Regular revenue assessment helps build a more resilient budget and prepares you for leaner months. And as the CFO or finance leader, you know the stakes for next year’s budget planning couldn’t be higher. Start by reviewing your historical revenue data and adjusting for any known changes in operations, pricing, or demand. Then factor in any growth initiatives, such as product launches or marketing campaigns, that could affect future sales.

Effective budgeting requires CFOs to create a clear, flexible framework to make faster, smarter decisions across the business. That means moving beyond static templates and isolated finance work to more collaborative, strategic budgeting. Before you start creating your budget, you need to make sure that you fully grasp how your business works. This goes beyond a high-level understanding of how the company operates and makes money. Preparing for the budgeting season, we set broad top-down goals as a leadership team.

Tips for Planning for Contingencies

Validate demand first and ensure your existing business model is profitable. Monitor key financial ratios like gross margin, operating margin, and cash burn rate. Fund growth through retained earnings or small strategic investments, rather than debt-heavy financing. Offer early payment discounts, enforce payment terms, and build a cash reserve that covers at least three to six months of operating expenses. Without a structured budget, you may not know if your business is profitable, when to cut costs, or when to reinvest. Many new entrepreneurs dive into business operations without a formal budget.

It’s a living document that requires ongoing attention and adjustment. Think of it as a financial fitness plan — regular check-ins and tweaks will help you reach your goals. To create a budget that works, you need to ensure every expense serves your business goals. By cutting unnecessary costs, you’ll free up resources for what truly matters. Once you know your goals, it’s time to assign purpose to your revenue.

How to Prepare a Business Budget in 7 Steps

  • A solid budgeting process helps you anticipate costs, avoid overspending, and plan for both short-term needs and long-term goals.
  • Building flexibility into your budget isn’t a sign of uncertainty—it’s a sign of preparation.
  • If you spend too much and are left with too little, your business can’t thrive, let alone survive.

Setting achievable revenue goals ensures that the budget is a practical tool for growth. It’s also important to note down seasonal, annual, or one-time investments. If you decorate the office for the holidays, make sure you account for that expense in your December budget! If you require additional staff in the summer, make sure your staffing budget allows for that.

Discover what budgeting is, how to create a business budget + top cfos tips the goals and questions your budget needs to answer, and why creating a budget is essential for any business. Once you’ve defined your approach, let’s discuss how you can prepare for the annual budgeting season to ensure a structured and productive budgeting process. Balance your budget by ensuring that projected revenues exceed estimated expenses. If there’s a deficit, identify areas where you can reduce costs or increase revenue. In an effort to save money, many entrepreneurs try to do everything themselves, bookkeeping, taxes, legal filings, and financial planning.

common budget planning pitfalls

These tools help you automate budgeting tasks and stay on top of financial management without extra effort. For startups, templates from resources like Bench or Smartsheet are excellent starting points. Use these reviews as an opportunity to refocus your efforts, catch problems early, and make more informed decisions.

  • Offer early payment discounts, enforce payment terms, and build a cash reserve that covers at least three to six months of operating expenses.
  • Reach out to Virtual CFO and let us guide you in making the best financial choices for your business.
  • Use KPIs like gross profit margin, return on ad spend (ROAS), and customer acquisition cost (CAC).
  • Spreadsheets or budgeting software like SumoSum can streamline this process.

Setting Realistic Revenue Goals

Rather than pooling all your income into one account, create clear categories to ensure your money is working for you. As previously mentioned, planning an accurate and successful budget is among a CFO’s top priorities. With this in mind, there are a few steps any CFO, from the newly promoted to the 25-year veteran, can take to make this goal a reality.

Reevaluating Business Goals

Our original research, trend analyses, and helpful how-tos provide the tools they need to improve workforce wellness in today’s fast-shifting professional landscape. These assumptions are like the foundation of a house — if they’re shaky, the whole structure would collapse. Before you start crunching numbers, you need to arm yourself with information. This step is like preparing for a big game — the more intel you have, the better your strategy will be. Keeps your business lean and focused while ensuring that your resources are aligned with your priorities. Here are six best practices you need to live by while budgeting for your SaaS business.

In this article, we’ll walk through how to prepare a budget for a company step by step. From defining goals to forecasting revenue and monitoring results, each part of the process plays a role in building a stable financial foundation. Building a better budget is key to achieving financial stability and driving operational efficiency in your business. At Summit CFO, we’re here to support you at every step—from evaluating your spending habits to optimizing your financial strategy with clear, actionable insights. Regular reviews allow you to track your progress, spot potential issues, and make adjustments to stay on course.

Sometimes companies operate from a budget-first mindset, which can lead to unrealistic expectations and poor financial decisions. A budget is a set plan for the year, which should only change under extraordinary circumstances. A forecast is an informed, continually updated view of the future that helps the company make the best use of budgeted funds. Depending on your business, you may have multiple streams of income. If you’ve been operating for years, you can use historical data to determine what your average monthly income will be for each month. If you’re just getting started, you may want to mark down a minimum revenue needed to keep your business operating smoothly.

Choose the Right Budgeting Method

Employee salaries and benefits are often the largest expense incurred by small businesses aside from their cost of sales. Consider how much it costs to fund your current staff, and project costs for future hires if you plan to expand your team. You can’t run a business if you don’t have the funds to pay bills, employees, and operating costs.

Starting with fixed expenses lets you know your break-even point, and the primary bills that need to be covered. These are the easiest to find because they tend to be the same month over month (rent, internet, hosting, staffing costs, etc.). Then, determine variable expense (COGS, variable staffing, utilities, etc). You can include a variety of scenarios for this budget depending on your income for each month. But budgets can feel tricky – if you’re still in the early stages, you may think it’s impossible to make an accurate budget.

If you spend too much and are left with too little, your business can’t thrive, let alone survive. Use shared dashboards or planning tools to give stakeholders access to relevant budget information. This empowers teams to track their numbers without relying on finance for updates. Build ownership by involving department leaders early in the planning process. Solicit their input on expected costs, resource needs, and potential risks. When people help create the plan, they’re more likely to adhere to it.