How do you do a monthly budget for your business?

Most business owners misunderstand the purpose of a budget, and think it is only a way to keep you from spending too much money. In fact building a budget and operating on it has different purposes which are explained in this article on my blog: https://www.cashflowmojosoftware.com/business-c...

I use the business cash flow management software I created to manage my budget, and I review and adjust the budget once a quarter to catch any major changes like increasing payroll because I am planning on hiring someone, or decreasing cost of goods sold because I found a supplier I can buy from for less.

The place to start is using your P&L and Balance Sheet to build a budget and then make adjustments to help you set aside cash to pay for future expenses so you don't have to go into debt. You can watch this video that gives you a short tour of the software and pay attention to the part on the budget window.  https://www.cashflowmojosoftware.com/take-a-tour/

I have over 29 years of budgeting for large commercial office buildings .  The easiest are fixed expenses, i.e. rent, RE taxes, insurance...
The variable expenses such as anything in the day to day operations such as payroll, utilities, to office supplies can be based on previous years expenses.  The most difficult are for the unknown (not normally budgeted) or break down of equipment(i.e. HVAC or computer equipment).  While a contingency is factored in for repairs some times it is difficult to know when they will break down.  Based on age and average life span of the equipment you can still come close to when it will be budgeted for replacement or major repairs.  A good preventive maintenance is a must with equipment.

Set aside an amount that will cover anticipated expenses- and a bit more to cover unexpected - C.over Y.our A.ssets!

I do my budgets at the end of the year.  And leave room for things I need to work in throughout the year.

FORTUNATELY FOR US WE HAVE SUFFICIENT STEADY CASH FLOW THAT I MONITOR MONTHLY THE ANNUAL BUDGET AND REVISE NEAR THE END OF THE FISCAL AS NEEDED FOR PUBLIC HOUSING.   

FOR MY NON PROFIT WE DO NOT HAVE AN OPERATING BUDGET BUT RATHER SEEK GRANT FUNDING AND ADMINISTER INCOMING FUNDS PER THE AWARDED  GRANT BUDGET

There are different form of expenses, therefore i will provide a response different from other andwers in order to provide something different to think about.

every business has similar expenses such as overhead, phone, payroll etc however, not all businesses has the same exact needs and budget. 

Regardless if your a startup, small, medium or larger business; knowing you budget and the liquid funds you have to work with and live on minus your basic personal and business expenses are key and crucial to your success.

once you understand what funds you have minus your expenses, you can now figure out what funds if any are left for additional ways to grow your business. 

For example:
marketing
digital marketing such as SEO
social media marketing
additional payroll
update website
software, etc.

once you decide all of these factors and only than can you now plan a true 5 year business plan budget

hope this different approach to the question was both simple to understand and helpful

I don´t do a monthly budget.  I only have a few expenses and the cost is minimal.  I also just consider the cost as part of my everyday living expense.  I believe in keeping everything as simple as possible. (the KISS method - Keep It Simple Stupid)

We actually use an annual budget based on membership and sponsorships.

my monthly income depends on the number of books I sell or on appearances.  I keep a supply of books on hand to make immediate sales 

Hello Natalie.

    I thought long and hard about your question and have a few ideas.  To have a 'budget' implies you have a cash flow or income to budget from.  A budget is also a constraint that you place on yourself based on that cash flow.  I use more of a resource management approach.

First, I look at my monthly operating expenses.  Even if I have paid for an expense in a lump sum to gain a discount, I divide that expense into 12 months.

Second, I divided my expenses between the Required versus the Discretionary expenses.  For example, cellphone, internet, automobile, etc are required expenses for me because my business cannot operate without them.  Discretionary expenses may be Adobe Professional, GoDaddy, and LinkedIn.  These may not be staples for my business, but it sure does help me operate my business easier.  By the way, GoDaddy and LinkedIn are Required expenses for me because they are my advertising and leads generation sources.

Third, I look at revenue versus expenses.  In a perfect world I would just generate more revenue to cover my expenses but that may reduce my actual income.  As you astutely noted, revenue may fluctuate from month to month, but I can control my expenses by 'trimming the fat' from my operating expenses.  This is the 'Have-To's versus the Want-To's.'  What can I do without that will not negatively impact my business?

This leads to the fourth and final point, do my expenses contribute to my annual organizational goals?  My long-term goals?  I set annual goals for my business and when I compared them to my expenses I noticed that I was spending in areas that I did not need too. This allowed me to cut those expenses or reallocate those monies to other goals.

Natalie, I hope you can use this to help you manage your operating expenses.

Dr. Burl