Best Tips for Creating a Budget


Unless blessed with unlimited funds, no organization of any size can survive — much less succeed — without effective budgeting. Understanding and controlling costs is key to making a profit, of course, but it can often be the difference between a company that endures and one that fades away. As the old saying goes, “If your outflow is greater than your income, your upkeep will be your downfall.”

Successful budgeting is about properly allocating resources where they are needed most. Budgeting is fundamental to operational efficiency, to fair and competitive compensation and benefits to retain valuable employees and to the acquisition of the necessary tools of business.

Create a Financial Overview

We've created a short guide to walk you through the basics and a helpful Excel spreadsheet to get you to the bottom line. It starts with a Budget Overview, sometimes known as a “balance sheet,” listing side by side, on a single page, a company’s assets (checking account balances, accounts payable, equity in real estate and equipment) and its liabilities (debts, wages, taxes, insurance, etc.). In the simplest of terms, it is a statement of what is owned and what is owed.

A Budget Overview gives an immediate picture of a company’s financial health. It is, almost literally, a balance that tips in either direction — toward a profitable, solid company or one that is overburdened by debt and runaway expenses. To get to the bottom line of the Budget Overview, we start with the underlying Asset and Expense worksheets detailing exactly what those assets and expenses are.

Assemble a Budget Team

While the details of a company’s budget are important, what is perhaps more critical is the team of people it takes to plan, assemble, execute and monitor financial health. For small businesses, budgeting is all too often a one-person operation. It's a lot to take care of, and knowing the different roles and responsibilities is important so that nothing gets overlooked. As a business grows you can assemble a budget team for the various duties. This Budget Team worksheet breaks down the roles and responsibilities in the budgeting process — from the accountant to the secretary.

Set a Timeline

A proper Budgeting Process is a lengthy and ongoing activity. Putting a team together is only the first step in a continual cycle of planning, presenting, revising and approving an overall budget agreed to by all levels of the company.

The final piece of the puzzle is a strategic plan of how your company wants to allocate its resources, how much it anticipates spending on any given priority and why that activity or asset purchase is a priority in the first place.

A proper plan requires clear strategic direction and specific dollar-value allocations. It is okay if certain line items exceed their targets set out at the beginning of the year, but it is critical to understand why a certain allocation could not be met. In many cases an overage in one line item must come at the expense of another. Through the budgeting process, it becomes clear that every budgeting decision is a strategic decision. The strategic plan will help your team make the hard choices on key allocations.

With these few documents in hand and a clear budget planned, a company can start each fiscal year with confidence that the dollars being spent are justified and support the best interests of the company’s long-term success.

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related resource

Guide: How to Create a Budget