Business Budget Template: Build a 12-Month Small Business Budget in Excel
How to build a business budget template for a small company: an assumptions tab, a driver-based revenue forecast, cost of sales, operating expenses, a cash view and a budget vs actual sheet with variance checks.
A business budget template is a 12-month plan of the revenue you expect to earn and the costs you expect to pay, laid out month by month so you can compare it with what actually happens. For a small business, a good budget fits in one workbook with four sheets: assumptions, the monthly budget itself, a cash view, and a budget versus actual comparison. This guide shows how to build each one in Excel or Google Sheets, with formulas, a worked example and the checks that keep the numbers honest.
What a business budget is for
A budget is not a prediction you are graded on. It is a set of targets and limits that helps you decide in advance how much you can spend on staff, stock and marketing, and that warns you early when results drift. It answers three questions:
- Will the business make a profit this year, and in which months?
- How much can each area spend without putting that profit at risk?
- Will there be enough cash to pay the bills along the way?
The first two come from the profit view; the third needs a cash view, because a profitable month can still be short of cash.
Sheet 1: assumptions
Keep every input that drives the budget on one sheet, each in its own labelled cell. The other sheets only contain formulas that refer to these cells. When something changes, such as a price increase or a new hire, you update one input and the whole budget recalculates.
| Assumption | Example | Where it is used |
|---|---|---|
| Units, orders or clients per month | 400 orders in January, growing 2% a month | Revenue |
| Average price or order value | $45 per order | Revenue |
| Seasonality factor by month | 0.9 in February, 1.4 in December | Revenue |
| Cost of sales as % of revenue | 40% | Gross profit |
| Headcount and pay by role | Two staff, one more from April | Payroll |
| Fixed monthly costs | Rent, software, insurance | Operating expenses |
| Payment terms | Customers pay in 30 days, suppliers paid in 30 days | Cash view |
Write next to each assumption where it came from: last year’s figures, a supplier quote or a deliberate target. A budget built on unexplained numbers is hard to defend and hard to correct.
Sheet 2: the 12-month budget
Put the months across the columns (B to M) and the lines down the rows, with a total in column N. The structure follows a profit and loss statement, so the budget can later be compared line by line with your actual profit and loss statement.
Revenue
Build revenue from drivers rather than typing a monthly total. For an online shop:
Orders = BaseOrders * (1+Growth)^(MonthNumber-1) * Seasonality
Revenue = Orders * AverageOrderValue
A service business would use billable hours times rate, or clients times monthly fee. Driver-based revenue makes it obvious what has to happen to hit the number, and it is much easier to adjust than a column of guesses.
Cost of sales and gross profit
Cost of sales covers what you spend to deliver each sale: products or materials, packaging, payment and platform fees, shipping you pay for. Model it as a percentage of revenue or per unit, then:
Gross profit = Revenue − Cost of sales
Show gross margin (gross profit divided by revenue) on its own row. If it falls in a month, prices or costs need attention before anything else.
Operating expenses
Group expenses into a short list you will actually track: payroll and contractor costs, rent and utilities, software and subscriptions, marketing, professional fees, insurance, travel, and a small “other” line. Payroll should include employer taxes and benefits, not just wages; the payroll template shows how to calculate the full cost of an employee. For marketing, a separate marketing budget can feed one line here.
Operating profit = Gross profit − Total operating expenses
Below operating profit, add interest and an estimate of income tax if you want a net profit figure.
Sheet 3: the cash view
Profit and cash differ for three main reasons: customers pay later than you invoice, you pay suppliers later than you receive goods, and some payments (equipment purchases, loan repayments, owner draws) are not expenses in the profit view at all. A simple cash view adds these timing differences:
- Cash received from customers: this month’s revenue for cash sales, last month’s revenue for 30-day terms (in February’s column, simply refer to January’s revenue cell).
- Cash paid for cost of sales and expenses, shifted by your supplier terms.
- Equipment purchases, loan repayments, tax payments and owner withdrawals.
- Opening cash, net cash flow for the month, and closing cash, which becomes next month’s opening cash.
Format the closing cash row red when it drops below the minimum balance you want to keep. For a week-by-week view of the next quarter, use the 13-week cash flow forecast.
Sheet 4: budget versus actual
Each month, enter actual results next to the budget for the same lines and calculate two variances:
- Amount:
=Actual−Budget - Percentage:
=IFERROR((Actual−Budget)/ABS(Budget),"")
Decide what counts as worth investigating, for example any line more than 10% and more than $500 away from budget, and highlight those with conditional formatting. Remember that a positive variance is good for revenue and bad for expenses; adding a “favourable/unfavourable” column avoids confusion. Write one sentence of explanation next to every highlighted line. Over a few months, those notes tell you which assumptions to change.
A worked example
An online shop plans January on 400 orders at an average of $45, a 40% cost of sales and two employees.
| Line | Calculation | January budget |
|---|---|---|
| Revenue | 400 × $45 | $18,000 |
| Cost of sales | 40% × $18,000 | $7,200 |
| Gross profit | $18,000 − $7,200 | $10,800 |
| Payroll incl. employer costs | Two staff | $6,000 |
| Rent and utilities | Fixed | $1,500 |
| Marketing | Plan | $1,200 |
| Software, insurance, other | Fixed | $900 |
| Operating profit | $10,800 − $9,600 | $1,200 |
The thin January profit tells the owner something useful before the year starts: a third hire in April only works if orders grow as assumed. A quick break-even analysis shows how many orders a month cover the higher fixed costs.
Scenarios: plan for more than one outcome
Add a scenario selector on the assumptions sheet with three options (Low, Base, High) and store three values for the most uncertain drivers, usually volume and price. Use =CHOOSE(ScenarioNumber,Low,Base,High) or INDEX to pick the active one. Looking at the low case before committing to a lease or a hire is one of the most valuable things a budget can do.
Common mistakes
- Budgeting revenue first and costs to match. Start costs from real commitments and quotes, then check whether the revenue needed is realistic.
- Forgetting annual and irregular costs such as insurance renewals, licences, equipment replacement and tax payments.
- Typing numbers into formula cells to “fix” a month. Change the assumption instead, so the logic stays intact.
- Never updating the budget. Keep the original budget for comparison, and add a reforecast column each quarter with your current best estimate.
Important limits
A budget template helps you plan and control spending. It does not replace your bookkeeping, statutory accounts or tax advice. Use figures from your accounting records for the actuals, and check any tax estimates with your accountant.
Related guides
To understand the statements behind the budget, read how to read a profit and loss statement, and see the balance sheet and cash flow statement templates. All small business finance guides are in Small Business Finance.
Frequently asked questions
What should a small business budget include?
Revenue, cost of sales, gross profit, operating expenses grouped into a few categories, operating profit, and a cash view with customer and supplier timing, loan repayments and equipment purchases.
Should a business budget be monthly or annual?
Both: plan the year, but in monthly columns. Monthly detail shows seasonality and cash pinch points that an annual total hides.
How do I budget for a new business with no history?
Start from costs you can confirm (rent, equipment, software, insurance), research realistic prices and volumes, and build a low scenario that the business can survive. Revisit the budget monthly during the first year.
What is the difference between a budget and a forecast?
The budget is the plan you set at the start of the year. A forecast is your updated estimate of how the year will end, based on results so far. Keep both and compare them.
Can I build a business budget in Google Sheets?
Yes. Every formula in this guide works in Google Sheets, and sharing the assumptions sheet with a partner or accountant is straightforward.