Learn more

Login

Get started

Sign me up

<h2>What You’ll Learn:</h2>


<ul>
<li style="list-style-type: none;">
<ul>
<li>What a business budget is and why you need a realistic one</li>
</ul>
</li>
</ul>


<ul>
<li style="list-style-type: none;">
<ul>
<li>The basics of budgeting, cash flow, and financial planning</li>
</ul>
</li>
</ul>


<ul>
<li style="list-style-type: none;">
<ul>
<li>Tips for building a budget that reflects your business goals</li>
</ul>
</li>
</ul>



All businesses (from hustling solopreneurs to large corporations) rely on budgets to help guide spending and work toward big picture goals. In basic terms, a budget is a plan that estimates the revenues and expenses of a business over a period of time—typically monthly, quarterly, or annually.  If you’re a small business, strong budgeting and financial planning skills are especially important. Here’s why:


According to a study by Jessie Hagen of US Bank, <a href="https://www.entrepreneur.com/article/187366" target="_blank" rel="noreferrer noopener">the most common reason small businesses fail is cash flow issues</a>. These issues can stem from a generally poor understanding of cash flow, starting out with too little money, and a lack of a developed business plan and budget. Let’s run through the basics of budgeting for small businesses and sole proprietors, then outline an approach to building your first budget.


<h2>What is a business budget?</h2>


We already know that a budget is a financial planning document that can help you meet business goals. But what does that mean in practical terms? A budget contains a snapshot of finances today and positions your business to tackle long-term financial growth in an effective way. Want to know how much your business can spend based on incoming revenue and available capital? Your budget will be your guide to smart decision-making. The overall goal of any budget is to make sure more money is coming in than is going out of a business—that way you can keep cash flowing and invest in future growth.


<h2>Why are budgets important?</h2>


Budgets are an effective way to organize, plan, and track progress toward your financial business goals. If you’re operating a business without a budget you risk losing sight of where your money is going and possibly putting your business in a bad position. Here are some of the benefits of an effective budget:


 Make plans: A budget is like a map. If the ultimate destination for a business is profitability and growth, a budget is your guide to getting there—with markers for how to strategically manage incoming and outgoing cash along the way. Use your budget to plan and make spending decisions that will deliver you to your desired destination.


 Track progress: Think about where you want to take your business in the short-term and the long-term and how a budget can help you reach each milestone. A short-term goal might be paying off debts or investing in equipment to streamline production. Long-term goals, like expanding to new markets or opening a storefront, are more ambitious but equally important for budget road mapping.


 Stay accountable: Budgets are a great way to set expectations and keep your team aligned on big-picture goals. But keep in mind that most financial journeys have detours and pit stops along the way. You will likely need to adjust and update your budget regularly to stay flexible and accommodate new information—and this is especially true for small businesses.


<h2>How to create a budget for your business</h2>


The good news is that business budgets have been around for a long time, and you don’t have to reinvent the wheel to get started. Use these five easy steps to start your business budget process:


<ol>
<li style="list-style-type: none;">
<ol>
<li>Measure your revenue</li>
</ol>
</li>
</ol>


<ol>
<li style="list-style-type: none;">
<ol>
<li>Calculate overhead costs</li>
</ol>
</li>
</ol>


<ol>
<li style="list-style-type: none;">
<ol>
<li>Identify variable expenses</li>
</ol>
</li>
</ol>


<ol>
<li style="list-style-type: none;">
<ol>
<li>Plan for fluctuations</li>
</ol>
</li>
</ol>


<ol>
<li style="list-style-type: none;">
<ol>
<li>Connect the dots</li>
</ol>
</li>
</ol>



Now, let’s take a deeper dive   into each step.


<h3>1. Measure your revenue</h3>


Revenue is the money a company receives from its clients, customers, or users. It’s important to note that revenue is not the same as profit! Revenue is all the money that comes into your business before you subtract your costs—​​once you deduct those expenses, the leftover amount is your profit.


The easiest way to calculate revenue: Number of Sales x Average Price


Another simple formula: Number of Clients x Average Fee


When measuring revenue, you should add up all your income streams to determine how much money comes into your business on a monthly basis. If you’ve been in business for a while, you’ll be able to look at real data to calculate this number—the more data the better! The goal of your business budget is to get an accurate understanding of your yearly revenue and then use that to inform future financial decision-making. There are likely seasonal patterns (holiday rushes or summer slumps) that you can plan for once you aggregate this data.


But wait—what if you don’t have any real financial data to go on? Businesses that are just starting out can use industry research to guide and approximate revenue projections. Try to back up your numbers with data whenever possible and err on the conservative side (overestimate your expenses and underestimate your revenues) to give yourself a cushion.


Hopscotch Habit: Keep in mind that revenue is typically the most important part of your budget and the fastest way to tell how your business is doing. Consistent revenue growth over time is a strong indicator of a healthy business. Unexpected spikes or drops in revenue may indicate that something unusual is happening and you might need to adjust to hit a more steady income stream. If you’re planning to apply for a small business loan or investor funding, you’ll need to have a solid budget in place tracking your income and expenses. 


<h3>2. Calculate overhead costs</h3>


Business overhead refers to fixed costs—recurring expenses that a business pays each month like rent, insurance, and payroll. Fixed costs are not impacted by business performance. This means these costs don’t fluctuate month-to-month based on a company’s production of its goods or services.


As long as you’re in business, you’re going to have fixed costs. Depending on your industry and the size of your business, these costs will vary, and it’s important to include a clearly defined list of these expenses in your business budget.


<h3>3. Identify variable expenses</h3>


Variable expenses are costs that flex higher or lower on a monthly basis. Unlike fixed costs, variable costs are tied to the production of a company’s goods or services—they trend upwards when production increases and trend downward when production decreases.


Unexpected or infrequent expenses like office supplies and business travel can also be considered variable costs. You should try to identify as many variable costs as possible to get a sense of how much they fluctuate throughout the year. Over time, you’ll hone in on an increasingly accurate understanding of your variable expenses and be able to make precise cost projections in your budget.


<h3>4. Plan for fluctuations</h3>


The best budgets will expect the unexpected. Let’s say you have a slow month or are still waiting on a big payment to come through from a past contract—you might suddenly be in a tight spot if you were counting on that incoming cash to cover an upcoming cost.


Ideally, an accurate budget will help your business survive curveballs like this. How? A contingency fund! A contingency fund is a pool of money reserved for unexpected costs. It can also help you weather market changes and other financial events that may be beyond your control.


Just like many people do with their personal savings accounts, businesses might want to invest a portion of company revenue in a contingency fund every month. Putting money aside can help alleviate the financial burden you may feel while waiting for a check to arrive or getting hit with a surprise bill.


<h3>5. Start growing your business</h3>


Once you’ve gathered all the information, it’s time to create a comprehensive view of your finances and expand your business! Having all this information organized in one place will help you maintain a comprehensive understanding of your finances and make better decisions for your business. You can make adjustments as you track the budget throughout the year, reducing spend or investing in new revenue opportunities as needed.


Most businesses, especially small teams in the early days of growth, should plan to regularly revisit and update their budget to drive the best financial decision-making. If your budget reflects the most relevant, up-to-date information, you’ll know exactly what you can afford to spend relative to how much you’re projected to make.


<h2>Connect with Hopscotch for additional help</h2>


Small business owners and entrepreneurs have been hit hard by recent events. But as many struggled to survive, even more decided to throw their hat in the ring—business applications were up 43.3% in the first year of the pandemic. Hopscotch supports this surge in entrepreneurial spirit, and we’re building tools every day to help more people do what they love.


Instant, fee-free transactions are just the beginning. You can also use Hopscotch to manage your accounts payable and receivable in one place. With full visibility on what’s coming in and going out, you’ll always have your finger on the pulse of your business. Ready to make the jump?


<a href="https://app.gohopscotch.com/register">Sign up today</a> and get early access to our latest products.

The basics of building a business budget

Basics-of-building-a-business-budget.png

LI_ Product Marketing—Existing Feature (1)

The best factoring alternative for your clients

Tax season and cash flow: How small businesses can navigate tax-time strain

Accounting for factoring receivables: How invoice and AR factoring affects your taxes

Future of B2B payments

6 fintech leaders to celebrate this Black History Month

Profile 18

What census and SBA data reveal about lending discrimination in 2025

Hopscotch improves visibility on cash flow with built in payment forecasting

LI_ Blog Content (03A) (2)

What are the primary cash flow forecasting methods?

Hopscotch makes predicting and calculating cash flow easier

pexels-tima-miroshnichenko-6694543

How to forecast cash flow in 7 easy steps

Frame

Ultra-simple cash flow forecasting template

Getting visibility on cash flow with Hopscotch

What is a cash flow forecast? An essential business finance tool

How to charge interest on overdue invoices

A template for late fees and interest on overdue invoice charges

Group 13571

How to follow up on overdue invoices: Complete guide with templates

Use Hopscotch to attach terms about late fees on overdue invoices before you send

Group 13570

Rules about late fees and interest on overdue invoice charges

Hopscotch helps businesses collect unpaid invoices

How to collect unpaid invoices: A step-by-step guide

Small business owner uses Hopscotch to avoid overdue invoices and get paid on time 

Smart strategies for managing overdue invoices

Common cashflow problems and how to solve them

How do companies account for receivables that are factored?

Invoicing

How factoring accounts receivable can benefit small businesses

Screenshot 2024-12-06 at 1.32.01 PM

AR financing vs. factoring

Why you need recurring payments for your small business (1)

How does invoice factoring work?

Small business owners review financial documents and project cash flow for upcoming quarter, deciding to use accounts receivable financing on some invoices. 

getty-images-kskXUynXSCE-unsplash

What is accounts receivable factoring? Your guide to financial flexibility

Small teams use invoicing software with early pay features to control cash flow 

Blog Content 8

Should you use invoicing software with early payment processing?

White label invoicing payment screen with custom brand details

A quick guide to white-label invoicing software for small businesses

Team learns about easy invoicing

How to choose white label invoicing software

Hopscotch Flow and small business owner

Is white label invoicing software free?

Hopscotch joins Avalara

Hopscotch joins Avalara!

Profile 17

Is invoice factoring a tax deduction?

Get paid instantly with Hopscotch Flow, an alternative to traditional invoice factoring

Invoice factoring vs bank loan

Instant cash flow that protects your client relationships

Is invoice factoring confidential?

Easy cash flow and instant payments for small businesses 

Easy cash flow and instant invoicing from Hopscotch

Is invoice factoring a loan?

Hopscotch helps businesses get paid fast and fee-free

Cash flow management for small business

4 cash flow management strategies for small businesses

Invoice factoring fees: how much & how fast do they add up?

Cash flow for small business

Navigating cash flow for small businesses

LI_ Small Business Community Content (4)

B2B ACH payments for small businesses

Frame (3)

What documents do you need for invoice factoring?

Life at Hopscotch

Will invoice factoring affect my client relationships?

Guide to invoicing (1)

Starter invoice template for self-employed freelancers and consultants

New agency’s guide to collecting unpaid invoices

A small business owner using Hopscotch Flow to easily get paid on time. 

Hopscotch Flow (2)

Traditional invoice factoring vs Hopscotch Flow

Secrets of Success | The Small Business Playbook

Elevating the payment experience for service-based businesses

Introducing "The Ultimate Stack"

The 5-step guide to managing customer payments

Common cashflow problems and how to solve them (2)

A guide to ACH payments for small business owners

Tailwind + Hopscotch

desola-lanre-ologun-IgUR1iX0mqM-unsplash

How trustworthy is Hopscotch?

Willa vs Hopscotch: What you need to know

Choosing the best invoicing software for freelancers

End Card

The ultimate guide to six-figure freelancing

End Card (1)

The best pricing strategies for freelancers

End Card (2)

Getting paid on time as a freelancer

Invoicing-for-graphic-designers.png

Invoicing software and automations for design companies

Invoicing tips and tricks for web developers

Invoicing software and automations for web developers

How-to-pay-yourself.jpg

How to pay yourself as a small business owner

Future-of-B2B-payments.png

Building the future of B2B payments with Reed Switzer and Thomas Rein

Fixed-vs-variable-costs.jpg

The difference between fixed and variable costs

Difference-between-invoices-bills-and-receipts.png

The difference between invoices, bills, and receipts

How-accepting-credit-card-payments-can-help-you-grow-your-business.png

How accepting credit card payments can help your business grow

Ruby-Money-x-Hopscotch-Webinar.jpg

The simple guide to paying taxes as a freelancer

Every-resource-you-need.png

Every resource you need to know as a freelancer

6-must-have-email-templates-for-freelancers.jpg

6 email templates for freelancers to earn more money and get paid faster

TankTalks-Podcast-Transcript.png

How failing at your first startup is the best education for young entrepreneurs with Reed Switzer