BUDGETING BASICS

By: Kim Throndson

Aug 6, 2025

A successful business has a financial budget.  In my blog 5 keys to success, having a business plan including a budget as a key success.  As a Finance Manager budgeting and reporting was a key function.    It can be a daunting task as a business owner and manager.  Here are some basics to follow:

1.        Use a Template

Most accounting systems have a budget template built into it.  There are several on line budget templates, or use  an excel spreadsheet.  The template line items should be the same as your accounting system.   For example, if  a  salon sells and records hair cuts and colors separately, then budget them separately.

Business Managers – the company probably has a template or a format they prefer.  Document how it is put together, and save your own copy to use for drafts.

2.       Collect the information

Take the time to pull all your contract, payroll, prices, and other relevant information (see my blog Know your Numbers).  Based on the information, choose a time frame for the budget.  (monthly, semi annual, annual).  I always found monthly was the easiest.  Then you can summarize it quarterly, and annually.

This step takes time, but it really will help you know your numbers.  Ask your accountant or accounting service for the information as well.

3.       Analyze your business and market

Now you know your basic numbers for a month or two, but as a business you want to grow.   How will you do that?  What are some key costs?  These are called Drivers of your business.  What will drive your revenues up?  For example a new Salon may have a marketing campaign in place, so expect 2% growth of revenue.  Also repeat customers will bring constancy.  Maybe there will be new services added in a couple of months.

Supplier Costs are a driver of costs for the business.  What are the key ones, will they increase, decrease? 

4.        Incorporate adjustments

Use the template to enter the basics, and adjustments for your budget.   This is the backbone of the bustiness strategy, but don’t make it perfect.  Don’t spend hours on making it perfect because it will change, and like a backbone it needs to be flexible.   

Save this as copy 1 or budget basic.

5.       Scenario plan versions

As we know the world is an uncertain place. Successful and sustainable enterprises understand and manage this risk.  

Create a couple of different versions of the basic budget, that change revenue, or costs – for the better and worse. 

Business Managers: Critical function – the business manager job is to manage problems.  So take some time to scenario plan different  problem scenarios, and create a plan.

6.       Monitor and report against

Ask for reporting from your accountant/service of actual results (monthly is best), and review against your budget. 

Update the budget  as needed when drivers change.  Spend more time on the review of reports and updating the budget, than creating the basic budget.

Summary:

Template

Collect Info

Drivers

Scenario Plan

Report and Adjust

Simple Example:

Hair Salon	Jan	Feb	March
Revenue
Hair cuts	500	500	800
Hair colors	100	100	300
Total	600	600	1100
Variable Costs
Stylist 1  pay	20	20	20
stylist 2 pay			20
Color Kits	10	10	10
Total	30	30	50
Fixed Costs
rent	50	50	50
insurance	10	10	10
Total	60	60	60
profit/loss	510	510	990

Budget	Actual report	Update