A small business budget template has four blocks: expected income, fixed costs, variable costs, and what is left for owner pay and tax. Fill it from last year's bank statement rows: total each category for the year, divide by twelve, then adjust for what you know will change. The result is a monthly target for every line, from real numbers.
What goes in a small business budget template?
A small business budget template needs an income block, a fixed cost block, a variable cost block, and a bottom block for tax set-aside, owner pay and a cash buffer. Each block has one line per category, with columns for last year's actual figure, the monthly average, and this year's monthly target.
The split matters because each block behaves differently. Income moves with the season and the clients you win. Fixed costs, such as rent, insurance and software subscriptions, arrive at the same amount whatever the month brings. Variable costs, such as materials, contract help and advertising, rise and fall with the work. A budget that lumps them together cannot tell you what happens in a slow month.
The bottom block is the one most templates skip. Profit is not money you can spend. A sole owner pays tax on it and lives on part of it, and the account needs a cushion. Putting those three lines in the template means the budget answers the question you care about: how much can I take home each month without trouble later?
The columns, left to right
- Line: the category name, the same one you use in your books.
- Last year: the total from last year's statements.
- Monthly average: last year divided by twelve.
- Target: this year's monthly figure, after your adjustments.
- Basis: a few words on why the target differs from the average.
The Basis column is easy to skip and worth keeping. In six months you will not remember why advertising went up, and the note tells you whether the reason still holds.
Pulling last year's statement rows into the business budget
Last year's statement rows are the raw material: every deposit and payment from every business account, for twelve months, in one table with a category on each row. Total each category and you have the "Last year" column. If your books are already categorized, this step is a report, not a project.
If they are not, you need the twelve months of statements first. Download each month's PDF or CSV from online banking, for checking and for every business card. Paste the rows into one sheet, give each a category, and remove transfers between your own accounts so they are not counted as spending.
Converting twelve PDFs is where the time goes when your bank does not offer CSV downloads. CheapBankConvert, which is preparing to open, turns each PDF statement into a CSV or Excel file for a one-time price, with a bundle for a stack of them; the homepage has the early prices and the free two-page preview.
If some months are missing or the year was never recorded, filing back taxes with bank statements covers rebuilding a past year from statements alone, which gives you the same totals a budget needs.
Fixed and variable costs in a small business budget
Fixed costs in a small business budget are the ones that stay the same each month whether you are busy or quiet: rent, insurance, software, phone and internet, bookkeeping or accounting fees. Variable costs move with the amount of work: materials, contract labor, shipping, card processing fees, advertising tied to a campaign.
Sort each category into one block by asking a single question: if I had no clients next month, would I still pay this? If yes, it is fixed. If it would mostly disappear, it is variable. Some costs are a mix. A phone plan is fixed; extra data used on a big job is not. Put the mix in whichever block holds most of it.
Budget each block differently:
- Fixed costs: use the current amount, not last year's average. If your rent went up in March, last year's average understates it. Check the latest statement or contract and budget that figure.
- Variable costs: budget them as a share of income. Divide last year's total for the category by last year's income to get a percentage, then apply the percentage to this year's income target.
That second step is what makes the template useful in a slow month. If income comes in 20% below target, variable costs should fall by about the same share, and the budget shows you what to expect.
Setting monthly income targets from last year's deposits
Monthly income targets come from last year's business deposits, totalled per month rather than averaged across the year. Most small businesses have busy and slow months. A flat target of one-twelfth of the year makes the slow months look like failures and the busy months look like windfalls.
Total the income rows by calendar month for last year. Then divide each month's total by the year's total to get its share. A garden designer might find that April to June carry 40% of the year's income and December to February carry 8%. Apply those shares to this year's annual target to get a target for each month.
Set the annual target honestly. Start from last year's income. Add work you have already signed. Remove clients you know you have lost. Add a modest amount for growth only if you have a plan that produces it. A target you can explain line by line is more useful than a round number.
Income that is invoiced but not yet received deserves a separate list, because the budget counts money only when it arrives. An invoice tracker spreadsheet keeps that list, and its expected payment dates help you spot a month where income will land late.
A worked business budget built from last year's totals
This worked example is a business budget for a one-person service business, filled from last year's statement totals. All figures are invented. Targets are monthly. Fixed costs keep their current amounts; variable costs are set as last year's share of income, shown rounded, applied to the new income target.
| Line (example) | Last year | Monthly average | Monthly target | Basis |
|---|---|---|---|---|
| Sales | 62,400 | 5,200 | 5,500 | Two signed retainers |
| Rent | 10,800 | 900 | 900 | Current lease |
| Software | 1,920 | 160 | 160 | Current subscriptions |
| Insurance | 1,140 | 95 | 95 | Renewal quote |
| Phone and internet | 1,320 | 110 | 110 | Current plan |
| Accounting fees | 600 | 50 | 50 | Same preparer |
| Fixed costs | 15,780 | 1,315 | 1,315 | |
| Supplies | 3,000 | 250 | 264 | 4.8% of sales |
| Advertising | 2,400 | 200 | 212 | 3.8% of sales |
| Travel | 1,800 | 150 | 159 | 2.9% of sales |
| Contract labor | 4,200 | 350 | 370 | 6.7% of sales |
| Variable costs | 11,400 | 950 | 1,005 | |
| Profit | 35,220 | 2,935 | 3,180 | |
| Tax set-aside | 795 | 25% of profit, example rate | ||
| Cash buffer top-up | 100 | Until buffer reaches two months | ||
| Owner pay | 2,285 | What is left |
Read the bottom of the table first. The owner can plan on about 2,285 a month, not the 3,180 of profit, because tax and the buffer come out first. The tax rate here is an example; use the rate your preparer gives you.
The variable lines show the percentage method at work. Sales are budgeted about 6% higher, so each variable line rises by about the same share. Fixed costs do not move, which is why profit grows faster than sales.
Budget versus actual in the business budget each month
Budget versus actual means adding an "Actual" column next to each month's target and filling it from that month's categorized statement rows. The gap between the two, line by line, is the most useful number the template produces. It tells you which line to look at, and whether to change the plan or your spending.
Do it on the same day each month, soon after the statements close. Fill the actuals, then look only at lines where the gap is large, perhaps more than 10% or more than a set amount. Small gaps are noise.
For each large gap, ask one question: is this timing or a trend? An annual insurance bill paid in one month is timing; the budget spreads it, the bank does not. A software line that is over target three months running is a trend, and either a subscription needs cancelling or the target needs raising.
The monthly review is also when you notice the work getting heavy. If categorizing and checking take most of an evening each month, read when to hire a bookkeeper instead of doing it yourself, which weighs that time against the fee.
When do last year's rows make a poor business budget?
Last year's rows make a poor business budget when last year does not resemble this year: the business is under a year old, you changed what you sell, you moved premises, you lost or won a client that made up a large share of income, or a one-off cost such as equipment distorted a category.
Each case has a workaround:
- A new business. Use the months you have, and fill the rest from quotes and contracts. Budget income cautiously and revisit the plan after three months.
- A big change in what you sell. Keep the fixed cost lines, which usually carry over, and rebuild income and variable costs from scratch.
- A one-off cost. Remove it from the category before you average. Put it on its own line if it will recur every few years, and set aside a monthly amount for it.
- Missing statements. A gap of one or two months can be estimated from the months on either side. A larger gap is worth filling properly, because guessed months make guessed targets.
In all of these, the template still helps. Its structure, with fixed costs, variable costs and the bottom block, works with any starting numbers. Only the "Last year" column needs care.