What is an expense budget?
One of the most important things you can do to have great finance management is to create an expense budget.
In fact, for any good management in general (not just finance management) a thorough expense budget is a must.
On your expense budget (using our expense budget spreadsheet), all you need to do is set your budget that you want to have and continuously review and adapt your expense budget to make sure you stay on track.
There is a popular idea that being exactly on budget is the best thing. however, good management is one that changes and adapts to changes to help the business improve its sales overall.
Therefore, as your business expands and develops, your budget will have to change as well.
Many people often call an expense budget an expense forecast or projected expenses. In reality, those are all the same thing and the function of the expense budget is most important here.
A detailed expense budget, combined with the projected sales and costs, will give you all the information you need to more accurately project your profit or loss.
To be fairly honest, your expense budget can be summed up to pretty much educated guessing. You can't predict the future. You can only do the expense budget based on your experience and combining some relatively well-researched, educated guessing.
When you create your expense budget, remember that you have an underlying goal here: to make good decisions.
That is all. In that perspective, you should be making sure that your expenses will align with your chosen strategies and tactics in order to achieve long-term progress.
When you create your budget, also keep track of your assumptions and how you figured the numbers for your budget. Then, make sure you come back to the expense budget and compare it to the real, actual numbers continuously.
That way you can see how well your predictions matched your reality, and how you can adjust the next expense budget to be closer to reality.