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Why your business needs a budget

A budget is your financial plan for the year ahead. It also helps you:

  • set business goals
  • decide where to allocate your money
  • track your business's financial health
  • get finance from banks and investors.

Know the difference between a budget and a forecast

Your budget is a plan for what you want to earn and spend for the financial year. A forecast uses your current financial data and recent trends to estimate what's likely to happen next.

A budget helps you set goals and plan where your money goes. A forecast helps you manage cash flow and adjust your plans (if needed).

One of the most important forecasting tools for business is a cash flow statement. It can help you keep on top of your bills. It can also help you get a loan – it shows lenders you can pay them back.

Use your budget to track how well you’re following your plan and your forecast to track your performance and respond to changes. For example, you budget $5,000 for marketing this quarter. After 2 months, you've spent $4,500. Your forecast shows you'll go over budget, so you adjust your plan.

Write your budget once a year and consider a mid-year review. Update your forecast more often – monthly or quarterly.

Create your budget

Download our Excel template or use budgeting software – choose which suits you best.

The template is easy to use. You can save and update it manually on your computer.

Budgeting software connects with your business bank account and automatically tracks your income and spending. This can save you time once you’ve learned how to use it and set it up.

Before you start

Before you start your budget, make sure you have all the information you need. This will help you make a budget that is accurate and useful for your business.

You will need:

  • clear business goals to help guide your spending decisions
  • details of your fixed costs, such as insurance, rent, car leases
  • estimates of your variable costs, such as wages, utilities, supplies
  • an estimate of how much income you expect to make.

Historical financial data can help you estimate your income and costs. If your business is new, market research or industry benchmarking can help you find the average income and costs for your industry.

Download our budget template

Use this template to create a budget for your business.

Budget template

xlsx ยท 0.05 Mb

Monitor your budget

Consistent monitoring of your budget will help your business meet its goals.

To stay on top of your finances:

  • Review your financial activity regularly to spot any trends or problems early.
  • Schedule time each month to check your spending and compare it to your original budget.
  • Adjust your budget as needed to keep your costs and income on track.

Analyse your budget to find seasonal patterns. This can help you decide if it’s the right time to change prices or add a new product or service.

Compare your actual results to your budget

It's important to compare your 'actuals' (real income and costs) with your budget (estimated income and costs). This helps you see where you are over or under budget and makes it easier to adjust your spending or planning.

Your profit and loss statement shows you what you earned and spent over time. You can use these figures to compare your actuals with your budget.

Use your budget

Use your budget to make better business decisions.

If you’re spending too much:

  • only spend money on things that are essential to running your business
  • find ways to save money on the essentials, such as switching to a different supplier.

If you have extra money:

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