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Define Your Financial Objectives

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  Published in Business and Finance on Monday, November 17th 2025 at 10:51 GMT by Forbes

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How to Build a Simple Business Budget – A Practical Guide from Forbes Finance Council

Running a business means juggling many moving parts, and one of the most essential tools for keeping those parts in sync is a clear, realistic budget. Forbes Finance Council’s 2025 article, “How to Create a Simple Business Budget,” distills the art of budgeting into a set of straightforward steps that even the busiest small‑business owner can follow. Below is a concise, 500‑plus‑word recap of the key points, along with extra context from linked resources that deepen the understanding of each step.

1. Define Your Financial Objectives

The article opens by stressing that a budget is only as useful as the goals it serves. Before you pull out a spreadsheet, ask yourself:

• What is the purpose of the budget? (e.g., monitoring cash flow, planning for expansion, preparing for a tax season, or securing a loan.)
• What are the time horizons? (monthly, quarterly, annually, or a multi‑year plan.)

For instance, a startup might focus on survival cash flow for the next 12 months, while an established company might craft a 5‑year growth budget. The authors note that having clear objectives helps prioritize which line items deserve more scrutiny.

2. Gather Accurate Data

A budget that is built on guesswork is likely to fail. Forbes’ authors recommend pulling data from three primary sources:

1. Historical financial statements (income statements, balance sheets, cash flow statements).
2. Industry benchmarks—the article links to a Forbes tool that aggregates average profit margins and operating costs for different sectors.
3. Market research—if you’re launching a new product or entering a new geography, include projected sales volumes and price points.

The linked “Cash Flow Forecast” guide from Forbes Finance Council offers a practical template for converting historical revenue data into monthly forecasts.

3. Forecast Revenue

Revenue is the lifeblood of a business budget, and the article lays out a pragmatic approach:

• Segment your revenue streams (product lines, services, recurring subscriptions).
• Apply realistic growth assumptions—use a conservative multiplier (e.g., 5‑10 % growth) unless you have evidence for higher expansion.
• Account for seasonality—for example, a retailer may see a 30 % spike in December sales.

The authors caution against “too‑optimistic” forecasts that can leave a business cash‑strapped when real sales lag behind expectations.

4. Itemize Expenses

Expenses come in two flavors: fixed and variable.

• Fixed costs remain constant month‑to‑month (rent, salaries, insurance).
• Variable costs fluctuate with output (raw materials, sales commissions, utilities).

The article provides a template that categorizes each expense into three buckets: Operating, Capital, and Contingency. It emphasizes the importance of setting aside a contingency reserve (typically 5‑10 % of total costs) to cushion unexpected shocks.

5. Choose the Right Tool

While many small‑business owners instinctively reach for Excel or Google Sheets, Forbes recommends evaluating cloud‑based accounting solutions like QuickBooks Online, Xero, or FreshBooks. These platforms automate many budget‑related tasks (e.g., reconciling bank feeds, generating variance reports). The article links to a side‑by‑side comparison of the top three SaaS tools, which helps readers decide based on cost, feature set, and integration with existing systems.

6. Build the Budget Spreadsheet

The authors break down the spreadsheet into three main worksheets:

1. Revenue Worksheet – monthly and annual projections for each revenue stream.
2. Expense Worksheet – line‑by‑line fixed, variable, and capital costs.
3. Summary Worksheet – net profit, cash flow, and a dashboard of key performance indicators (KPIs).

A key tip: use formulas for automatic updates. For example, a simple SUMIF can pull all costs from a category, and a VLOOKUP can pull in historical data from another sheet.

7. Validate with Stakeholders

Budget creation isn’t a solitary activity. The article encourages owners to involve department heads, finance leads, or even external advisors (accountants, CFOs). The linked “Financial Management Basics” article explains how stakeholder feedback can surface overlooked costs—such as hidden overtime or under‑budgeted marketing spend—and ensures buy‑in across the organization.

8. Monitor, Adjust, and Iterate

A static budget is a relic. Forbes stresses the importance of a continuous monitoring loop:

• Monthly variance analysis – compare actuals to projections; investigate significant deviations.
• Quarterly review – adjust growth assumptions or expense allocations based on new data.
• Annual update – incorporate strategic changes (new product lines, market expansions).

The authors also suggest leveraging the “Financial Forecasting Tools” guide, which introduces dynamic forecasting models and scenario analysis that can be embedded into your spreadsheet or accounting software.

9. Prepare for Tax and Financing

A well‑constructed budget doesn’t just help day‑to‑day operations; it also positions your business for tax planning and financing. The article links to the IRS’s small‑business tax filing checklist and offers a brief walkthrough of how a realistic budget can demonstrate financial health to banks or investors.

Takeaway

Creating a simple business budget is a systematic process that blends data, clarity of purpose, and iterative refinement. Forbes Finance Council’s article makes budgeting feel approachable by providing templates, real‑world examples, and links to deeper dives on related topics such as cash flow forecasting, SaaS accounting tools, and tax preparation. By following the steps outlined above, even a founder with no finance background can craft a living document that guides strategic decisions, safeguards cash flow, and sets the stage for sustainable growth.