How do you do a monthly budget for your business?

As a commercial real estate brokerage firm our budgeting is quite simple.
I provide broadcast services to my brokers, like Co-Star, Loop Net, Crexi, Catalyst, basic rent for their office desk, internet, etc.  My costs are all annual contracts.
Where the process becomes complicated is when the team has no closings, income, for a period of several weeks.  At that point the reserves kick in to pay the bills.

You really need to do an annual budget, then, do your monthly budget, and stick to the budget.  If your income goes up one month, don't spend the surplus.  If you land a huge new contract, then you can review your budget and make some changes, but don't increase expenses, just because you have a one-month uptick in revenue.  Believe me, you will have some downturns, so you need to be prepared, just count yourself lucky when you exceed your sales goals.

Shelly Cole / Balanced Bookkeeping is very correct with her comments. To make a budget you need to know all of your expenses. Annual, bi-annual and monthly expenses, if you don't pay them annually, you still need to know how much they are and divide by 12 etc. These types of expenses don't fluctuate or very little. This can be very difficult if you are just starting out because you don't know how much they are until you have been in business for a while. Don't forget things like insurance, property taxes, legal and accounting, even fees that show up once per year (auto license or business fees).    Anything other than the direct cost of parts and labor needed to complete the job, such as rent, utilities etc. Once you know what your fixed costs are, you can budget for how much you need to operate and make a profit. Your profit margin is your decision. The largest difficulty I have had is dealing with how many thousands of dollars I have to make to pay my overhead before I can start doing business for profit. Keep your overhead under control.

Budgeting is tough for any artist. It is very difficult to predict sales since ART isn’t a “necessity” and we can’t count on an exact  monthly sales amount. I usually take money from sales at the end of each month/year and set a specific amount aside to allow for my expected costs... materials, entry fees, travel, etc.  other than that I have no advice! 

As a consultant the biggest challenge is being able to predict monthly income. Many of my projects are short term, 3 to 6 months, so I am developing more online work (mostly online courses) which is still unpredictable but if I have that more or less "passive income" I can focus more of my time marketing. I work at home so my expenses are easy to budget, mostly things like computer software like Mail Chimp, Zoom, website services etc. and I have most of those set up on automatic monthly charges.

To create an initial budget for marketing particularly use percentages. Take 5% from your net earnings and allocate it for marketing. Whatever that may be. From there you want to watch your ROI on your marketing spend and divide it up according to the performance. The marketing that brings the  loins share of business gets the lions share of the budget. This may change at different times of the year, but you can keep the 5% consistent. From there you look at what you owe and break it into immediate, 30, 60 90 day, full pay and partial pay groups. the immediate full pay get paid. from what's left we pay the immediate partials. then we mark in the calendar the 30 60 90 due dates. If we have a particularly good month with a lot extra we can plan for these by putting a little way for each. Always record what you pay, how you pay it, when and how much. If you have a transaction or reference number be sure to attach that as well.

Budgeting in a small business with a fluctuating income is always the most difficult when you get a big contract. There is always a temptation to spend the win-fall. But the smarter thing to do is put away the 5% and then figure out what you normal monthly obligations are and put that away as well. Why not put yourself in a position of having a month in the bank. So if you hit a particularly lean month you're still okay.

When working with budgets, budgeting for bills owed is the most important.  Once the bills are paid, we prioritize what is most important.  We do not have employees, which would be a priority along side of paying bills.  After that we budget according to what is needed for our business, i.e. advertising, supplies, etc.  The rest of the profits are held into an account, after paying ourselves, for times when our income fluctuates.  We do not hold onto money because of a belief in lack.  A big part of handling money and making up budgets is to be sure to have a prosperous consciousness.  If one is handling money from a consciousness of lack, they will, more than likely, budget from a place of fear.  Money is energy like everything else.  Perhaps a good question to ask is, "How and where do I want to place my energy when it comes to my business?"  If you ask this from your heart, where your wisdom is sourced, and not from your small, thinking mind, you might be surprised how differently you budget looks!

There are 2 groups of expenses: monthly/annual recurring and nonrecurring expenses.

Nonrecurring expenses are not your friend and are not budget-friendly!

Your goal is to make the expenses as predictable as possible. To do that we must select and purchase services/products so our recurring expenses will effectively eliminate our nonrecurring expenses as much as and as fast as possible.

Ideally having only recurring expenses will make budging a simple matter of having a list of all expenses that will not change from month to month.

Is it possible to only have recurring expenses? I don’t think so!

Therefore, we also have a non-predictable expense account that we consider as a recurring expense (Saving $X every month)  to cover for surprise expenses.  How to calculate X? One way to estimate it is to look at all surprise expenses over the last couple of years/#months.

One example that we also recommend our clients is to avoid surprises when it comes to IT expenses by subscribing to low fixed monthly rate Managed IT Services that are proactively monitoring and preventing problems to escalate. If these problems not dealt with and proactively prevented, they could escalate to much larger problems and downtime costing way more in terms of lost business and downtime.

https://www.bizconnectors.com/managed-it

A simple solution has worked for me . I take half of my commission income and deposit it in a special account for paying quarterly taxes ,unexpected expenses ,auto repair and maintenance etc. You would be suprized that you can learn to live off half of your income and set aside funds for a rainy day .

I would say budgeting is the most difficult task when owing your own business. If you have inconsistent revenue I would go to 90 day budget
your monthly fixed costs are the same but variable changes .
Cash flow over 90 days is a bit easier if you know the AR is correct .
Also set up a line item called contingency meaning the stuff that comes up that you have not planned and budget say 20% of your cash .
If you show you have good controls I recommend you got to a local bank and apply for a line of credit based on your assets . Try and get as much as you can but only use it to balance your 90 days .Remember it is not free money and you need to pay it back use the 50/50 rule using no more than 50% of your line .
I hope this helps 
Best
Chuck 
Managing Partner Desmond LLC