Creating a Successful Budget for the New Year

[Updated November 2021]

Not gonna lie, I love putting together budgets. Forecasting revenue and expenses, and then seeing how close I can get to the estimated numbers gives me great satisfaction. 🤓 Not everybody feels this way—and that’s okay! But how can this big fan of budgets help you implement one of your own?

I’ve worked on budgets pretty much throughout my entire career, so I’ve got you. 💪 The best way to get over the intimidation factor is to just get started. Don’t know where to start? I’ve outlined a few key steps to getting your budget rolling.

The Steps to an Amazing Budget

Step 1 - Organize your chart of accounts. Remember, this is how your financial transactions get coded in your accounting software. However the accounts are organized, is how you’ll see them when reports are generated. Make sure the way things are grouped together make sense to you and gives you the ability to base your business decisions.

Step 2 - Use a spreadsheet and categorize the columns by month and the rows by expense type. These expense types should match your chart of accounts to keep things organized. Don’t leave any expense accounts unaccounted for if you know an expense will land there during the year. 

Step 3 - Identify your estimated revenue per month. Make sure you indicate what’s secured revenue and what’s not yet closed. Once you’ve got your expenses buttoned up, you can revisit the revenue gap and adjust your goal.

Step 4 - Solidify your estimated expenses. Gather the data from your teams by prompting each department with this question: In an ideal world, what expenses does your department need this upcoming year? Assign a person from each team to be responsible to document their department’s specific requests. Be careful assuming you already know what they’ll say; they might surprise you! You can then cull the requests in order to create a realistic budget, just make sure you circle back with the department so they’re aware of where things land.

Step 5 - This sounds simple but make meticulous notes for how you came up with your estimations. You can add these as notes/comments directly in the cell. It’ll save you from trying to remember how you calculated something down the line. It will also help you refine your cost estimation process as you progress.

Step 6 - Utilize your accounting software’s budgeting feature and enter the budget directly into the software. This will allow you to run reports such as budget vs. actual to see how far you strayed from what you expected to spend.

Step 7 - Re-visit and update the budget at least once a quarter. Don’t override previous forecasts of the budget. That’s important historical information that you might need later on! An easy way to retain this info is simply duplicate the sheet and date it with an updated version.

How to Use the budget

This project is a great one to undertake at the end of the year or as you start the next one. Make sure you include your team and give feedback on what is realistic. That way you’ll have team buy in when forecasting projects and predicting resource needs.

Just like your personal finances, having a budget in place for your company will help guide your day to day decisions and set you up for success. Make the choices today to know where your dollars are going and reclaim confidence over those intimidating metrics.