Business budget template
A business budget is your plan for the year in numbers: what you expect to sell, what it will cost to deliver, what you'll spend running the company, and the profit that leaves. This free Excel template has a twelve-month budget, a matching sheet for actual results, and a budget vs actual report that works out the variances for any month and the year to date.
Running a company of 30 to 200 people? Documents like this are now worth money.
It's built for a business rather than a household: it separates direct costs from overheads, so you can see gross margin as well as the bottom line.
What's in the template
Four sheets: Budget (twelve months of income, direct costs and overheads, with gross and operating profit worked out), Actuals (the same layout for what really happened), Budget vs actual (pick a month and see the month and year-to-date variances) and a read-me. Both grids come filled with a fictional company's figures so you can see it working. Its September review:
| September | Budget | Actual | Variance | Budget YTD | Actual YTD | Variance YTD |
|---|---|---|---|---|---|---|
| Total income | 283,200 | 288,800 | 5,600 | 2,428,300 | 2,436,500 | 8,200 |
| Total direct costs | 155,500 | 158,600 | 3,100 | 1,333,300 | 1,337,600 | 4,300 |
| Gross profit | 127,700 | 130,200 | 2,500 | 1,095,000 | 1,098,900 | 3,900 |
| Total overheads | 84,800 | 85,900 | 1,100 | 763,200 | 773,100 | 9,900 |
| Operating profit | 42,900 | 44,300 | 1,400 | 331,800 | 325,800 | -6,000 |
Variance is actual minus budget. On income and profit lines a positive number is good news; on cost lines a positive number means you spent more than planned.
How to build the budget
- Start with last year's actuals. Put them in a P&L first if you don't have them by month. A budget built from a blank sheet ignores the patterns your business already has.
- Budget sales by month, not as a yearly figure divided by twelve. Most businesses have seasons, and a flat budget makes every month look either good or bad for the wrong reason.
- Tie direct costs to sales. If materials run at about a quarter of revenue, let them rise and fall with the sales line rather than budgeting a fixed amount.
- List the overheads you're committed to (rent, salaries, software, insurance), then add the discretionary ones (marketing, travel) as deliberate choices.
- Agree it with the people who'll be held to it. A budget the sales lead never saw is just a hope.
- Freeze it, and track against it monthly in the Actuals and Budget vs actual sheets. Don't rewrite the budget when reality differs; that's what forecasts are for.
Reading the variances
A variance is only useful if someone explains it. Each month, pick the two or three biggest variances and answer: is this timing (it will catch up), a one-off, or a real change in the business? In the example, sales fall behind plan in July and August while marketing runs 18% over budget all year. The first is probably seasonal timing; the second is a decision someone should own.
Look at the year-to-date column as well as the month. A single bad month matters less than a gap that's been widening for a quarter.
Budget, forecast or P&L?
- Budget: the plan, set before the year starts and fixed. You measure against it.
- Forecast: your current best guess, updated as things change. The cash flow forecast does this for cash.
- P&L: what actually happened. Your actuals come from it.
Most companies of 30 to 200 people need all three: the budget to set targets, the P&L to record results and a forecast to see where the year will land.
Common mistakes
- Dividing the year by twelve instead of phasing it by month.
- Optimistic sales with realistic costs, which guarantees a profit miss.
- No link between headcount and salaries. Budget each planned hire from its start month.
- Forgetting annual bills such as insurance renewals, audit fees and bonuses.
- Never comparing the budget with actuals, which turns a planning tool into a filing exercise.
Frequently asked questions
Is this a personal budget template?
No. It's for a company's income, direct costs and overheads. Household budgets are organised by bills and savings goals instead.
How often should we compare budget and actual?
Monthly, once the month's books are closed. Quarterly is too slow to correct course in the same year.
Should we change the budget during the year?
Usually not. Keep the budget fixed so variances mean something, and keep a separate forecast for where you now expect to land.