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How to put together a business budget

How to put together a business budget

If you want to run a successful business, then creating an accurate, detailed business budget (or cash-flow) is essential. We’ll show you how to put together a business budget that will give you a complete view of your company’s finances – something you’ll need if you’re going to stay on top of your business’s affairs.

Why do I need a business budget?

The reasons you need to build a business budget are endless, but the fact that literally every successful business has one should be enough to convince you. Without one, how can you expect to know what you’re spending money on week-on-week, or how much you can afford to pay yourself?

Not only will a business budget give you a reliable picture of where your money’s going so you can stay on top of your finances, it’ll also help you identify areas you might be able to cut back in if you fall into debt. Other reasons why a business budget is so important to have include:

  • Incomings and outgoings – see how much money is coming into your business each week, and how much is being spent on business costs.
  • Tax – everyone has to pay it, and a business budget will help you to keep organised with how much income tax, National Insurance and VAT (value added tax) you’ll have to pay.
  • Drawings – see how much money you can draw from your business each month to put into your personal bank account.
  • Cost control – an easily accessible business budget will allow you to highlight areas where you can cut costs, if you need to.
  • Debt payment – if you need to make payment offers to your creditors, then a business budget will show you how much you can realistically afford.

Working out your business income and outgoings

Possibly the biggest benefit of having a business budget is knowing your incomings and outgoings. Let’s start with working out your total income:

  • Look at your business accounts, bank statements and business books to work out how much money you’ve taken for sales over the last three months to get an average monthly income.
  • Does your business have natural fluctuations in income? For example, do you take in a lot more money over winter rather than summer, or vice versa? If this is the case, work out your average income over 12 months rather than 3 (be sure to use the last 12 months to get the most accurate impression of your income possible). 

Types of outgoings

Next up in your business budget checklist is working out what types of outgoings you’ve got, and how much they’re costing you each month. This should include:

  • Any fixed costs you have, such as business rent or business rates
  • Variable costs you may have, like business utilities, phone or travel costs
  • Any other regular direct debits or charges being taken from your business account

Whilst it’s fairly easy to note down fixed costs that don’t change from month to month, working out variable costs can be a little more difficult. A good thing to do is work out average variable costs for things like travel costs or business gas, electricity and phone bills over 12 months and use those averages to build your budget with.

Be realistic about your outgoings; it can be tempting to downplay the amount you’re really spending, but if creditors need to look at your outgoings in the future , putting a lower number than what you’re really spending means they may ask for more money than you can afford when it’s time to make payments on a debt.


How much Value Added Tax (VAT) you’ll need to pay depends on the type of goods or services you supply.

If your business’s yearly sales don’t add up to the registration level show on the table below, you don’t have to be registered for VAT, and if you want to de-register from paying VAT you’ll have to be making less that the amount specified as the de-registration level on the below table.

VAT rates for 2019/2020 are as follows:

VAT Rates


Registration level


De-registration level


Security over business assets

It might be the case that some creditors, such as banks, may ask for something called security over your business assets. What this means is that if you’re in debt and unable to pay the amount that you owe, your creditor can take these assets in order to recover the amount you owe them.

Naturally, if the means equipment you need to keep your business running is taken, then it may well become difficult for you to continue trading, so be aware of this when your creditors ask for security over business assets.


Once you’ve subtracted your business’s average costs from your average monthly income, you’ll know how much profit you’re making on a monthly basis. You can use your budget to work out how much tax and National Insurance you have to pay; once you’ve set money aside to pay for tax and National Insurance, you’ll know how much you can draw out of your business account into your personal account.

A common mistake amongst self-employed business owners (especially new ones) is not accounting for tax or NI before they take money out of their business. This can leave people thinking that they’re earning more than they actually are doing and then not having enough money to pay their tax bill when it falls due,  so be sure to account for these costs when you’re completing your business budget.

Reducing your outgoings

It might be the case that you need to reduce your business’s monthly outgoings in order to pay your creditors for a debt that you owe them. Look at your fixed and variable costs and see if there’s any way you can reduce them; this can result in you being able to draw more from your business and be able to pay off your creditors quicker.

If you’re worried about your debt levels, why not call our experienced, supportive helpline team for a confidential chat on 0800 316 1833 ? Our opening hours are 8am to 8pm, Monday to Friday, and 9am to 3pm on Saturdays. 

Let’s make life more affordable

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