation of the Biden agenda, there is a degree of differentiation.
In 2019, when she was in the Senate, Harris co-sponsored legislation to increase the child tax credit. And upon becoming vice president, she was particularly passionate on the issue.
“I saw with my own eyes the way that she fought for and championed the expanded child tax credit,” said Michael Pyle, Harris’ former chief economic adviser at the White House, referring to the COVID-era American Rescue Plan.
Former White House officials and advisers say Harris has specifically been a vocal supporter of policies that help working families with children.
In February 2021, amid the pandemic, she took to the pages of the Washington Post to warn that the “mass exodus of women from the workforce” was a “national emergency” and called for “affordable and accessible childcare.”
![budgeting vs business plan Left: U.S. Vice President Harris arrives for an NCAA championship teams celebration on the South Lawn of the White House on July 22 in Washington, D.C. Right: Republican presidential nominee former President Donald J. Trump holds a rally at the Van Andel Arena on July 20 in Grand Rapids, Mich., Bill Pugliano/Getty Images)](https://npr.brightspotcdn.com/dims3/default/strip/false/crop/3375x3375+1329+0/resize/100/quality/15/format/jpeg/?url=http%3A%2F%2Fnpr-brightspot.s3.amazonaws.com%2Fa0%2F53%2F03a38bf04d1db2b4a14f0c2ed2b2%2Fdiptych.jpg)
Poll: Harris jumps to a small national lead over Trump
“The vice president wanted the care agenda to be a part of their economic agenda,” said Ai-jen Poo, an advocate and organizer for caregivers. “Historically, the care agenda shows up as a child care pillar inside of a women's agenda.”
But looking at care as part of a broader economic agenda, Poo said, was novel.
The Biden administration laid out an ambitious investment to lower the cost of caregiving. But that part of Biden’s agenda didn’t have the votes in Congress.
“After it was clear it wasn't going to make it through the Senate bill, I did have a conversation with [Harris] where she said to me that she was not going to stop fighting for those investments in the care agenda and that we shouldn't stop either,” Poo said. “I really think that she is going to double down on the pieces that are still the unfinished business.”
Another key priority for Harris as vice president has been small-business creation.
“Her very first meeting when she became vice president with ordinary Americans was with small-business owners,” Pyle said. “That’s something she made clear to me, she made clear to the entire staff — ‘This matters to me.’ ”
When Harris would travel around the country, even if visiting a city for an unrelated matter, she often made a point of visiting small, women- or minority-owned businesses.
A former Harris adviser told NPR that it was important to the vice president to bring people to the table who traditionally have not had a seat — and she did that through her work with small businesses and community-development financial institutions.
What challenges are expected ahead
But policy priorities are theoretical at a moment when the most persistent concern voters have is their daily experience with the economy.
The unemployment rate is at its highest level in nearly three years. And even though inflation has cooled from its record high of 9.1% in the summer of 2022, many Americans still say prices are too high.
![budgeting vs business plan Annalise and Ellie Currence stand at the fridge deciding on dinner at their home in Belton, Mo., on July 17.](https://npr.brightspotcdn.com/dims3/default/strip/false/crop/2001x2001+499+0/resize/100/quality/15/format/jpeg/?url=http%3A%2F%2Fnpr-brightspot.s3.amazonaws.com%2F59%2Fc9%2Fe8ce158c4c76824151f0e4a709de%2Fthe-currence-family-ccastor-10.jpg)
All Things Considered
Sticker shock: how the supermarket has become a potent symbol of inflation in america.
“People are pretty negative about the state of the economy,” said Glen Bolger, a Republican pollster with Public Opinion Strategies.
But he said voters don’t seem to blame Harris directly for their woes the way they blame Biden.
Trump has held a significant advantage among voters on the economy throughout this presidential campaign, but the latest NPR/PBS News/Marist poll found his edge shrinking. In June, Trump led Biden on who was more trusted to handle the economy by 9 points (54% to 45%). Now he leads Harris by just 3 points (51% to 48%).
Still, Harris is the sitting vice president. And negative impressions of the economy are traditionally more detrimental to the party in power.
“Since people have negative impressions of the economy, it's more of a drag on her than a positive,” Bolger said. “Keep in mind, she's relatively new as the candidate for president.”
NPR's Megan Lim and Jordan-Marie Smith contributed to this story.
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IMAGES
COMMENTS
The scope of the business plan is therefore much larger than the budget. Business plan vs. budget: T he time frame. Both documents have very different time frames. A budget is done over a short-term horizon, generally for 12 months, while a business plan is a medium-long term document looking at the next 3 to 5 years. Business plan vs. budget ...
Think of the main business goals you would like to achieve and be sure to add them to the new annual plan (or edit the old one according to them). Create a budget. Come up with budget targets. Complete the plan. Be sure to review it regularly (every month, every three months, etc.), making changes if necessary.
A financial plan is a strategic, long-term tool, while a budget is tactical and short-term. A financial forecast is an updated reflection of the future. In a way, the forecast bridges the gap between the business plan and the budget. The most financially disciplined businesses leverage all three tools in planning and operations.
Budgeting and business planning. Once your business is operational, it's essential to plan and tightly manage its financial performance. Creating a budgeting process is the most effective way to keep your business - and its finances - on track. This guide outlines the advantages of business planning and budgeting and explains how to go about it.
A budget is a key management tool for small business owners. When you think of budgets vs. forecasts, think of a budget as a plan: It helps you map out where you want to be in the next one, two ...
Budgeting and financial forecasting are tools that companies use to establish a plan for where management wants to take the business—budgeting—and whether it is heading in the right direction ...
From there, here's how to put together your business budget: 1. Examine your revenue. One of the first steps in any budgeting exercise is to look at your existing business and find all of your ...
A budget is a forecast of revenue and expenses over a specified future period. Budgets are utilized by corporations, governments, and households and are an integral part of running a business (or ...
It takes a plan to get things off the ground. The plan continues to serve through the life of the business. Budgeting works close to the operating side and determines how things will run in the ...
Planning, budgeting and forecasting is typically a three-step process for determining and mapping out an organization's short- and long-term financial goals. Planning provides a framework for a business' financial objectives — typically for the next three to five years. Budgeting details how the plan will be carried out month to month and ...
A budget is an essential part of a business plan and is necessary for starting a new business. It plays an important role in determining your start-up and operating costs. Once your business is established, budgeting becomes a regular task that normally occurs on a quarterly or annual basis.
Business Plan: A business plan is a written document that describes in detail how a business, usually a new one, is going to achieve its goals. A business plan lays out a written plan from a ...
Budgeting plays a crucial role in the financial management of a business for several reasons: Resource Allocation: Helps allocate resources efficiently to prioritize essential activities and investments. Financial Control: Provides a framework for monitoring and controlling expenses to prevent overspending. Performance Evaluation: Facilitates ...
Business budgeting can be time-consuming, and it's not uncommon for the budgeting process to run up against its deadline ; ... The key difference between a plan vs. a budget vs. a forecast is that a plan is high-level and focused on goals, a budget determines a company's resource allocations according to the plan, and a forecast is a potential ...
Explanation. The budget is a formal quantitative expression of the goals of management. The act of preparing a budget is called budgeting. The use of a budget to assist management in the controlling process is called budgetary control. However, in the budgeting process, these three terms are sometimes used interchangeably.
Budgeting vs. forecasting difference . In business, the budget outlines the direction the management wants the company to go in, while the financial forecasts are used to track progress toward the goals defined in the budget. ... A business plan typically outlines the company's overall vision and goals for a longer time frame (such as 3-5 ...
Key Takeaways. The Purpose of a Business Budget: The purpose of a business budget is primarily to provide your company with a short-term spending plan for the upcoming year (or another set financial period)… Know How to Create a Budget: First, you need to gather your financial records. Then use the information to reasonably estimate what your revenue will be for the upcoming financial period.
Budgeting is the process of making a plan for how you will spend your business's money over a given period (month, quarter, year, etc.). The budget estimates your company's revenue and expenses for that period. ... But there are important differences in financial forecasts vs. budgets. A budget (for that particular time period, generally a ...
Budgets and forecasts play a crucial role in companies' financial well-being during every stage of the business lifecycle. They help businesses achieve their financial goals and targets and prepare for potential uncertainties. And while budgets and forecasts work in tandem, they serve distinct functions. Put simply, the budget sets out a firm ...
Budgeting and forecasting include: planning financially for the year ahead. using data to update your predictions. predicting future financials. Use our budgeting and forecasting infographic (JPG, 442KB)to understand the differences between budgets and forecasts and when and why to use them. Transcript of infographic.
Budgeting vs Planning for Businesses. Planning is the first step in setting up a small business. All entrepreneurship examples I can think about will benefit from having a good business plan. A business plan is an essential written document that provides a description and overview of the company's future. The plan should explain the business ...
Your budget is your planned revenue and spending. It allows you to allocate funds. Consider preparing a budget quarterly or yearly. Forecasts are usually more frequent, often monthly. A forecast predicts past and current trends in your financial statements. This gives you a more realistic idea of how your business is going and help you to avoid ...
The traditional budget is an annual plan you calculate for the fiscal year based on the previous year's historical data. Compared to rolling forecasts, traditional incremental budgeting is the de facto standard for financial planning. Instead of continuously updating the plan with a rolling forecast, the traditional processes have finance ...
Budgeting to $0, also known as zero-based budgeting, ensures that every dollar of your income is assigned a specific purpose.This method involves creating a detailed plan for your finances, and planning thoroughly for every expense. By allocating every dollar, you can make sure your money supports your financial goals, whether it's paying off debt, saving for the future or investing.
Expect slowing economic growth and falling inflation. Look for 2.0% GDP growth in 2025, versus 2.6% this year, with growth picking up in the second half.By the end of 2025, the Federal Reserve ...
Here are a few pieces of advice that I believe will help you combine your tech expertise with business: Follow inspiring leaders. Seek out individuals who inspire you.
Former President Donald Trump and Vice President Kamala Harris have each proposed economic policy that could affect your taxes. Here's what to know.
Food prices have surged by more than 20% under the Biden-Harris administration, leaving many voters eager to stretch their dollars further at the grocery store.
The dollars are big. Some at the Committee for a Responsible Federal Budget say Harris' proposed rate hike could reduce the U.S. deficit by over $1 trillion in a decade.
What Harris is saying now that she's the nominee. On the campaign trail, Harris talks about the economy in bold, yet broad terms. "We believe in a future where every person has the opportunity ...