How do you do a monthly budget for your business?

After 30 years of running a business- I still run it lean and mean.....  I enjoy doing some of the repairs and some of the work myself that my colleagues outsource and pay a fortune for .  I also make sure to always use my patients and local businesses for jobs and repairs that I cannot do mySelf. Call your vendors every year and do comparable rates for supplies and services that are ongoing. And spend money Where it really counts…  on your people/
your training programs and things that truly add value to your business. 

Profit First - That is instead of using the standard Sales-Expenses=Profit, flip it over to say Sales-Profit=Expenses.    So if you are fluctuating, maybe look at total sales, subtract what you need to take out for profit and this will show you how much you can spend on Expenses. 

Cash Flow-
Do a six week cash forecast on a spreadsheet.  Start with projected Cash Deposits and then drop in each week the estimated payouts (list these by vendor names) so you can see what needs to be paid and to whom.  If deposits don't materialize, move expenses to the next week if you can.  Create a formula that shows beginning cash plus deposits, less total expenses to get to ending cash and then carry balance to next column.   Continue to update columns with actual numbers.  This will help you with cash budgeting.

I think the answer to this relies on the longer term goal.

I have read lots of books that talk about habit recently. The best way I can describe the answer to your question is" your monthly budget is the "habits" of your business. In order to change the habits personally, you must define the personality you aspire to. In order to define the habits of your business then you must lay it out. If you are happy with status quo, then define it as such. If you want growth, well...I think you get the point.

If you are trying to grow by "X" factor, forecast what that looks like. Then you back into what you need to achieve each month in order to build the business to "X". I call this plan my operating plan. This lays out for me what I must do and adds reality and "intentionality" to all my actions.

This operating plan gives you a baseline snapshot of what your month should look like. Further your monthly budget should be. Then your budget is intention driven and not simply a snapshot of what is. Now you can see if you are purposefully moving forward.

...of course reality and plan are two different things. But now you have a relevant measuring stick. I think this is an easily missed step in operation of a business: budgeting with no measure of success. NOTE: success can mean biggest, most profitable or just supportive of your lifestyle. Now you can adjust your plan or next month double down...but now you will know: why. Then your monthly budget is not a tool for "what should I spend?" as a question, rather "what should I spend" as an assertion.

I hope that helps?

After being in business for 23 years, the years have taught me to keep my expenses low and my overhead even lower. I have been in the same building all this time and have paid rent on an office that has fluctuated very little over the years.  This business, like a lot of other businesses, is a roller coaster.  You have your good months and not so good months.  You save for those not so good ones so you can continue to pay the bills.  Watch your expenses particularly your rent payments.  You don't need an extra fancy office to succeed in your business.  Something adequate, comfortable, clean and large enough to operate is all you need...….could tell you stories of people starting out in business who rented 2500 sq. ft. spaces when 800 would have been fine, and not able to pay the rent...…….Hope this helps!!

In order to budget well, you need to be aware of your overhead costs.  These are the costs associated with running your business that don't fluctuate with your business.  These items include things like rent, utilities, insurance.  It doesn't matter if you work 1 hour or 100, these items will still need to be paid each month.  Often the overhead costs get out of hand before owners realize it so it's good to stay on top of these costs.  

I am an ex-banker, owned a number of businesses, staffing agency, marina, spec home builder, insurance brokerage......and one thing is constant, I ALWAYS have 3 - 4 mo. 'fixed' expenses 'in the bag'......in business and in personal life...….NEEDS before WANTS...…..oh, and render unto Caesar what belongs to Caesar.....ie all fed/st txes etc.....paid promptly.....and not held in operating acct...…….

Discipline. Make a budget and stick with it. If an initiative will stretch you financially, then ensure that your plan, preparation, level of competence are there to help you bridge the gap between inception and completion. Get up early every day, and develop good habits, it is your habits that will cost you or earn you more money.

Do not think of monthly. Do an annual budget. Review each month and each quarter. Compare results monthly to the budgeted numbers. Do it by month, then year to date versus the annual budget. Finally, compare to prior years to see how your company is doing. compared to prior years.
In short, one is comparing monthly projections to current vs. prior year(s) and year to date vs budget. Be a long range planner and thinker. Think small, stay small. THINK LONG RANGE.
It does not matter if you biz is big or small.   

You have two columns....one for money coming in and one for money going out ...if more is going out than coming in you are in trouble.

For a great many years at our studio budget management was more about crises management where vital things were paid and anything that could be kicked down the trail was.  After fourteen years I realized the tightrope walking was a kind of psychodynamic I brought on myself,    Fifteen years of just making it is a kind of self-loathing.  A friend asked me how I could run a business for twenty years and just get by each month,  I credit an unconscious need to torcher myself.