What is a Small Business Budget?

A small business budget is a detailed outline of your financial status and projection, based on your historical financial data. It includes your projected income and expenses and is used to determine where your money is best spent.

All businesses should have a budget, especially small ones with less room for errors. A small business can better weather periods of low income by knowing exactly where its money is going, forecasting sales, and identifying what can be cut when needed.

Your budget should be based on historical financial data and not exceed what you expect to make in the budgeted period. Be realistic with your numbers and projections so that you do not find yourself in a position you cannot recover from.

Your budget should take into account all of your sources of revenue and all of your expenses, as well as an additional percentage for any emergencies or surprises.

“Small businesses should absolutely be sure to pad their budget with contingency funds for unseen expenses,” suggests Light.

Larger businesses tend to make budgets annually, but for a small business, especially at first, it is a good idea to break down your budget monthly. To get started and identify a realistic monthly budget for your business check out our small business monthly budget templates for Google Sheets.

A small business budget should include all income and expenses the business accrues over a given period. These numbers may change month to month, so it is important to either use an average, or to overestimate expenses and underestimate income.

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