Estimating your budget and comparing it with actual spending can reveal a lot about your business’s financial performance. Whether sales fall short of or exceed your expectations, whether expenses run higher than you planned, or whether costs come in below budget, these differences can directly affect your bottom line. A business budget template can help you track these changes side by side to show how they affect your overall profit or loss. But creating a new workbook can be a whole task.
To save you the hassle, WordLayouts introduces this editable business budget template, which includes all the metrics you need. With automatically calculated totals, it helps you track variances, net profit/loss, and net profit margins on the same sheet. Download now to get started.
What Is a Business Budget Template?
A business budget template is a financial document that helps a business track and compare its budgeted income and expenses with actual results over a set period of time. It is basically a structural tool that helps you identify the difference between a budget and actual financial results.
This difference usually helps businesses assess whether they are meeting their financial targets. Reviewing these helps businesses spot revenue shortfalls, unexpected expenses, and areas where performance is better than expected. This makes financial data readily available and trackable. Lenders and grant providers may ask for a business budget template when applying for a loan or grant. This is because such information reflects predicted vs. real performance of a business.
Our template is designed for annual planning and budget-vs-actual analysis. Here, it is important to note that a business budget template is different from a bookkeeping system or cash flow tracker.
What’s Included in the Business Budget Workbook?
This business budget workbook contains two main sheets:
Business Budget (Goods): This sheet is intended for businesses that sell a product and need to account for the cost of goods sold. It records categories, budget, COGS, actual, variance, variance % for revenue and operating expenses (OPEX) and gross profit for goods. It also includes an automated profit and loss summary of the data you enter.
Business Budget (Services): This sheet is specifically designed for service-based businesses. Unlike the goods sheet, it does not include COGS or gross profit calculations. Instead, it organizes income and expenses into operating and non-operating sections. This helps you track and compare budgeted and actual amounts for each category.
You can use either worksheet based on your business model. If your business sells both goods and services, you can use the Business Budget (Goods) sheet, which also includes a Service Revenue category for recording income from services.
Key Features and Benefits
The template includes certain features that make it practically beneficial and can help save time and effort. Some features of the template are stated below:
Budget-versus-actual comparison
This template records the budget and actual income and expenses in adjacent columns. This helps identify where financial performance differs from expectations.
Automatic calculations
Some fields of the template are automatically calculated and have built-in formulas. These formulas help calculate subtotals, total income, expenses, variances, profit or loss, and applicable profit margins. This saves users from the need to calculate each result manually.
Variance and variance percentages
The variance and variance percentages feature helps you identify the difference between budgeted and actual figures. Percentage comparisons can make deviations easier to assess, especially when you have to compare categories of different sizes.
Profit and loss summary
The template also provides a profit and loss summary derived from the data entered in the above fields.
Editable budget categories
Users can adjust category descriptions to reflect their business’s terminology and reporting needs. Changing descriptions does not automatically change the workbook’s calculation structure.
How to Use the Business Budget Template
Here is a step-by-step guide on how to use this business budget template:
Step 1: Fill in the basic details
Start the template by filling in the basic details section. The template includes fields for fiscal year, prepared by, and last updated. Here you can manually enter the year you are making the report for, the name of the person who made the report, and the last date it was updated, respectively.
Step 2: Revenue section
The template includes 5 main columns:
- Category
- Budget
- Actual
- Variance
- Var%
The category column lists the different sources of income, such as product sales, service revenue, and subscription income. For each category, you can enter the budgeted and actual amounts, while the template automatically calculates the variance and variance percentage to show how actual earnings compare with your expectations.
Let’s look at how to fill in these columns.
Income
The first section of the template is revenue. Here, the template provides categories that are generating income, for instance, product sales, service revenue, subscription income, consulting fees, affiliate/referral, grant/funding, and other income.
You can also add an entry in this existing list if you have another category you are generating income from. While adding an entry to the list, make sure you add it between the two already existing entries to not disturb the formula, as the row below the last item falls outside the sum.
Once the categories list is completed, enter your fiscal year’s budget and actual amount for each item. As you enter these values, the template automatically calculates the variance and var% for that particular item. For instance, the business expected to earn $72k from product sales but actually earned $68,500; then the variance represents the shortfall you experienced in this category. The template represents an unfavorable variance in red and a favorable variance in green. For example, if actual product sales are below the budgeted amount, the variance appears in red. If actual sales exceed the budget, it appears in green.
The template also automatically calculates the totals for the budget and actual columns. It then subtracts the total budget from the total actual to calculate the total variance. The total variance percentage (Var%) is calculated by dividing total actual by total budget and subtracting 1.
COGS (cost of goods sold)
Next, fill in the COGS section, which is the amount invested in producing or purchasing the goods you are selling to generate income. It includes:
- Raw material/inventory
- Direct labor/contractors
- Manufacturing/production
- Shipping and fulfillment
Similar to the above section, enter the actual amount you spent in manufacturing these goods versus your budget. The template will provide the variance and its percentage.
If your budgeted amount is higher than your actual spending, the difference represents how much you saved. However, if your actual spending is higher than your budgeted amount, the difference shows how much you overspent. The template displays favorable expense variances in green and unfavorable expense variances in red. Therefore, a negative variance is generally green when actual expenses are below budget, while a positive variance is red when actual expenses exceed budget. It further calculates the total budget, total actual, variance, and Var % for each column.
Once the totals are calculated, the template automatically provides the gross profit value, which is calculated by subtracting COGS from total revenue (total income in this case).
Gross profit = total income – total COGS.
A positive result indicates income is higher than COGS, while a negative amount represents the opposite.
Step 3: Operating expenses
Next, there is a separate section to record operating expenses (costs a business incurs to run its day-to-day operations). It includes different subcategories:
- Payroll & HR: Mostly records group expenses such as salaries & wages, payroll taxes, and employee benefits.
- Marketing & Sales: Includes digital advertising, content & design, events & promotion.
- Technology & Software: Includes software subscriptions, website & hosting, and IT support/hardware.
- Facilities & Utilities: Rent/lease, utilities, and insurance.
- Finance & Admin: Accounting and legal, bank charges & interest, and office supplies.
- Travel and Entertainment: such as business travel, meals, and entertainment.
Once you enter the budget and actual values in these fields, the template will automatically calculate variance, var %, and their totals in each subcategory.
The template also provides totals of budget, actual, variance, and var% of total operating expenses. If the budget is larger than the actual, then the variance will represent how much you saved, but if the actual is larger than the budget, then the variance represents how much you went over. A negative variance (you spent less than budgeted) is green. A positive variance (you spent more) is red.
Step 4: P&L summary
This profit and loss summary section is completely automated and updates itself as soon as you enter the data. It shows the total of all 4 columns: budget, actual, variance, and var%. It includes:
- Net profit/loss: It is calculated by subtracting total OpEx from total gross profit value. If OpEx is higher than the gross profit, then it will be considered a loss, and the template presents the value in red. If OpEx is lower than the gross profit, then the business is in profit, and the value is presented in green.
However, a minus sign alone does not mean good or bad. On income, a negative variance is a shortfall. On COGS and expenses, it is a saving.
- Net profit margin: Calculated by dividing net profit by total income and expressing the result as a percentage. A higher margin means more profit per dollar earned.
- Gross profit margin: Shows how much revenue remains after direct costs. A higher margin means more room to cover overhead and earn profit.
Step 5: Fill in the services sheet
Alternatively, if your business earns revenue by providing services, use the second sheet,
which is designed to keep in mind the needs of a business earning revenue by providing services. The info section works the same as the goods sheet, but instead of the revenue and OpEx sections, this one includes sections for income and expenses.
Income
The income section records:
- Operating income: It includes income generated from normal service-related business activities, for instance, service fees, consulting charges, project fees, retainer income, hourly income fees, maintenance & support fees, implementation fees, and other operating income.
- Non-operating income: this is the income generated from activities outside the business’s core operations, such as interest income, investment income, rental income, asset sale gain, and other non-operating income.
Simply enter the budget and actual values for each subcategory in the relevant columns. The template will automatically update variance and var%, just like the goods sheet. The template also provides total operating income and total non-operating income values for budget, actual, variance, and var%. It also gives you a sum of total income by adding the totals of operating and non-operating income.
Expenses
Next is the expenses section, which records:
- Operating Expenses: These include costs incurred in running day-to-day business operations, such as accounting and legal fees, advertising and marketing, depreciation and amortization, professional memberships and subscriptions, business insurance, software and technology, repairs and maintenance, office supplies, payroll taxes and benefits, postage and shipping, office rent or lease, research and development (R&D), salaries and wages, and other operating expenses.
- Non-Operating Expenses: These include expenses arising outside the business’s regular operating activities, such as interest expense, loan fees and financing charges, bank charges and financial fees, foreign exchange losses, investment losses, losses on the sale of assets, asset impairment and disposal losses, penalties and fines, restructuring costs, and other non-operating expenses.
Just like the above section, enter the budget and actual expense amounts for each subcategory in the relevant columns. The template will automatically calculate the variance and variance percentage. It also calculates total operating expenses and total non-operating expenses for the budget, actual, variance, and variance percentage. Finally, it adds these two subtotals to calculate total expenses and give an overall view of planned spending versus actual expenses.
Step 6: Summary
Lastly, it provides an automatically calculated formula-driven profit and loss summary section. It includes two entries: net profit/loss, which is calculated by subtracting the values of budget, actual, variance, and var% of total expenses from total income.
Net profit margin shows the percentage of total income retained as net profit. The result is shown as a percentage. The green value generally indicates favorable results. For net profit and net profit margin, green indicates that actual performance is better than budgeted performance. Red indicates unfavorable results. For net profit and net profit margin, red indicates that actual performance is worse than budgeted performance, such as when actual profit falls below the budgeted amount.
How to Interpret the Results
Here is what the results of the spreadsheet can help you know:
- If your revenue is below the budget, investigate sales volume, pricing, customer demand, or timing.
- If your expenses are above budget, review the category, determine the reason for overspending, and assess whether the additional cost was necessary.
- If your net profit is below expectations, examine revenue shortfalls and expense increases together rather than relying on one variance in isolation.
This spreadsheet can only help calculate results but does not diagnose the underlying business reasons.
Best Practices
- Estimate the budget based on historical data to avoid major discrepancies between your assumptions and actual budget figures.
- Use consistent accounting classifications for budgeted and actual figures.
- Major variance can indicate an issue. Review and document the reasons for significant differences.
- Don’t overwrite formula cells when editing the workbook; it can disrupt the functioning of the whole workbook.
- Save a clean master copy before making extensive structural changes.
Who Should Use This Business Budget Template?
This template is suitable for use by:
- Small business owners
- Startups
- Retailers and product sellers
- Consultants and freelancers
- Bookkeepers and administrative professionals
Conclusion
With Google Sheets and Microsoft Excel versions, this sheet is suitable for both online and offline use. It makes comparisons between actual spending and budget easy, which can reveal whether your business is meeting the set expectations and targets or needs adjustments. By reviewing budget variances, you can easily identify areas that warrant closer attention. Simply download, choose the goods or services worksheet that fits your business, and customize the categories to suit your needs.
