How to Create a Business Budget (Template + Monthly Rhythm)

A business budget is a monthly plan of the money you expect to come in and go out. To build one, list your expected income by source, list your fixed costs and your variable costs, set aside money for tax, and see what's left. Then, at the end of each month, put the actual figures next to the plan and adjust the next month.

This page is about building the plan and the monthly review. For running the money side of a business more widely, see how to manage business finances. For timing problems, where profit looks fine but the bank balance doesn't, see how to manage cash flow.

Step 1: List expected income by source

Write one line for each source of income rather than a single total. A line per client, retainer or product shows you which part of the plan depends on which customer.

Base each line on work that's already signed or invoiced. Put work you're still hoping to win on a separate line marked as unconfirmed, and leave it out of the totals until it's signed.

Step 2: Separate fixed and variable costs

• Fixed costs stay the same from month to month whatever you sell: rent, insurance, software subscriptions, loan repayments.
• Variable costs rise and fall with the work you do: materials, subcontractors, payment processing fees, travel for a job.

Keeping them apart shows you the minimum you have to bring in each month just to cover the fixed list. For the difference in more detail, see fixed costs and variable costs.

Step 3: Set money aside for tax

Tax on business income isn't only a year-end bill. In the US, the IRS's Estimated Taxes page (last reviewed or updated September 25, 2026) says: "Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments." The same page says: "Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed."

Give tax its own line in the budget. Ask your accountant what share of profit to set aside; the figure in the example below is only a sample.

Step 4: Add the irregular costs

Annual or quarterly bills, such as insurance renewals, professional fees or equipment you replace every few years, won't appear in a month-by-month list unless you add them. Divide each one by the number of months it covers and add that amount to every month.

The one-page template

Copy this layout into a spreadsheet, one column per month:

• Income: one line per client or source, then a total of confirmed income
• Unconfirmed income: listed, but not added to the total
• Fixed costs: one line each, then their total
• Variable costs: one line each, then their total
• Irregular costs: the monthly share of each
• Profit before tax = total confirmed income − fixed − variable − irregular
• Tax set-aside: the share your accountant suggests
• Left after tax set-aside
• Actual and difference columns next to each line, filled in at month end

Worked example: one month, planned and actual

Sample figures for a small design studio, not a recommendation:

• Confirmed income: three retainers at $3,000 each and one project at $3,000 = $12,000
• Fixed costs: rent $1,200 + software $150 + insurance $250 = $1,600
• Variable costs: subcontractor $1,800 + printing $400 = $2,200
• Irregular costs: a $1,200 annual professional fee ÷ 12 = $100
• Profit before tax: $12,000 − $1,600 − $2,200 − $100 = $8,100
• Tax set-aside at a sample 25%: $8,100 × 25% = $2,025
• Left after tax set-aside: $8,100 − $2,025 = $6,075

At month end, the project slipped and only $1,500 of its $3,000 was invoiced, so actual income was $10,500. If every cost came in as planned, profit before tax was $10,500 − $3,900 = $6,600, which is $1,500 below plan. The next month's budget moves the other $1,500 of the project into that month, once the client confirms the new date.

Step 5: Review it every month

Pick a fixed day each month, put the actual figures next to the plan, and write one sentence on each line that's far from it. Then update the next month's plan with what you learned, rather than keeping a plan you already know is wrong.

Where Billed fits

If you invoice and record expenses in Billed, the actual figures for the review come from its reports. Billed's financial reporting page says: "Billed offers several built-in reports: Invoice Reports (paid, partially paid, and overdue), Expense Reports, Income vs Expense Reports, Top Selling Products, and Time Tracking Reports." It adds: "Each report can be filtered by date range and exported." For sorting costs into budget lines, Billed's expense tracking page says: "Give every expense a category so your spending is already sorted when you file taxes or hand the year to your accountant."

When this guide isn't for you

If you need a budget for a loan application, an investor or a board, they can set the format, so ask for it first. This page doesn't give tax advice; ask an accountant for the amount to reserve and the payment dates.

Related Articles

• How to Manage Business Finances
• How to Manage Cash Flow
• Fixed Costs and Variable Costs
• How to Write a Business Plan
• Expense Tracking for Small Business

Frequently Asked Questions

Where do I start if I've never made a budget?

List your expected income by source, then your fixed and variable costs, then a line for tax and a monthly share of any annual bills. Subtract the costs from the income to see what's left, and compare it with your actual figures at the end of the month.

How often should I compare the budget with what actually happened?

A monthly review on the same date each month is a pace you can keep. Put the actual figures next to the plan, note the reason for each large difference, and update the next month.

What share of profit should go aside for tax?

That depends on your income, structure and state, so ask an accountant. In the US, the IRS says (last reviewed or updated September 25, 2026): "Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments."

Which Billed reports help with a budget review?

Billed's financial reporting page says: "Billed offers several built-in reports: Invoice Reports (paid, partially paid, and overdue), Expense Reports, Income vs Expense Reports, Top Selling Products, and Time Tracking Reports."