business expenses for business plan

What Are Business Expenses? Examples, Tips and FAQs

Any company will have business expenses. Meticulously tracking them ensures you know where your funds are going, and it helps you reduce your tax liability. It’s also crucial to understand what business expenses are and what you can deduct so you're not paying more taxes than necessary.

What Are Business Expenses?

According to the Internal Revenue Service (IRS), business expenses are ordinary and necessary costs incurred to operate your business. Examples include inventory, payroll and rent. Fixed expenses are regular and don’t change much — things like rent and insurance. Variable expenses are expected, but they can change. Some examples include sales commissions, gas for business vehicles and shipping costs. You expect variable expenses each month, but the actual amount will vary. Tracking your business expenses helps you keep an eye on whether you’ll see profits or losses.

Key Takeaways

• Business expenses need to be considered ordinary and necessary for them to be tax-deductible.
• Business expenses are recorded on an income (profit and loss) statement.

Business Expenses Explained

Also referred to as deductions, business expenses are the costs of operating a business. They’re recorded on the income statement. These expenses will be subtracted from business revenue to show a company's net profit or loss and taxable income.

Guidelines for business expenses can be found in Section 162 of the Internal Revenue Code (IRC). As long as an expense is considered ordinary and necessary, it can be reported to the IRS to help reduce tax liability.

According to the IRS, ordinary refers to expenses common to most business owners in the industry or trade. Necessary means your expenses help with your business operations, and they're appropriate to your organization.

How Do Business Expenses Impact or Reduce Taxes?

Any expense that meets the IRS definition of ordinary and necessary can be deducted. To be written off, an expense needs to be incurred by a business intending to make a profit. Some expenses may be fully deductible, whereas others are partially deductible or won’t be fully deducted the year they’re incurred.

What Are Examples of Deductible Business Expenses?

The following business expenses may be fully or partially deductible:

• Advertising and marketing
• Bank fees and interest
• Business mileage
• Commissions
• Educational expenses for employees
• Employee benefits
• Equipment maintenance and repair
• Home office (you’ll need to meet certain requirements such as that it is your main place of business)
• Membership dues (business-related expenses only)
• Office supplies and equipment
• Payroll (employees and contractors)
• Rent or office lease
• Mortgage payments
• Some costs of business travel

What Are Examples of Non-Deductible Business Expenses?

Not all business expenses are tax-deductible.

Here are some examples:

• Demolition expenses or losses
• Educational expenses incurred to meet requirements to conduct business
• Government fines and penalties
• Illegal activities
• Lobbying expenses
• Political contributions

Also note that capital expenditures, while deductible, are typically written off over several years through an accounting process known as depreciation.

Income Statement Reporting

Your income statement is the main financial statement used when recording business expenses and determining your taxable income. The income statement shows a picture of your company’s expenses and revenues over a given period of time. The statements are typically broken into different categories.

Costs of Goods Sold (COGS): Also known as cost of sales, COGS refer to the cost of manufactured or purchased goods sold. COGS are a business expense and affect how much profit a company makes on its products. It's deducted from a business's total revenue to determine gross profit and can include factory overhead, storage, cost of raw materials and parts used to make a product, direct labor costs, shipping or freight in costs and indirect costs, such as distribution or sales force costs.

Operating Costs: Operating costs are any expenses associated with the day-to-day maintenance and administration of a business. Operating costs include fixed, variable and semi-variable costs. These expenses are subtracted from gross profit to find operating profit and typically include marketing costs and executive compensation. Gifts and meals would also fall under this category.

Depreciation: Depreciation is the process of deducting the cost of a business asset over a long period of time, rather than over one year. Depreciation has two main components: one is the decrease in the value of an asset over time and when you allocate the price you originally paid for an asset over the period of time you use that asset. Generally Accepted Accounting Principles (GAAP) requires that companies use standard depreciation methods with specific depreciation schedules for various asset categories. Amortization is similar to depreciation, but is a method of spreading the cost of an intangible asset over a specific period of time.

Interest expenses: Interest paid on loans is subtracted from taxable income.

Personal vs. Business Expenses

Business expenses can be deducted to lower your company’s overall taxable income. Personal expenses cannot. So, what are some of the differences and is there ever a gray area?

Personal expenses: It’s vital that you keep your personal expenses separate from business. For example, if you go to the hardware store to buy some lumber for a personal project and throw in some industrial cleaner to scrub the floors of your store, be sure to run two transactions. That way you can keep separate receipts and if you have a business credit or debit card, you can use that for the business purchase.

Business expenses: Are you making a purchase to try and drive more revenue to your business? Is it something that would be considered a normal purchase in your industry? It’s likely a business expense. Record the purchase, store the receipt and record the reason for the purchase. The amount can be deducted from your income and lower your tax liability. Large expenses that increase the long-term value of your business like buying new equipment or investing in a new building are considered capital expenditures and are handled differently than other expenses .

Key differences: Business purchases are things you buy in the normal operations of your business. Personal expenses are items that do not pertain to your business. But what about things like home offices? If you use an office out of your home primarily for business purposes, you may be able to write off that expense. But you won’t be able to deduct the entire price of your home mortgage. There are occasions when you can itemize certain aspects of expenses like utilities, real estate taxes or phones. It’s especially important for you to keep meticulous records that detail why you’re expensing these items, in case you are ever audited.

Top 6 Business Expense Tips

Staying on top of your business expenses can be overwhelming. But it is also one of the easiest ways to reduce your overall tax liability. Here are some tips to make expense management a little easier.

Keep meticulous records.

When in doubt, keep it. Not only will receipts and other documentation of your business expenses come in handy if you’re ever audited, the IRS requires some records be kept for up to 7 years. Things like receipts, tax returns and employment records need to be kept for 3-4 years. And documentation of writing off bad debt should be kept for 7 years. Consider using business accounting software to track your expenses and go paperless for record keeping.

Separate personal and business expenses.

Business expenses can be written off and reduce your overall tax liability. Start separating your business and personal expenses right away. Open a separate business checking account. Get a business credit or debit card. And make sure your business partners know which expenses can be written off, and which can’t.

Brush up on what expenses are considered tax deductible.

Not all expenses are tax deductible. But most expenses you incur while trying to drive revenue to your business can be written off. Some major purchases like large equipment are considered capital expenditures. The initial purchase may not be written off all in one tax year, but the depreciation of value, along with the costs of running it would be.

Save receipts for business travel.

Many business travel expenses are tax deductible. Keep records of costs like transportation, lodging and some of the meals (usually 50% of the cost.) Keep your receipts for these expenses for at least three years, as long as the IRS can audit you.

Record expenses as soon as possible.

Whether you store your records yourself or use a business accounting software program, get in the habit of recording expenses right away. Formalize the process for how you track and store the receipts and record expenses.

Monitor and review expenses regularly.

Business accounting software can display your expense information with charts and dashboards. And if you track your expenses manually, be sure to build regular review into the expense management policies and procedures. Consider double-entry bookkeeping to catch errors and prevent fraud.

How to Track Business Expenses?

Tracking your business expenses should become a habit. By making it part of your regular workflow , you’re less likely to miss expenses that can reduce your overall tax burden. And by keeping an eye on your expenses and revenue through your income statement, you’re able to better monitor the financial health of your company.

Open a business bank account. Make sure this is separate from your personal checking account and only use it for business expenses. This will make it easier to track your business charges. And you may be eligible for business credit or debit cards that come with perks like cash back or no-interest financing for three months.

Formalize how you store receipts. Consider scanning receipts and keeping digital copies. Try and make it part of your regular workflow. If not daily, try to set aside the same time each week to scan and organize receipts. Write the business purpose on the receipt so you can remind yourself later, if needed.

Review and categorize your expenses regularly. Examine each transaction and track your spending by category. By comparing your expenses to revenue, you can see how much it costs to produce an amount of revenue in a given time.

Consider buying business accounting software. Save time and ensure you have the most up-to-date information with an accounting platform. Store and track receipts and easily categorize expenses. You can see charts and dashboards of your financial information, as well as generate important reports, like the income statement.

Tracking Business Expenses With Software

By tracking your expenses, you can reduce your tax liability. But it’s also important to keep detailed records of these expenses in case you’re audited or need to reconcile accounts. Going paperless and using business accounting software can help save time, automate processes and keep more accurate financial records, even if you have a small business or startup. As your business grows, the software will scale with your growth. And top-tier cloud solutions like NetSuite integrate with other business software, such as your CRM, inventory management and ecommerce functions.

#1 Expense Management Software

Business Expense FAQs

Can business expenses be carried forward.

Your business may be able to take a carryforward if you have a net operating loss (NOL), you're over the amount of deductions allowed and a nonrefundable credit you qualify for is more than the tax you owe in a year.

Business expenses that can be deducted are not taxed. There are a few business expenses like demolition that cannot be written off.

Can I deduct personal expenses for business?

You cannot deduct personal expenses for your business. However, if the expense is for both business and personal use, you may deduct the business portion. For example, let’s say you have a vehicle and drive to consult with on-site clients 25% of the time. You can deduct 25% of your business expenses. You’ll need to keep records such as mileage incurred, maintenance costs and the purpose of each trip.

What are the three types of business expenses?

The three major types are:

• Fixed: These expenses tend not to change and remain the same. Examples include rent or equipment lease payments.
• Variable: These expenses change from month to month. Examples include employee commissions and utilities.
• Periodic: These expenses happen occasionally. Examples include emergency equipment repairs and annual bonuses.

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Business expenses: definition with examples.

Business expenses are ordinary and necessary costs a business incurs in order for it to operate. Businesses need to track and categorize their expenditures because some business expenses can count as tax deductions. Deductible expenses reduce a business’s taxable income, which can result in significant cost savings.

Here’s What We’ll Cover:

What Can You Write off as Business Expenses?

Business expenses examples, can business expenses be carried forward, can i deduct personal expenses for business, types of business expenses, tips for tracking business expenses.

NOTE: FreshBooks Support team members are not certified income tax or accounting professionals and cannot provide advice in these areas, outside of supporting questions about FreshBooks. If you need income tax advice please contact an accountant in your area.

Tax deductible business expenses are ones that are considered by the Internal Revenue Service (IRS) to be both “ordinary and necessary.”

Ordinary is defined by the IRS as “one that is common and accepted in your trade or business. A necessary expense is “one that is helpful and appropriate for your trade or business.”

Not all expenses a company incurs are tax deductible. Those that are may only qualify for a partial reduction. Some companies will need to ‘ capitalize ’ a business expense.

Capitalizing an expense refers to business assets that a business invests in to generate revenue, but is also one that will depreciate over a number of years (like a building or piece of equipment).

Capitalizing large business expenses means only the depreciation amount of those items for that year will show up on a company’s income statement, unlike regular business expenses which show the full amounts. This will allow a company to accurately assess its profits.

Here are some common business expense examples that may be partially or fully tax deductible:

• Payroll (employees and freelance help)
• Bank fees and interest
• Insurance expenses
• Business vehicles
• Equipment or equipment rental
• Office supplies
• Membership dues (including union or other professional affiliations)
• Commissions & fees
• Business meals
• Business travel expenses
• Employee retirement plans
• Employee education plans
• Employee benefit programs
• Subscriptions
• Equipment rentals
• Advertising and marketing costs
• Office equipment
• Repair and maintenance costs
• Executive compensation
• Employee salaries and wages
• Interest expenses
• Shipping costs

If you operate a small business out of your home, some of your housing costs may be partially deductible:

• Home office space (as long as this is your main place of business)
• Mortgage interest
• Security system
• Property taxes
• Maintenance, repairs or upkeep
• Business phone line (separate from home line)

For example, say your home is 1,000 square feet, and you use 100 square feet (10% of the total square footage) exclusively for your home office. In that case, you can deduct 10% of the above expenses as part of the home office deduction. The remaining 90% are considered personal expenses.

Typically, a company’s business expenses are fully deductible the tax year the purchases were made. If the business expenses missed were considerable and affected a company’s taxes, the company could then choose to file an amended tax return . You have three years from the tax return due date to file an amended return and claim business expenses and get a tax refund.

In addition, business expenses that are considered to be capitalized costs (see above) will be carried forward, but the depreciation amounts will change every year. Capitalizing business expenses is standard for a new company with a lot of expensive start up costs.

No, you cannot claim personal expenses as tax-deductible business expenses. The only exception is if the costs incurred are both personal and business expenses. In that case, you can only deduct the portion of the expense that relates to business purposes.

Let’s give an example. Take John, he’s self-employed and runs his own tax consulting business. He uses his vehicle 50% of the time to visit clients in their homes or at their place of business, and 50% of the time the vehicle is used for family or pleasure. The costs of maintaining and operating the vehicle include both personal and business expenses.

The rules allow John to deduct the business portion of gas, insurance, maintenance, and repairs as deductible expenses. But to back up these business expenses on his taxes he needs to track mileage and the purpose of each trip.

There are three types of business expenses:

Fixed Expenses

A fixed cost is one that does not change or changes only slightly. An example of fixed business expenses would be the monthly rent a business pays on its headquarters.

Variable expenses vary from month to month and are typically a company’s largest expense. Examples of variable business expenses would be payroll for a company with a large amount of freelance personnel, or overtime expenditures.

Periodic expenses are ones that happen infrequently. Periodic business expenses can be hard to plan for, such as money needed for an unexpected machine replacement or repair.

Keeping track of business expenses can be a time-consuming burden for a small business owner. However, there are several ways to make this task easier and more efficient.

The following tips can help you ensure you track business expenses efficiently and effectively:

• Set up a separate business bank account. Open a business checking account and ensure all of your business-related income and expenses run through that account.
• Use business accounting software . Most business owners use accounting software to track business costs. Most modern accounting software can connect to your business bank account to automatically record expenses.
• Keep good records. Document all business spending with receipts and invoices to establish a clear paper trail in case the IRS decides to audit your taxable income.
• Review expenses regularly. It’s important for business owners to review their expenses regularly in order to stay on top of their finances. This allows them to identify areas where they can reduce operating costs to save money, spot tax deductions to lower the company’s tax liability, and make more informed decisions about how to grow their business.

By following these simple steps, business owners will always know where their business money is going, helping them make better decisions in their business and reduce their tax liability.

Janet Berry-Johnson

About the author

Janet Berry-Johnson, CPA, is a freelance writer with over a decade of experience working on both the tax and audit sides of an accounting firm. She’s passionate about helping people make sense of complicated tax and accounting topics. Her work has appeared in Business Insider, Forbes, and The New York Times, and on LendingTree, Credit Karma, and Discover, among others. You can learn more about her work at jberryjohnson.com .

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How To Write A Business Plan (2024 Guide)

Updated: Apr 17, 2024, 11:59am

Table of Contents

Brainstorm an executive summary, create a company description, brainstorm your business goals, describe your services or products, conduct market research, create financial plans, bottom line, frequently asked questions.

Every business starts with a vision, which is distilled and communicated through a business plan. In addition to your high-level hopes and dreams, a strong business plan outlines short-term and long-term goals, budget and whatever else you might need to get started. In this guide, we’ll walk you through how to write a business plan that you can stick to and help guide your operations as you get started.

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Drafting the Summary

An executive summary is an extremely important first step in your business. You have to be able to put the basic facts of your business in an elevator pitch-style sentence to grab investors’ attention and keep their interest. This should communicate your business’s name, what the products or services you’re selling are and what marketplace you’re entering.

Ask for Help

When drafting the executive summary, you should have a few different options. Enlist a few thought partners to review your executive summary possibilities to determine which one is best.

After you have the executive summary in place, you can work on the company description, which contains more specific information. In the description, you’ll need to include your business’s registered name , your business address and any key employees involved in the business. 

The business description should also include the structure of your business, such as sole proprietorship , limited liability company (LLC) , partnership or corporation. This is the time to specify how much of an ownership stake everyone has in the company. Finally, include a section that outlines the history of the company and how it has evolved over time.

Wherever you are on the business journey, you return to your goals and assess where you are in meeting your in-progress targets and setting new goals to work toward.

Numbers-based Goals

Goals can cover a variety of sections of your business. Financial and profit goals are a given for when you’re establishing your business, but there are other goals to take into account as well with regard to brand awareness and growth. For example, you might want to hit a certain number of followers across social channels or raise your engagement rates.

Another goal could be to attract new investors or find grants if you’re a nonprofit business. If you’re looking to grow, you’ll want to set revenue targets to make that happen as well.

Intangible Goals

Goals unrelated to traceable numbers are important as well. These can include seeing your business’s advertisement reach the general public or receiving a terrific client review. These goals are important for the direction you take your business and the direction you want it to go in the future.

The business plan should have a section that explains the services or products that you’re offering. This is the part where you can also describe how they fit in the current market or are providing something necessary or entirely new. If you have any patents or trademarks, this is where you can include those too.

If you have any visual aids, they should be included here as well. This would also be a good place to include pricing strategy and explain your materials.

This is the part of the business plan where you can explain your expertise and different approach in greater depth. Show how what you’re offering is vital to the market and fills an important gap.

You can also situate your business in your industry and compare it to other ones and how you have a competitive advantage in the marketplace.

Other than financial goals, you want to have a budget and set your planned weekly, monthly and annual spending. There are several different costs to consider, such as operational costs.

Business Operations Costs

Rent for your business is the first big cost to factor into your budget. If your business is remote, the cost that replaces rent will be the software that maintains your virtual operations.

Marketing and sales costs should be next on your list. Devoting money to making sure people know about your business is as important as making sure it functions.

Other Costs

Although you can’t anticipate disasters, there are likely to be unanticipated costs that come up at some point in your business’s existence. It’s important to factor these possible costs into your financial plans so you’re not caught totally unaware.

Business plans are important for businesses of all sizes so that you can define where your business is and where you want it to go. Growing your business requires a vision, and giving yourself a roadmap in the form of a business plan will set you up for success.

How do I write a simple business plan?

When you’re working on a business plan, make sure you have as much information as possible so that you can simplify it to the most relevant information. A simple business plan still needs all of the parts included in this article, but you can be very clear and direct.

What are some common mistakes in a business plan?

The most common mistakes in a business plan are common writing issues like grammar errors or misspellings. It’s important to be clear in your sentence structure and proofread your business plan before sending it to any investors or partners.

What basic items should be included in a business plan?

When writing out a business plan, you want to make sure that you cover everything related to your concept for the business,  an analysis of the industry―including potential customers and an overview of the market for your goods or services―how you plan to execute your vision for the business, how you plan to grow the business if it becomes successful and all financial data around the business, including current cash on hand, potential investors and budget plans for the next few years.

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Julia is a writer in New York and started covering tech and business during the pandemic. She also covers books and the publishing industry.

Kelly Main is a Marketing Editor and Writer specializing in digital marketing, online advertising and web design and development. Before joining the team, she was a Content Producer at Fit Small Business where she served as an editor and strategist covering small business marketing content. She is a former Google Tech Entrepreneur and she holds an MSc in International Marketing from Edinburgh Napier University. Additionally, she is a Columnist at Inc. Magazine.

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How to Create a Business Budget for Your Small Business

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A business budget estimates future revenue and expenses in detail, so that you can see whether you’re on track to meet financial expectations for the month, quarter or year. Think of your budget as a point of comparison — you run your actual numbers against it to determine if you’re over or under budget.

From there, you can make informed business decisions and pivot accordingly. For example, maybe you find that your expenses are over budget for the quarter, so you may hold off on a large equipment purchase.

Here’s a step-by-step guide for creating a business budget, along with why budgets are crucial to running a successful business.

» MORE: What is accounting? Definition and basics, explained

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QuickBooks Online

How does a business budget work?

Budgeting uses past months’ numbers to help you make financially conservative projections for the future and wiser business decisions for the present. If you’ve had a few bad months and predict another slow one, you can prepare to minimize expenses where possible. If business has been booming and you’re bringing in new customers, maybe you invest in buying more inventory to satisfy increased demand.

Creating a business budget from scratch can feel tedious, but you might already have access to tools that can help simplify the process. Your small-business accounting software is a good place to start, since it houses your business’s financial data and may offer basic budgeting reports.

To create a budget in QuickBooks Online , for example, you break down your estimated income and expenses across each area of your business. Then, the software calculates figures like gross profit, net operating income and net income for you.

You can then compare actual versus projected figures side by side by running a Budget vs. Actuals report. Businesses that need more in-depth features, like cash flow forecasting or the ability to use different projection methods, might subscribe to business budgeting software in addition to accounting software.

If your small business doesn’t have access to these features or has simple financials, you can download free small-business budget templates to manually create and track your budget. Regardless of which option you choose, your business will likely benefit from hiring an accountant to help manage your budget, course-correct when the business gets off track, and make sure taxes are being paid correctly.

Why is a business budget important?

A business budget encourages you to look beyond next week and next month to next year, or even the next five years.

Creating a budget can help your business do the following:

Maximize efficiency. 

Establish a financial plan that helps your business reach its goals. 

Point out leftover funds that you can reinvest.

Predict slow months and keep you out of debt.

Estimate what it will take to become profitable.

Provide a window into the future so you can prepare accordingly.

Creating a business budget will make operating your business easier and more efficient. A business budget can also help ensure you’re spending money in the right places and at the right time to stay out of debt.

How to create a business budget in 6 steps

The longer you’ve been in business, the more data you’ll have to inform your forward-looking budget. If you run a startup, however, you’ll want to do extensive research into typical costs for businesses in your industry, so that you have working estimates for revenue and expenses.

From there, here’s how to put together your business budget:

1. Examine your revenue

One of the first steps in any budgeting exercise is to look at your existing business and find all of your revenue sources. Add all those income sources together to determine how much money comes into your business monthly. It’s important to do this for multiple months and preferably for at least the previous 12 months, provided you have that much data available.

Notice how your business’s monthly income changes over time and try to look for seasonal patterns. Your business might experience a slump after the holidays, for example, or during the summer months. Understanding these seasonal changes will help you prepare for the leaner months and give you time to build a financial cushion.

Then, you can use those historic numbers and trends to make revenue projections for future months. Make sure to calculate for revenue, not profit. Your revenue is the money generated by sales before expenses are deducted. Profit is what remains after expenses are deducted.

2. Subtract fixed costs

The second step for creating a business budget involves adding up all of your historic fixed costs and using them to reliably predict future ones. Fixed costs are those that stay the same no matter how much income your business is generating. They might occur daily, weekly, monthly or yearly, so make sure to get as much data as you can.

Examples of fixed costs within your business might include:

Debt repayment.

Employee salaries.

Depreciation of assets.

Property taxes.

Insurance .

Once you’ve identified your business’s fixed costs, you’ll subtract those from your income and move to the next step.

3. Subtract variable expenses

As you compile your fixed costs, you might notice other expenses that aren’t as consistent. Unlike fixed costs, variable expenses change alongside your business’s output or production. Look at how they’ve fluctuated over time in your business, and use that information to estimate future variable costs. These expenses get subtracted from your income, too.

Some examples of variable expenses are:

Hourly employee wages.

Owner’s salary (if it fluctuates with profit). 

Raw materials.

Utility costs that change depending on business activity.

During lean months, you’ll probably want to lower your business’s variable expenses. During profitable months when there’s extra income, however, you may increase your spending on variable expenses for the long-term benefit of your business.

4. Set aside a contingency fund for unexpected costs

When you’re creating a business budget, make sure you put aside extra cash and plan for contingencies.

Although you might be tempted to spend surplus income on variable expenses, it’s smart to establish an emergency fund instead, if possible. That way, you’ll be ready when equipment breaks down and needs replacing, or if you have to quickly replace inventory that's damaged unexpectedly.

5. Determine your profit

Add up all of your projected revenue and expenses for each month. Then, subtract expenses from revenue. You may also see the resulting number referred to as net income . If you end up with a positive number, you can expect to make a profit. If not, that’s a loss — and that can be OK, too. Small businesses aren’t necessarily profitable every month, let alone every year. This is especially true when your business is just starting out. Compare your projected profits to past profits to confirm whether they’re realistic.

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6. Finalize your business budget

Are the resulting profits enough to work with, or is your business overspending? This is your opportunity to set spending and earning goals for each month, quarter and year. These goals should be realistic and achievable. If they don’t line up with your projections, make sure to establish a strategy for making up the difference.

As time goes on, regularly compare your actual numbers to your budget to determine whether your business is meeting those goals, and course correct if necessary.

» MORE: Ways your small business can spend smarter

A business budget projects future revenue and expenses so you can create a smart, realistic spending plan. As the year progresses, comparing your actual numbers against your budget can help you hold your business accountable and make sure it reaches its financial goals.

A business budget includes projected revenue, fixed costs, variable costs and the resulting profits. You can also factor in contingency funds for unforeseen circumstances like equipment failure.

On a similar note...

How to Create an Expense Budget

4 min. read

Updated October 27, 2023

One of the fundamentals of your financial plan and the start of good business management is managing expenses. That starts with an expense budget. Set your budget as a goal, then review and revise often to stay on track. Being right on budget is usually good, but good management takes the regular review to check on the timing, efficiency, and results of what your business spends.

For the record, we could call it an expense forecast, or projected expenses. Those are the same thing. Regardless of what you call it when you combine it with projected sales and costs, you have what you need to project your profit or loss.

• The key types of expenses in business spending

Expenses make up just one of the three common types of spending in a normal business.

Expenses  mostly include operating expenses, like rent, utilities, advertising, and payroll. That’s what I’m talking about in this article.

Direct costs  are another type of spending—another way to say it is the costs of goods sold (COGS), or what you spend on what you sell. For example, the COGS for a bookstore are the costs of buying the books it resells to its customers. Those go in your  sales forecast .  

Repaying debts and purchasing assets  is the third type of spending. These affect your  cash flow  (the amount of real cash you have on hand to pay bills) and your balance sheet, but not your profits—which are left over after you pay your bills.

• Your expense budget

It’s all about educated guessing.

Don’t expect to accurately guess the future. Do use your experience, educated guessing, a bit of research, and common sense to estimate expenses in line with sales and costs and your planned activities.

The math is simple

The illustration here shows a sample expense budget from a soup delivery subscription plan we use as an example.

The math and the logic is simple. Make the rows match your accounting as much as possible. Set timeframes and estimate what expenses will be for each of the next 12 months, and then for the following two years as estimated annual totals.

In the example, the two owners know their business. As they develop their budget, they have a good idea of what they pay for kitchen time, Facebook ads, commissions, office equipment, and so on.

And if you don’t know these numbers for your business, find out. If you don’t know rents, talk to a broker, see some locations, and estimate what you’ll end up paying.

Do the same for utilities, insurance, and leased equipment: Make a good list, call people, and take a good educated guess.

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Payroll and payroll taxes are operating expenses

Expenses also include payroll, wages and salaries, or compensation. They are worth a list of their own. In the case of the soup business in the example above, for payroll, they do a separate list so they can keep track. Payroll is a serious fixed cost and an obligation. Here is the payroll budget associated with the sample plan above.

Notice that the totals from the personnel plan show up in the expense budget. And you can see the estimated expense for benefits over and above the gross salary. Employee-related expenses include payroll taxes along with what they budget for health insurance and other benefits.

Don’t worry too much about depreciation

Depreciation is a special case. Traditionally, it counts as an operating expense, but a lot of businesses budget for it separately because it doesn’t actually cost money.

It’s a concept the tax code allows us to deduct as a business expense, in theory, to allow for the gradual decline in the value of an asset, or—depending on which expert you follow—to allow money to buy new assets when existing assets become obsolete.

The argument for including it in the expenses is that it gives a more accurate picture of profits. And many people separate depreciation from the other expenses so they can calculate EBITDA, which is earnings before interest, taxes, depreciation, and amortization (which is like depreciation, but for intangible assets).

Bottom line:  Include it or not; it’s your choice.

Yes, interest expense is an expense

Because interest is also excluded from EBITDA, many people also exclude it from operating expenses. They list it separately, along with depreciation, to make the EBITDA calculation easier. I say you can do that either way, it doesn’t matter, as long as you include the interest expense in your budget. Because, unlike depreciation, interest does cost money.

• Remember the underlying goal

The purpose of the budget is to help you make good decisions.

Set expenses to align with your strategy and tactics, so you do what works best for your long-term progress. Match your accounting categories as much as possible, so you can track later. Keep track of assumptions so when things come out different from the plan —and they always do—you can adjust quickly.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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The Best Free Business Budget Templates

Published: October 12, 2023

Business budgets are a source of truth for your income and expenses. That includes all the money you spend — from A/B testing your marketing campaigns to your monthly office rent.

While organizing the numbers may sound difficult, using a business budget template makes the process simple. Plus, there are thousands of business budget templates for you to choose from.

We’ll share seven budget templates that can help organize your finances. But first, you’ll learn about different types of business budgets and how to create one.

What is a Business Budget?

A business budget is a spending plan that estimates the revenue and expenses of a business for a period of time, typically monthly, quarterly, or yearly.

The business budget follows a set template, which you can fill in with estimated revenues, plus any recurring or expected business expenses.

For example, say your business is planning a website redesign. You'd need to break down the costs by category: software, content and design, testing, and more.

Having a clear breakdown will help you estimate how much each category will cost and compare it with the actual costs.

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Types of Budgets for a Business

Master budget, operating budget, cash budget, static budget, departmental budget, capital budget, labor budget, project budget.

Business budgets aren’t one size fits all. In fact, there are many different types of budgets that serve various purposes. Let’s dive into some commonly used budgets:

Think of a master budget as the superhero of budgets — it brings together all the individual budgets from different parts of your company into one big, consolidated plan. It covers everything from sales and production to marketing and finances.

It includes details like projected revenues, expenses, and profitability for each department or business unit. It also considers important financial aspects like cash flow, capital expenditures, and even creates a budgeted balance sheet to show the organization's financial position.

The master budget acts as a guide for decision-making, helps with strategic planning, and gives a clear picture of the overall financial health and performance of your company. It's like the master plan that ties everything together and helps the organization move in the right direction.

Your operating budget helps your company figure out how much money it expects to make and spend during a specific period, usually a year. It not only predicts the revenue your business will bring in, but also outlines expenses it will need to cover, like salaries, rent, bills, and other operational costs.

By comparing your actual expenses and revenue to the budgeted amounts, your company can see how it's performing and make adjustments if needed. It helps keep things in check, allowing your business to make wise financial decisions and stay on track with its goals.

Free Business Budget Templates

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A cash budget estimates the cash inflows and outflows of your business over a specific period, typically a month, quarter, or year. It provides a detailed projection of cash sources and uses, including revenue, expenses, and financing activities.

The cash budget helps you effectively manage your cash flow, plan for cash shortages or surpluses, evaluate the need for external financing, and make informed decisions about resource allocation.

By utilizing a cash budget, your business can ensure it has enough cash on hand to meet its financial obligations, navigate fluctuations, and seize growth opportunities.

A static budget is a financial plan that remains unchanged, regardless of actual sales or production volumes.

It’s typically created at the beginning of a budget period and doesn’t account for any fluctuations or changes in business conditions. It also assumes that all variables, such as sales, expenses, and production levels, will remain the same throughout the budget period.

While a static budget provides a baseline for comparison, it may not be realistic for businesses with fluctuating sales volumes or variable expenses.

A departmental budget focuses on the financial aspects of a specific department within your company, such as sales, marketing or human resources.

When creating a departmental budget, you may look at revenue sources like departmental sales, grants, and other sources of income. On the expense side, you consider costs such as salaries, supplies, equipment, and any other expenses unique to that department.

The goal of a departmental budget is to help the department manage its finances wisely. It acts as a guide for making decisions and allocating resources effectively. By comparing the actual numbers to the budgeted amounts, department heads can see if they're on track or if adjustments need to be made.

A capital budget is all about planning for big investments in the long term. It focuses on deciding where to spend money on things like upgrading equipment, maintaining facilities, developing new products, and hiring new employees.

The budget looks at the costs of buying new stuff, upgrading existing things, and even considers depreciation, which is when something loses value over time. It also considers the return on investment, like how much money these investments might bring in or how they could save costs in the future.

The budget also looks at different ways to finance these investments, whether it's through loans, leases, or other options. It's all about making smart decisions for the future, evaluating cash flow, and choosing investments that will help the company grow and succeed.

A labor budget helps you plan and manage the costs related to your employees. It involves figuring out how much your business will spend on wages, salaries, benefits, and other labor-related expenses.

To create a labor budget, you'll need to consider factors like how much work needs to be done, how many folks you'll need to get it done, and how much it'll all cost. This can help your business forecast and control labor-related expenses and ensure adequate staffing levels.

By having a labor budget in place, your business can monitor and analyze your labor costs to make informed decisions and optimize your resources effectively.

A project budget is the financial plan for a specific project.

Let's say you have an exciting new project you want to tackle. A project budget helps you figure out how much money you'll need and how it will be allocated. It covers everything from personnel to equipment and materials — basically, anything you'll need to make the project happen.

By creating a project budget, you can make sure the project is doable from a financial standpoint. It helps you keep track of how much you planned to spend versus how much you actually spend as you go along. That way, you have a clear idea of whether you're staying on track or if there are any financial challenges that need attention.

How to Create a Business Budget

While creating a business budget can be straightforward, the process may be more complex for larger companies with multiple revenue streams and expenses.

No matter the size of your business, here are the basic steps to creating a business budget.

1. Gather financial data.

Before you create a business budget, it’s important to gather insights from your past financial data. By looking at things like income statements, expense reports, and sales data, you can spot trends, learn from past experiences, and see where you can make improvements.

Going through your financial history helps you paint a true picture of your income and expenses. So, when you start creating your budget, you can set achievable targets and make sure your estimates match what's actually been happening in your business.

2. Find a template, or make a spreadsheet.

There are many free or paid budget templates online. You can start with an already existing budget template. We list a few helpful templates below.

You may also opt to make a spreadsheet with custom rows and columns based on your business.

3. Fill in revenues.

Once you have your template, start by listing all the sources of your business’ income. With a budget, you’re planning for the future, so you’ll also need to forecast revenue streams based on previous months or years. For a new small business budget, you’ll rely on your market research to estimate early revenue for your company.

When you estimate your revenue , you're essentially figuring out how much money you have to work with. This helps you decide where to allocate your resources and which expenses you can fund.

4. Subtract fixed costs for the time period.

Fixed costs are the recurring costs you have during each month, quarter, or year. Examples include insurance, rent for office space, website hosting, and internet.

The key thing to remember about fixed costs is that they stay relatively stable, regardless of changes in business activity. Even if your sales decrease or production slows down, these costs remain the same.

However, it's important to note that fixed costs can still change over the long term, such as when renegotiating lease agreements or adjusting employee salaries.

5. Consider variable costs.

Variable costs will change from time to time. Unlike fixed costs, variable costs increase or decrease as the level of production or sales changes.

Examples include raw materials needed to manufacture your products, packaging and shipping costs, utility bills, advertising costs, office supplies, and new software or technology.

You may always need to pay some variable costs, like utility bills. However, you can shift how much you spend toward other expenses, like advertising costs, when you have a lower-than-average estimated income.

6. Set aside time for business budget planning.

Unexpected expenses might come up, or you might want to save to expand your business. Either way, review your budget after including all expenses, fixed costs, and variable costs. Once completed, you can determine how much money you can save. It’s wise to create multiple savings accounts. One should be used for emergencies. The other holds money that can be spent on the business to drive growth.

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How to manage a business budget.

There are a few key components to managing a healthy business budget.

Budget Preparation

The process all starts with properly preparing and planning the budget at the beginning of each month, quarter, or year. You can also create multiple budgets, some short-term and some long-term. During this stage, you will also set spending limits and create a system to regularly monitor the budget.

Budget Monitoring

In larger businesses, you might delegate budget tracking to multiple supervisors. But even if you’re a one-person show, keep a close eye on your budget. That means setting a time in your schedule each day or week to review the budget and track actual income and expenses. Be sure to compare the actual numbers to the estimates.

Budget Forecasting

With regular budget tracking, you always know how your business is doing. Check in regularly to determine how you are doing in terms of revenue and where you have losses. Find where you can minimize expenses and how you can move more money into savings.

Why is a Budget Important for a Business?

A budget is crucial for businesses. Without one, you could easily be drowning in expenses or unexpected costs.

The business budget helps with several operations. You can use a business budget to keep track of your finances, save money to help you grow the business or pay bonuses in the future, and prepare for unexpected expenses or emergencies.

You can also review your budget to determine when to take the next leap for your business. For example, you might be dreaming of a larger office building or the latest software, but you want to make sure you have a healthy net revenue before you make the purchase.

Best Free Business Budget Templates

1. marketing budget template.

Knowing how to manage a marketing budget can be a challenge, but with helpful free templates like this marketing budget template bundle , you can track everything from advertising expenses to events and more.

This free bundle includes eight different templates, so you can create multiple budgets to help you determine how much money to put toward marketing, plus the return on your investment.

2. Small Business Budget Template

For small businesses, it can be hard to find the time to draw up a budget, but it’s crucial to help keep the business in good health.

Capterra offers a budget template specifically for small businesses. Plus, this template works with Excel. Start by inputting projections for the year. Then, the spreadsheet will project the month-to-month budget. You can input your actual revenue and expenses to compare, making profits and losses easy to spot.

3. Startup Budget Template

What if you don’t have any previous numbers to rely on to create profit and expense estimates? If you are a startup, this Gusto budget template will help you draw up a budget before your business is officially in the market. This will help you track all the expenses you need to get your business up and running, estimate your first revenues, and determine where to pinch pennies.

4. Free Business Budget Template

You might be familiar with Intuit. Many companies, big and small, rely on Intuit’s services like Quickbooks and TurboTax. Even if you don’t use the company’s paid financial services, you can take advantage of Intuit’s free budget template , which works in Google Sheets or Excel.

It features multiple spreadsheet tabs and simple instructions. You enter your revenue in one specific tab and expenses in another. You can also add additional tabs as needed. Then, like magic, the spreadsheet uses the data in the income and expense tabs to summarize the information. This template can even determine net savings and the ending balance.

5. Department Budget Sheet

A mid- to large-size company will have multiple departments, all with different budgetary needs. These budgets will all be consolidated into a massive, company-wide budget sheet. Having a specific template for each department can help teams keep track of spending and plan for growth.

This free template from Template.net works in either document or spreadsheet formats. This budget template can help different departments keep track of their income and spending.

6. Project Budget Template

Every new project comes with expenses. This free budget template from Monday will help your team estimate costs before undertaking a project. You can easily spot if you're going over budget midway through a project so you can adjust.

This template is especially useful for small companies that are reporting budgets to clients and for in-house teams getting buy-in for complex projects.

7. Company Budget Template

Want to keep track of every penny? Use this template from TemplateLab to draw up a detailed budget. The list of expenses includes fixed costs, employee costs, and variable costs. This business template can be especially useful for small businesses that want to keep track of expenses in one, comprehensive document.

Create a Business Budget to Help Your Company Grow

Making your first business budget can be daunting, especially if you have several revenue streams and expenses. Using a budget template can make getting started easy. And, once you get it set up, these templates are simple to replicate.

With little planning and regular monitoring, you can plan for the future of your business.

Editor's note: This post was originally published in September 2021 and has been updated for comprehensiveness.

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Business Plan: What It Is, What's Included, and How to Write One

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

What Is a Business Plan?

A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include and how to write one.

Key Takeaways

• A business plan is a document describing a company's business activities and how it plans to achieve its goals.
• Startup companies use business plans to get off the ground and attract outside investors.
• For established companies, a business plan can help keep the executive team focused on and working toward the company's short- and long-term objectives.
• There is no single format that a business plan must follow, but there are certain key elements that most companies will want to include.

Investopedia / Ryan Oakley

Understanding Business Plans

Any new business should have a business plan in place prior to beginning operations. In fact, banks and venture capital firms often want to see a business plan before they'll consider making a loan or providing capital to new businesses.

Even if a business isn't looking to raise additional money, a business plan can help it focus on its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs."

Ideally, a business plan should be reviewed and updated periodically to reflect any goals that have been achieved or that may have changed. An established business that has decided to move in a new direction might create an entirely new business plan for itself.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.

Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.

While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.

How to Write a Business Plan

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

Common Elements of a Business Plan

The length of a business plan can vary greatly from business to business. Regardless, it's best to fit the basic information into a 15- to 25-page document. Other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and attached as appendices.

These are some of the most common elements in many business plans:

• Executive summary: This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services: Here, the company should describe the products and services it offers or plans to introduce. That might include details on pricing, product lifespan, and unique benefits to the consumer. Other factors that could go into this section include production and manufacturing processes, any relevant patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
• Market analysis: A company needs to have a good handle on the current state of its industry and the existing competition. This section should explain where the company fits in, what types of customers it plans to target, and how easy or difficult it may be to take market share from incumbents.
• Marketing strategy: This section can describe how the company plans to attract and keep customers, including any anticipated advertising and marketing campaigns. It should also describe the distribution channel or channels it will use to get its products or services to consumers.
• Financial plans and projections: Established businesses can include financial statements, balance sheets, and other relevant financial information. New businesses can provide financial targets and estimates for the first few years. Your plan might also include any funding requests you're making.

The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.

2 Types of Business Plans

Business plans can take many forms, but they are sometimes divided into two basic categories: traditional and lean startup. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These plans tend to be much longer than lean startup plans and contain considerably more detail. As a result they require more work on the part of the business, but they can also be more persuasive (and reassuring) to potential investors.
• Lean startup business plans : These use an abbreviated structure that highlights key elements. These business plans are short—as short as one page—and provide only the most basic detail. If a company wants to use this kind of plan, it should be prepared to provide more detail if an investor or a lender requests it.

Why Do Business Plans Fail?

A business plan is not a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections to begin with. Markets and the overall economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All of this calls for building some flexibility into your plan, so you can pivot to a new course if needed.

How Often Should a Business Plan Be Updated?

How frequently a business plan needs to be revised will depend on the nature of the business. A well-established business might want to review its plan once a year and make changes if necessary. A new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is an option when a company prefers to give a quick explanation of its business. For example, a brand-new company may feel that it doesn't have a lot of information to provide yet.

Sections can include: a value proposition ; the company's major activities and advantages; resources such as staff, intellectual property, and capital; a list of partnerships; customer segments; and revenue sources.

The Bottom Line

A business plan can be useful to companies of all kinds. But as a company grows and the world around it changes, so too should its business plan. So don't think of your business plan as carved in granite but as a living document designed to evolve with your business.

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

U.S. Small Business Administration. " Write Your Business Plan ."

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All the business expense categories you need to know

Tackling tax season without a well-organized record of your business expenses is like trying to assemble a puzzle in the dark — frustrating, time-consuming, and you might turn the light on just to realize you didn’t do any of it right in the first place.

For many small businesses and startups , categorizing business expenses to prep for tax season might not seem like the highest priority task. But putting your business expenses on the back burner can lead to significant financial issues and missed tax savings that directly impact your bottom line.

Read on to uncover the essential business expense categories every business should be familiar with, ensuring you’re set up for success during tax season and beyond.

What are business expenses?

Business expenses are the costs incurred during the day-to-day operations of a company. These can range from tangible assets such as inventory or office equipment to intangibles like fees for legal services or advertising. 

Because these expenses are so broad, knowing what does and doesn’t qualify as a business expense is key. That’s where business expense categories come into play. Knowing and utilizing these categories helps business owners plan their finances, save money during tax time, and improve how they run their business.

Business expense categories, defined

Business expense categories are essentially the systematic grouping of these day-to-day business costs to inform your internal finance team and tax filings. They provide a structured way to record and track where money is being spent, making it easier to analyze and budget in the future. 

Business expense categories aren’t one-size-fits-all — different businesses have different categories based on what they do. For example, a car repair shop might sort expenses into categories like "Auto Parts" or "Mechanic Tools," but a digital marketing firm might have categories like "Software Costs" or "Client Meetings." 

28 business expense categories for businesses of all sizes 

To help you figure out which costs qualify as business expenses, we’ve listed 28 common business expense categories to give you an idea of the options available and guide you in choosing the right ones for your business. 

1. Advertising and marketing

Advertising and marketing are tried-and-true ways for businesses to expand their customer base and boost sales. Investing in well-planned campaigns can reap significant rewards for brand visibility and recognition, so a dedicated expense category is totally warranted.

Examples: Billboards, social media ads, television ads, signage and brochure printing, podcast spots. 

Business types: Virtually any business, from local shops to e-commerce platforms, will have some sort of advertising and marketing expense.

Tax info: Typically, advertising and marketing costs are fully deductible. Keep detailed records of every expenditure, including copies of advertisements and invoices.

2. Bank fees

Running a business often entails various bank-related costs, from account maintenance fees to transaction charges. Set up a company credit card to easily discern personal vs. business-related spending and any corresponding fees. 

Examples: Monthly account fees, wire transfer fees, ATM fees, merchant service fees.

Business types: Any business with a bank account, especially those making frequent transactions or international dealings.

Tax info: Generally, bank fees associated with a business account are deductible. Ensure you maintain a separate business account to simplify this process.

3. Business meals

Meeting clients or team members over a meal is a common practice — and one that’s great for relationship building and long-term partnerships. But remember, not every meal can be written off.

Examples: Client lunches, team dinners, and meals during business travel.

Business types: Especially common for businesses in sales, consulting, or any profession where networking and relationship-building are key, but common across all industries.

Tax info: Historically, 50% of the cost of business meals is deductible . However, always check current tax regulations, as these percentages can change.

4. Business use of your car

If you use your personal vehicle for business purposes, you can claim related expenses. 

Examples: Travel to client meetings, product deliveries, traveling between worksites.

Business types: Companies with consultants, field sales reps, delivery businesses, or any professions requiring travel.

Tax info: There are two main methods for deducting car expenses: the standard mileage rate or actual expenses (fuel, maintenance, etc.). Remember to always maintain a detailed log, and keep personal and business use separate! 

5. Company car usage

Many businesses use company cars for various purposes, ranging from client meetings to product deliveries, which can be costly to purchase, maintain, and fuel. However, you can snatch significant savings during tax season by keeping track of these expenses. 

Examples: Purchasing a car to be used exclusively for business purposes, fueling and maintaining the car, tolls, and parking fees. 

Business types: Sales companies, businesses with delivery services, construction or trade companies, and/or rental car agencies will typically incur this type of expense.

Tax info: According to the IRS , if you only use your car for business purposes, you may deduct its entire cost of ownership and operation. The IRS is very particular about writing off the cost of vehicles, so if you plan to take a vehicle deduction, keep a detailed log of your business miles and other related expenses.

6. Client gifts

Gifting is a thoughtful way to strengthen business relationships and show appreciation to your clients, but there are limits on how much you can deduct.

Examples: Holiday gifts, thank-you baskets, promotional items.

Business types: B2B enterprises, consultants, agencies, and more.

Tax info: As of the last IRS update, you can deduct up to $25 per gift per client .

7. Continuing education

Investing in further education for yourself or your employees can enhance skills and services, making your business more competitive. Plus, it shows your employees that you’re invested in their growth and may have an effect on employee retention.

Examples: Online courses, seminars, workshops, industry conferences.

Business types: Tech firms, medical practices, or any business in rapidly evolving industries.

Tax info: Costs for education that maintain or improve skills required in your current business are usually tax deductible. 

8. Credit and collection fees

These are fees associated with trying to obtain payments from customers or fees paid to third-party services to handle collection.

Examples: Fees paid to a collection agency, and credit card chargeback fees.

Business types: Retailers, e-commerce platforms, and B2B companies offering credit terms (such as buy now, pay later).

Tax info: Generally, these fees can be deducted as business expenses. It's essential to maintain a clear record of all transactions and fees.

9. Charitable contributions

It’s always rewarding and impactful to give back to the community by contributing to charities, but there are guidelines on how these are deducted.

Examples: Monetary donations, event sponsorships, and product donations.

Business types: All businesses, but especially those with a focus on corporate social responsibility.

Tax info: Corporations can deduct charitable contributions up to 50% of their taxable income. Remember, for your donation to qualify for a tax deduction, your chosen charity needs to be a bona fide 501(c)(3) organization. 

10. Professional dues 

These are fees paid for membership in professional, business, or trade organizations.

Examples: Chamber of Commerce dues, industry association memberships, club memberships primarily for business.

Business types: Professionals such as lawyers, doctors, consultants, accountants , and others who rely on networking to stay updated in their industry.

Tax info: Dues for clubs organized for pleasure aren’t deductible, but professional or trade organization dues are typically fully deductible.

11. Depreciation

Depreciation represents how much of an asset's value has been used, and it allows companies to earn revenue from the assets they own by paying for them over a certain period of time.

Examples: Assets that lose value over time, such as office equipment, machinery, buildings, and vehicles.

Business types: Manufacturing companies, transport businesses, firms with office spaces, or physical stores.

Tax info: You can deduct the cost of a capital asset, but not all at once. The general rule is that you depreciate the asset by deducting a portion of the cost on your tax return over several years.

12. Employee benefit programs

These are perks or benefits given to employees beyond their salaries, helping to enhance job satisfaction and retention.

Examples: Health insurance, retirement plans, stock options, wellness programs, on-site daycare, and dependent care reimbursement accounts.

Business types: Corporations, startups, and other businesses that have a substantial number of employees.

Tax info: Most employee benefits are tax deductible.

13. Employee loans

Some businesses offer loans to employees, usually at favorable interest rates, as part of their compensation package.

Examples: Home loans, vehicle loans, and education loans.

Business types: Large corporations, financial institutions.

Tax info: If the loan is offered at a below-market interest rate, there might be tax implications for both the business and the employee. Proper documentation here is key!

14. Foreign earned income

Businesses that operate internationally may have income from sources outside their home country. In some cases, this income can be left off your tax return — but not always. 

Examples: Revenue from overseas clients, income from foreign investments or subsidiaries.

Business types: Exporters, multinational companies, and online service providers with a global clientele.

Tax info: Reporting requirements vary by country. In the U.S., foreign income is subject to tax , but exclusions and credits are available. It's crucial to understand the tax treaties between countries when completing your taxes. 

15. Insurance

Insurance protects businesses from unforeseen losses and is often a vital part of any business plan. And the best part? These expenses are generally tax deductible. 

Examples: Property insurance, liability insurance, workers' compensation, and health insurance for employees.

Business types: Virtually all businesses need some form of insurance.

Tax info: Premiums paid on most business insurance are deductible. However, specific rules apply to life insurance policies where the business is a beneficiary.

16. Raw materials

Businesses that produce physical goods will have expenses associated with the materials required to create their products.

Examples: Wood for furniture making, metals for machinery, or fabrics for clothing manufacturing.

Business types: Manufacturing companies, artisans, craft businesses, and textile companies.

Tax info: These costs are considered “cost of goods sold” (COGS) and are deductible. Remember, proper inventory tracking and costing methods are crucial for accurate expense reporting .

17. Mortgage interest

Companies that have financed commercial properties through mortgages can deduct the interest from these loans — and you can deduct interest from residential properties (at least in the U.S.) if you meet the right requirements .

Examples: Interest from a loan on a factory, office building, warehouse, or home office.

Business types: Any business that has taken a mortgage on a commercial property.

Tax info: The interest on the mortgage is deductible, but principal repayments are not.

18. Licenses and permits

Operating legally often means obtaining and maintaining various licenses and permits, which can often come at a cost. But the cost is typically deductible. 

Examples: Business licenses, health permits, liquor licenses, and professional licenses.

Business types: Restaurants, bars, professionals like doctors or lawyers, and general businesses in most municipalities.

Tax info: The cost of obtaining and renewing licenses and permits is generally deductible. Some may be deducted in the year they're paid, while others may need to be amortized over several years.

19. Maintenance and repairs

Maintaining business properties and equipment is crucial for smooth operations, but maintenance can be costly. That’s why it's essential to budget for these inevitable expenses and stay informed about potential tax deductions to optimize your spending.

Examples: Office repainting, machinery servicing, and HVAC repairs.

Business types: Any business with physical assets, from offices to factories.

Tax info: Routine maintenance and repair costs are deductible in the year they occur. However, significant improvements or overhauls may need to be capitalized and depreciated over time.

20. Office expenses and supplies

Many companies need to purchase everyday items to keep an office running smoothly. Any of those expenses would fall under this category. 

Examples: Stationery, printer ink, coffee for the break room, office snacks, and office furniture.

Business types: Almost any business operating in an office setting.

Tax info: These expenses are typically deductible, but remember to differentiate between depreciable office equipment and expendable office supplies. For depreciable office equipment, like computers, furniture, or any higher-value items that will be used longer than one year, companies can deduct a portion of the cost each year over the course of the item’s useful life. For expendable office supplies, like paper, pens, or any lower-value items that will be used quickly, businesses can typically deduct the full cost of these supplies in the year they're purchased.

21. Phone use

You really can’t run a business without communicating with your team, so many businesses have costs associated with phone use.

Examples: Monthly phone bills, cost of smartphones, and video conferencing subscriptions.

Business types: Nearly all businesses, especially those with remote or on-the-go employees.

Tax info: Business-related phone expenses are deductible. If a phone is used partly for personal use, only the business portion is deductible. 

22. Utilities

Keeping the lights on, literally, is a recurring cost for many businesses.

Examples: Electricity, water, gas, and trash services.

Business types: Any business with a physical location, including offices, stores, and factories.

Tax info: Utility costs related strictly to business operations are deductible.

23. Shipping

Businesses selling physical goods often incur shipping costs when sending their products to customers. 

Examples: Postage, packaging materials, courier services, and freight.

Business types: E-commerce businesses, retail stores, and manufacturers.

Tax info: Shipping costs associated with business products or operations are deductible.

Space costs money, whether you're leasing an office, a storefront, or a warehouse. Regardless, those expenses are tax deductible.

Examples: Monthly lease payments and co-working space memberships.

Business types: Any business that doesn't own its premises.

Tax info: Rent expenses for business purposes are fully deductible.

Traveling for business , be it conferences, client meetings, or otherwise, can lead to essential collaborations, discoveries, and expanded horizons for professionals — but not without some accrued costs. 

Examples: Airfare, accommodation, meals on trips, conference tickets, car rentals.

Business types: Companies with consultants, sales professionals, or corporate executives that travel for their jobs.

Tax info: Business travel is deductible, but there are specific guidelines about what can be claimed. 

26. Software

More and more frequently, businesses are doing away with outdated manual processes and opting for automated solutions like Expensify to keep their business up and running. Using software is key to streamlining operations, ensuring accuracy, and reducing stress across the board. Plus, our software can create expense reports on the go, making tax season that much easier. 

Examples: CRM systems, accounting software, graphic design tools, online cloud storage, and recurring business software subscription costs.

Business types: Almost all, especially tech companies, design firms, and corporate offices.

Tax info: Software expenses can often be deducted, but rules vary depending on whether it's a one-time purchase, a subscription, or custom-developed software.

27. Personal property use

Using personal assets for business purposes can lead to some key business expenses — and resulting deductions during tax season. 

Examples: A personal car for business errands, or a home office.

Business types: Freelancers, sole proprietors, or home-based businesses.

Tax info: A portion of the costs related to personal assets used for business can be deductible. Be sure to keep track of personal vs. business use here. 

28. Entertainment

Building relationships with clients or rewarding employees sometimes involves entertainment costs. 

Examples: Taking clients to a show, or hosting a company retreat or party.

Business types: Sales-heavy businesses, corporations, and agencies.

Tax info: There are specific rules around the deductibility of entertainment expenses, often requiring clear business purposes and documentation.

Taxes and your business expenses

Operating a business involves a myriad of costs, some of which can benefit you come tax season. By understanding how business expenses interact with taxes, you'll be better prepared to make informed decisions throughout the fiscal year. 

Let's explore how certain expenses can be deducted from your taxable income while others can't. We'll also cover some strategies to ensure you're keeping accurate records for a smoother tax filing process.

Tax-deductible expenses

A tax-deductible expense can be subtracted from a business's income before it’s subject to taxation, effectively reducing the amount of money the business owes in taxes. Score! This is the government's way of incentivizing certain types of business spending. Some commonly deductible expenses include:

Business use of a car: Mileage or actual expenses related to business travel.

Home office: If a portion of your home is used exclusively for business.

Salaries and wages: Payments to employees, but not owner withdrawals.

Interest: Interest on business loans.

Rent: Rent for business premises or equipment.

Advertising and marketing: Costs associated with promoting your business.

Categorizing and deducting these expenses reduces your taxable income, which can mean a lower tax bill — saving you time, money, and headaches during tax season. Remember, you’ll need to keep clear records and receipts to prove the validity of the expenses.

Expenses that aren’t tax-deductible

Not all business expenses grant you tax breaks. Unfortunately, some costs, although necessary for business operations, can't be deducted. Keep an eye out for these so you can manage your finances more effectively. Non-deductible expenses include:

Owner's salary: Payments to business owners or partners.

Fines and penalties: Paid to the government for violations.

Lobbying expenses: Money spent trying to influence legislation.

Capital expenses: Costs related to business start-up and improvements.

While these expenses aren't tax-deductible, your business can still adopt money-saving and efficient habits like shopping around for suppliers, taking advantage of bulk purchasing discounts, or negotiating better contract terms to help you save money in the long run.

How to track and submit accurate business expenses

Whether you're a seasoned business owner or just starting out, understanding how to track and submit your expenses effectively can make all the difference during tax season. Not only does it ensure you benefit from all eligible deductions, but it also offers peace of mind knowing your financial records are in order in case of any audits. 

In the sections below, we'll explore best practices and tools to help you manage this process with ease and precision.

Stay organized with precise categorization 

Choosing the right categories for your business expenses will help you keep everything organized during the fiscal year. Once you’ve established your business expense categories, you’ll be able to document each expense and sort it effectively into the right folder, which will save you time when you’re ready to do taxes.

Harness the power of digital tools

Manual processes lead to lost receipts, inaccurate data, and lots of stress. With expense management software like Expensify, each business expense can be digitally logged and categorized with a corresponding receipt, invoice, or note, ensuring you have proof of every penny spent. 

Consistently review and categorize

Periodically sift through and classify your expenses to ensure everything is on track. This proactive approach not only preempts tax season stresses but also gives you a clear picture of your financial standing. Expensify's dashboard provides an overview of expenses across all categories, giving you a peek at your financial status whenever you need it. 

Work with a licensed tax professional

Knowing the basics of what’s expensable and not and what’s tax-deductible and not is super important as a business owner. To ensure complete accuracy and compliance with IRS guidelines, we always recommend working with a professional who can help answer specific questions about your business’s specific needs. These professionals often use tools like Expensify to help automate business expenses so come tax season, your paperwork is ready to go.

Ready to get prepared for tax season? 

Navigating the IRS guidelines is not for the faint of heart, but you don’t have to go it alone. With Expensify on your side, understanding and categorizing your business expenses is easy. Our intuitive tool integrates with your accounting software, simplifying your expense tracking and offering insights into your spending habits year-round. Think of us as your expense management BFF.

So, ready to be friends forever? Get started with Expensify today. 

Joanie Wang

Joanie is the Director of Marketing and Brand at Expensify, and possibly the only Bahhston native who doesn't run on Dunkin’. She is "outside-y," enjoys food-based travel, and loves John Mayer maybe a little too much.

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Free Financial Templates for a Business Plan

By Andy Marker | July 29, 2020

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In this article, we’ve rounded up expert-tested financial templates for your business plan, all of which are free to download in Excel, Google Sheets, and PDF formats.

Included on this page, you’ll find the essential financial statement templates, including income statement templates , cash flow statement templates , and balance sheet templates . Plus, we cover the key elements of the financial section of a business plan .

Financial Plan Templates

Download and prepare these financial plan templates to include in your business plan. Use historical data and future projections to produce an overview of the financial health of your organization to support your business plan and gain buy-in from stakeholders

Business Financial Plan Template

Use this financial plan template to organize and prepare the financial section of your business plan. This customizable template has room to provide a financial overview, any important assumptions, key financial indicators and ratios, a break-even analysis, and pro forma financial statements to share key financial data with potential investors.

Download Financial Plan Template

Word | PDF | Smartsheet

Financial Plan Projections Template for Startups

This financial plan projections template comes as a set of pro forma templates designed to help startups. The template set includes a 12-month profit and loss statement, a balance sheet, and a cash flow statement for you to detail the current and projected financial position of a business.

‌ Download Startup Financial Projections Template

Excel | Smartsheet

Income Statement Templates for Business Plan

Also called profit and loss statements , these income statement templates will empower you to make critical business decisions by providing insight into your company, as well as illustrating the projected profitability associated with business activities. The numbers prepared in your income statement directly influence the cash flow and balance sheet forecasts.

Pro Forma Income Statement/Profit and Loss Sample

Use this pro forma income statement template to project income and expenses over a three-year time period. Pro forma income statements consider historical or market analysis data to calculate the estimated sales, cost of sales, profits, and more.

‌ Download Pro Forma Income Statement Sample - Excel

Small Business Profit and Loss Statement

Small businesses can use this simple profit and loss statement template to project income and expenses for a specific time period. Enter expected income, cost of goods sold, and business expenses, and the built-in formulas will automatically calculate the net income.

‌ Download Small Business Profit and Loss Template - Excel

3-Year Income Statement Template

Use this income statement template to calculate and assess the profit and loss generated by your business over three years. This template provides room to enter revenue and expenses associated with operating your business and allows you to track performance over time.

Download 3-Year Income Statement Template

For additional resources, including how to use profit and loss statements, visit “ Download Free Profit and Loss Templates .”

Cash Flow Statement Templates for Business Plan

Use these free cash flow statement templates to convey how efficiently your company manages the inflow and outflow of money. Use a cash flow statement to analyze the availability of liquid assets and your company’s ability to grow and sustain itself long term.

Simple Cash Flow Template

Use this basic cash flow template to compare your business cash flows against different time periods. Enter the beginning balance of cash on hand, and then detail itemized cash receipts, payments, costs of goods sold, and expenses. Once you enter those values, the built-in formulas will calculate total cash payments, net cash change, and the month ending cash position.

Download Simple Cash Flow Template

12-Month Cash Flow Forecast Template

Use this cash flow forecast template, also called a pro forma cash flow template, to track and compare expected and actual cash flow outcomes on a monthly and yearly basis. Enter the cash on hand at the beginning of each month, and then add the cash receipts (from customers, issuance of stock, and other operations). Finally, add the cash paid out (purchases made, wage expenses, and other cash outflow). Once you enter those values, the built-in formulas will calculate your cash position for each month with.

‌ Download 12-Month Cash Flow Forecast

3-Year Cash Flow Statement Template Set

Use this cash flow statement template set to analyze the amount of cash your company has compared to its expenses and liabilities. This template set contains a tab to create a monthly cash flow statement, a yearly cash flow statement, and a three-year cash flow statement to track cash flow for the operating, investing, and financing activities of your business.

Download 3-Year Cash Flow Statement Template

For additional information on managing your cash flow, including how to create a cash flow forecast, visit “ Free Cash Flow Statement Templates .”

Balance Sheet Templates for a Business Plan

Use these free balance sheet templates to convey the financial position of your business during a specific time period to potential investors and stakeholders.

Small Business Pro Forma Balance Sheet

Small businesses can use this pro forma balance sheet template to project account balances for assets, liabilities, and equity for a designated period. Established businesses can use this template (and its built-in formulas) to calculate key financial ratios, including working capital.

Download Pro Forma Balance Sheet Template

Monthly and Quarterly Balance Sheet Template

Use this balance sheet template to evaluate your company’s financial health on a monthly, quarterly, and annual basis. You can also use this template to project your financial position for a specified time in the future. Once you complete the balance sheet, you can compare and analyze your assets, liabilities, and equity on a quarter-over-quarter or year-over-year basis.

Download Monthly/Quarterly Balance Sheet Template - Excel

Yearly Balance Sheet Template

Use this balance sheet template to compare your company’s short and long-term assets, liabilities, and equity year-over-year. This template also provides calculations for common financial ratios with built-in formulas, so you can use it to evaluate account balances annually.

Download Yearly Balance Sheet Template - Excel

For more downloadable resources for a wide range of organizations, visit “ Free Balance Sheet Templates .”

Sales Forecast Templates for Business Plan

Sales projections are a fundamental part of a business plan, and should support all other components of your plan, including your market analysis, product offerings, and marketing plan . Use these sales forecast templates to estimate future sales, and ensure the numbers align with the sales numbers provided in your income statement.

Basic Sales Forecast Sample Template

Use this basic forecast template to project the sales of a specific product. Gather historical and industry sales data to generate monthly and yearly estimates of the number of units sold and the price per unit. Then, the pre-built formulas will calculate percentages automatically. You’ll also find details about which months provide the highest sales percentage, and the percentage change in sales month-over-month. 

Download Basic Sales Forecast Sample Template

12-Month Sales Forecast Template for Multiple Products

Use this sales forecast template to project the future sales of a business across multiple products or services over the course of a year. Enter your estimated monthly sales, and the built-in formulas will calculate annual totals. There is also space to record and track year-over-year sales, so you can pinpoint sales trends.

Download 12-Month Sales Forecasting Template for Multiple Products

3-Year Sales Forecast Template for Multiple Products

Use this sales forecast template to estimate the monthly and yearly sales for multiple products over a three-year period. Enter the monthly units sold, unit costs, and unit price. Once you enter those values, built-in formulas will automatically calculate revenue, margin per unit, and gross profit. This template also provides bar charts and line graphs to visually display sales and gross profit year over year.

Download 3-Year Sales Forecast Template - Excel

For a wider selection of resources to project your sales, visit “ Free Sales Forecasting Templates .”

Break-Even Analysis Template for Business Plan

A break-even analysis will help you ascertain the point at which a business, product, or service will become profitable. This analysis uses a calculation to pinpoint the number of service or unit sales you need to make to cover costs and make a profit.

Break-Even Analysis Template

Use this break-even analysis template to calculate the number of sales needed to become profitable. Enter the product's selling price at the top of the template, and then add the fixed and variable costs. Once you enter those values, the built-in formulas will calculate the total variable cost, the contribution margin, and break-even units and sales values.

Download Break-Even Analysis Template

For additional resources, visit, “ Free Financial Planning Templates .”

Business Budget Templates for Business Plan

These business budget templates will help you track costs (e.g., fixed and variable) and expenses (e.g., one-time and recurring) associated with starting and running a business. Having a detailed budget enables you to make sound strategic decisions, and should align with the expense values listed on your income statement.

Startup Budget Template

Use this startup budget template to track estimated and actual costs and expenses for various business categories, including administrative, marketing, labor, and other office costs. There is also room to provide funding estimates from investors, banks, and other sources to get a detailed view of the resources you need to start and operate your business.

Download Startup Budget Template

Small Business Budget Template

This business budget template is ideal for small businesses that want to record estimated revenue and expenditures on a monthly and yearly basis. This customizable template comes with a tab to list income, expenses, and a cash flow recording to track cash transactions and balances.

Download Small Business Budget Template

Professional Business Budget Template

Established organizations will appreciate this customizable business budget template, which  contains a separate tab to track projected business expenses, actual business expenses, variances, and an expense analysis. Once you enter projected and actual expenses, the built-in formulas will automatically calculate expense variances and populate the included visual charts. 

‌ Download Professional Business Budget Template

For additional resources to plan and track your business costs and expenses, visit “ Free Business Budget Templates for Any Company .”

Other Financial Templates for Business Plan

In this section, you’ll find additional financial templates that you may want to include as part of your larger business plan.

Startup Funding Requirements Template

This simple startup funding requirements template is useful for startups and small businesses that require funding to get business off the ground. The numbers generated in this template should align with those in your financial projections, and should detail the allocation of acquired capital to various startup expenses.

Download Startup Funding Requirements Template - Excel

Personnel Plan Template

Use this customizable personnel plan template to map out the current and future staff needed to get — and keep — the business running. This information belongs in the personnel section of a business plan, and details the job title, amount of pay, and hiring timeline for each position. This template calculates the monthly and yearly expenses associated with each role using built-in formulas. Additionally, you can add an organizational chart to provide a visual overview of the company’s structure. 

Download Personnel Plan Template - Excel

Elements of the Financial Section of a Business Plan

Whether your organization is a startup, a small business, or an enterprise, the financial plan is the cornerstone of any business plan. The financial section should demonstrate the feasibility and profitability of your idea and should support all other aspects of the business plan. 

Below, you’ll find a quick overview of the components of a solid financial plan.

• Financial Overview: This section provides a brief summary of the financial section, and includes key takeaways of the financial statements. If you prefer, you can also add a brief description of each statement in the respective statement’s section.
• Key Assumptions: This component details the basis for your financial projections, including tax and interest rates, economic climate, and other critical, underlying factors.
• Break-Even Analysis: This calculation helps establish the selling price of a product or service, and determines when a product or service should become profitable.
• Pro Forma Income Statement: Also known as a profit and loss statement, this section details the sales, cost of sales, profitability, and other vital financial information to stakeholders.
• Pro Forma Cash Flow Statement: This area outlines the projected cash inflows and outflows the business expects to generate from operating, financing, and investing activities during a specific timeframe.
• Pro Forma Balance Sheet: This document conveys how your business plans to manage assets, including receivables and inventory.
• Key Financial Indicators and Ratios: In this section, highlight key financial indicators and ratios extracted from financial statements that bankers, analysts, and investors can use to evaluate the financial health and position of your business.

Need help putting together the rest of your business plan? Check out our free simple business plan templates to get started. You can learn how to write a successful simple business plan  here . 

Visit this  free non-profit business plan template roundup  or download a  fill-in-the-blank business plan template  to make things easy. If you are looking for a business plan template by file type, visit our pages dedicated specifically to  Microsoft Excel ,  Microsoft Word , and  Adobe PDF  business plan templates. Read our articles offering  startup business plan templates  or  free 30-60-90-day business plan templates  to find more tailored options.

Discover a Better Way to Manage Business Plan Financials and Finance Operations

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The Smartsheet platform makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done. Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed. 

When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time.  Try Smartsheet for free, today.

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• Order Forms and Pubs
• Help with Forms and Instructions
• Comment on Tax Forms and Publications

Note:  We have discontinued Publication 535, Business Expenses; the last revision was for 2022. Below is a mapping to the major resources for each topic. For a full list, go to the Publication 535 for 2022 PDF . Also, note that Worksheet 6A that was in chapter 6 is now new 2023  Form 7206 , Self-Employed Health Insurance Deduction.

Related Items

• Schedule A (Form 1040) Itemized Deductions
• Form 5213, Election To Postpone Determination as To Whether the Presumption Applies That an Activity is Engaged in for Profit
• Publication 15, (Circular E), Employer's Tax Guide
• Publication 15-A, Employer's Supplemental Tax Guide
• Publication 15-B, Employer's Tax Guide to Fringe Benefits
• Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts
• Publication 538, Accounting Periods and Methods
• Publication 925, Passive Activity and At-Risk Rules
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How to Create a Basic Business Budget

8 Min Read | May 16, 2024

You’d never intentionally set your business up to fail, right? But if you don’t know your numbers and how to make a business budget, that’s exactly what you’re doing. Money problems and bad accounting are two reasons why many small businesses don’t make it past their first five years. 1

Talking about budgets can feel overwhelming. We get it. For a lot of business leaders, it’s a lot more comfortable dreaming up big ideas and getting stuff done than digging into numbers. But you can’t set yourself up for steady growth until you have a handle on the money flowing in and out of your company. You also can’t enjoy financial peace in your business.

Not a numbers person? That’s okay. Follow the simple steps below to learn how to create a budget for a business and manage your finances with confidence. We’ll even give you a link to an easy-to-use small-business budget template in the EntreLeader’s Guide to Business Finances .

But before we get to that, let’s unpack what a budget is and why you need one.

Don't Let Your Numbers Intimidate You

With the EntreLeader’s Guide to Business Finances, you can grow your profits without debt—even if numbers aren’t your thing. Plus, get a free business budget template as part of the guide!

What Is a Business Budget?

A business budget is a plan for how you’ll use the money your business generates every month, quarter and year. It’s like looking through a windshield to see the expenses, revenue and profit coming down the road. Your business budget helps you decide what to do with business profit, when and where to cut spending and grow revenue, and how to invest for growth when the time comes. Leadership expert John Maxwell sums it up: “A budget is telling your money where to go instead of wondering where it went.”

But here’s what a business budget is not: a profit and loss (P&L) report you read at the end of the month. Your P&L is like a rearview mirror—it lets you look backward at what’s already happened. Your P&L statement and budget are meant to work together so you can see your financial problems and opportunities and use those findings to forecast your future, set educated goals, and stay on track.

Why Do I Need to Budget for My Business?

Creating a budget should be your very first accounting task because your business won’t survive without it. Sound dramatic? Check this out: There are 33.2 million small businesses in the United States. Out of the small businesses that opened from 1994 to 2020, 67.7% survived at least two years. But less than half survived past five years. 2    The top reasons these businesses went under? They hit a wall with cash-flow problems, faced pricing and cost issues, and failed to plan strategically . 3

As a business owner, one of the worst feelings in the world is wondering whether you’ll be able to make payroll and keep your doors open. That’s why we can’t say it enough: Make a business budget to stay more in control and have more financial peace in running your business.

A budget won’t help you earn more money, but it will help you:

• Maximize the money you’ve got
• Manage your cash flow
• Spend less than your business earns
• Stay on top of tax payments and other bills
• Know if you’re hitting your numbers so you can move at the true speed of cash

How to Create a Budget for a Business

Your ultimate goal is to create a 12–18-month business budget—and you will get there! But start by building out your first month. Don’t even worry about using a fancy accounting program yet. Good ol’ pen and paper or a simple computer document is fine. Just start! Plus, setting up a monthly budget could become a  keystone habit  that helps kick-start other smart business habits.

Here’s how to create your first budget for business:

1. Write down your revenue streams.

Your revenue is the money you earn in exchange for your products or services. You’ll start your small- business budget by listing all the ways you make money. Look at last month’s P&L—or even just your checking account statement—to help you account for all your revenue streams. You’re not filling in numbers yet. Just list what brings in revenue.

For example, if you run an HVAC business, your revenue streams could be:

• Maintenance service calls
• Repair services and sales
• New unit installation
• Insulation installation
• Air duct cleaning

2. Write down the cost of goods sold (if you have them).

Cost of goods is also called inventory. These expenses are directly related to producing your product or service. In the HVAC example, your cost of goods would be the price you pay for each furnace and air conditioning unit you sell and install. It could also include the cost of thermostats, insulation and new ductwork.

3. List your expense categories.

It’s crazy how much money can slip through the cracks when we’re not careful about putting it in the budget. Think through  all  your business expenses—down to the last shoe cover your technicians wear to protect your customers’ flooring during house calls. Here’s a list of common business budget categories for expenses to get you started:

• Office supplies and equipment
• Technology services
• Training and education

Related articles : Product Launch: 10 Questions to Ask Before You Launch a New Product New Product Launch: Your 10-Step Checklist

4. Fill in your own numbers.

Now that you have a solid list of revenue and expense categories, plug in your real (or projected) numbers associated with them. It’s okay if you’re not sure how much you’ll sell just yet or exactly how much you’ll spend. Make an educated guess if you’re just starting out. If your business has been earning money for a while, use past P&L statements to guide what you expect to bring in. Your first budget is about combining thoughtful guesswork with history and then getting a more realistic picture month over month.

5. Calculate your expected profit (or loss). 

Now, number nerds and number haters alike—buckle in. We’re about to do some basic accounting so you know whether you have a profit or loss. This is your chance to figure out exactly how much you’re spending and making in your business.

Take your  gross revenue (the total amount of money you expect to make this month) and subtract your expenses and  cost of goods sold  to find your profit or loss. Here’s what that calculation looks like:

Revenue - Expenses - Cost of Goods Sold = Profit or Loss

Don’t freak out if your first budget shows a loss. That actually happens a lot with your first few monthly budgets. You’re learning and getting context on what’s coming in and going out so you can make adjustments. Keep doing your budget, and before you know it, you’ll be a rock star at telling your money where to go, planning for emergencies ,  investments and opportunities , and building momentum.  

6. Review your budget often. 

Whew! Once you get that first business budget under your belt, take a deep breath and celebrate. You’ve just done something huge for your business! (You’ll also be happy to know, budgeting gets easier from here since you can copy and paste your first one and tweak your income and expenses each month.)

But here’s the thing: Your budget can’t just sit in a drawer or on your computer. You’ve got to look at it consistently to make sure you’re actually following it.

Weekly Review

At least once a week, someone in your business (whether it’s you, a qualified team member or a bookkeeper) needs to track your transactions so you know what’s happening with your money all month. Then you can make adjustments before you have more month than money.

Every time you review your budget, ask yourself these three questions:

• Are we on target to hit our revenue goal this month?
• If not, what we can change to get there?
• Are there any expenses we can cut or minimize?

Monthly Review

You also need to review your business budget when you close your books every month to compare it to your actuals—your P&L. Otherwise, how can you know how you’re doing?

7. Work toward a 12–18-month budget.

Now that you’ve created your first month’s budget, move on to the next one. You’ve got this! The more budget-building reps you get in, the better you’ll be at looking forward and planning for growth. In no time, you’ll reach that ultimate goal of a 12–18-month budget. Just keep adjusting as you go based on all you’re learning about getting an accurate road map for your finances.

As you start owning your numbers, remember: It’s okay if you’re a little intimidated by the process of accounting and making a budget for business. But it’s not okay to avoid the financial details that will make or break you. So just keep applying the basics we covered and keep moving forward.

Follow the steps above to create your budget, and review it often to stay on track.

Want a tool to make budget building simpler? Check out the EntreLeader’s Guide to Business Finances. It includes an easy-to-use small-business budget template in the extra resources section.

What are the benefits of budgeting?

A business budget will help you:

• Make informed, strategic decisions
• Invest in under-resourced areas
• Trim over-resourced areas
• Plan for the future
• Set goals and track your progress

Does using a small-business budget template save time?

Yes! Using a small-business budget template helps you plug in the numbers you need to operate with more confidence and fewer wrong turns. Check out the small-business-budget template inside our EntreLeader’s Guide to Business Finances .

How do I budget if I own a seasonal business?

Just like farmers put extra hay in the barn to cover leaner months, if you’re a seasonal business owner, you need to set aside resources in times of plenty to cover months your business turns down. Use your P&L statements to go back in time and look at financial performance year over year. Then, create your business budget based on what you learn and on any changes you see coming. You can also go to trade conferences to get an idea of your industry’s seasonal benchmarks.

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About the author

EntreLeadership

EntreLeadership is the part of Ramsey Solutions that exists to help small-business owners thrive by mastering themselves, rallying their teams, and imposing their will on the marketplace. Thousands of leaders use our proven EntreLeadership System and resources to develop as leaders and grow their businesses. These resources include The EntreLeadership Podcast , EntreLeadership Elite digital membership , books, live events, coaching sessions and business workshops. Learn More.

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Planning, Startups, Stories

Tim berry on business planning, starting and growing your business, and having a life in the meantime., business plan financials: starting costs.

It’s really important to have an idea of what you need before you start. Continuing with my series on standard business plan financials , startups need to project starting costs. Starting costs set up a starting balance, which is necessary to plan cash flow. And the starting costs are critical to determining whether a startup can bootstrap or needs outside funding. For existing companies that already have financial results, projections start with the expected ending balance of the previous period. But for startups, it’s about starting costs.

Starting costs are essentially the sum of two kinds of spending. You can estimate them both in two simple lists:

• Startup expenses : These are expenses that happen before the beginning of the plan, before the first month of operations. For example, many new companies incur expenses for legal work, logo design, brochures, site selection and improvements, and signage. If there is a business location, then normally the startup pays rent for a month or more before opening. And if employees start receiving compensation before the opening, then those disbursements are also startup expenses.
• Startup assets : Typical startup assets are cash (the money in the bank when the company starts), business or plant equipment, office furniture, vehicles, and starting inventory for stores or manufacturers.

A Simple Starting Costs Example

I’ve used a bicycle store as an example in several posts that are part of this series of standard business plan financials. Here’s a visual in spreadsheet form, of sample starting costs for a hypothetical bicycle store.

Notice that the lists for estimating starting costs, on the left in the illustration above, are matched to another list of starting funding, on the right side of the illustration. Books have to balance, so the initial estimates need to include not just the money you spend, but also where it comes from. In the case above, Garrett had to find $124,500, and you can see that he financed it with Accounts Payable, debt, and investment in various categories.

Another Simple Starting Costs Example

Here is another simple example: the starting costs worksheet that Magda developed for the restaurant I used for a sample sales forecast . Magda’s list includes rent and payroll, the same as in her monthly spending, but here they are included in starting costs because these expenses happen before the launch.

I included rent and payroll because they point out the importance in timing. The difference between these as startup expenses and running expenses is timing, and nothing else. Magda could have chosen to plan startup expenses as a running worksheet on expenses, starting a few months before launch, as in the illustration below. The launch in this case is early January, so the expenses for October through December are startup expenses. I prefer the separate lists, because I like the way the two lists create an estimate of starting costs. But that’s an option.

The LivePlan Alternative

If you’re a LivePlan user, the LivePlan interface assumes this method and has a more intuitive interface than the spreadsheet version I’m showing in this post. For LivePlan, you start your plan when you start spending, regardless of launch date. So the spending you do for rent and salaries and such, before launch, is part of the flow, as above. Also, LivePlan has its own guided way of helping you figure out what assets you need, how much they cost, and how you are going to finance starting costs, to set up your balance. And the LivePlan cash flow estimator will help you decide how much cash you need, so you don’t have to follow the spreadsheet method here (below).

How to Estimate Your Starting Costs

Obviously the goal with starting costs isn’t just to track them, but to estimate them ahead of time so you have a better idea, before you start a new business, of what the financial costs might be. Breaking the items down into a practical list makes the educated guess a lot easier. Ideally, you know the business you want to start, you are already familiar with the industry, so you can do a useful estimate for most of the startup costs from your own experience. If you don’t have enough firsthand knowledge, then you should be talking to people who do. For others, such as insurance, legal costs, or graphic design for logos, call some providers or brokers, and talk to partners; educate those guesses.

Starting Cash is the Hardest and Most Important

How much cash do you need in the bank, as you launch? That’s usually the toughest starting cost question. It’s also prone to misinformation, such as those alleged rules of thumb you can find everywhere, saying you need to have a year’s worth of expenses, or six months’ worth, before you start. It’s not that simple. For most businesses, the startup cash isn’t a matter of what’s ideal, or what some expert says is the rule of thumb – it’s how much money you have, can get, and are willing to risk.

The best way is to do a Projected Cash Flow while leaving the supposed starting cash balance at zero, which shows how much (at least in theory, according to assumptions) the startup really needs in cash to support the business as it grows, before it reaches a monthly cash flow break-even point. Magda did that to determine the $12,000 needed as starting cash for her restaurant. Note how, in the illustration here, the lowest point in cash is slightly less than $12,000:

That low point comes, theoretically, in the third month of the business, March. The low point is $11,609. Obviously that’s just an educated guess, but it’s based on assumptions for sales forecast, expense budget, and important cash flow factors including sales on account and purchasing inventory. So it’s better than a stab in the dark, or some rule of thumb. Just as an example, the total spending with the estimates shown here, the theoretical “year’s worth of spending,” is $182,000 (which you don’t see on the illustration, by the way, but take my word for it). The total for the first six months is $93,000. If Magda sticks to those old formulas, she can’t start the business. She is able to raise enough money, between loans and her savings, to put $12,000 into the starting cash balance. So that’s what she does. Then she launches and continues to have her monthly reviews, and watch the performance of all key indicators very carefully.

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10 Free Business Plan Templates in Word, Excel, & ClickUp

Praburam Srinivasan

Growth Marketing Manager

February 13, 2024

Turning your vision into a clear and coherent business plan can be confusing and tough. 

Hours of brainstorming and facing an intimidating blank page can raise more questions than answers. Are you covering everything? What should go where? How do you keep each section thorough but brief?

If these questions have kept you up at night and slowed your progress, know you’re not alone. That’s why we’ve put together the top 10 business plan templates in Word, Excel, and ClickUp—to provide answers, clarity, and a structured framework to work with. This way, you’re sure to capture all the relevant information without wasting time. 

And the best part? Business planning becomes a little less “ugh!” and a lot more “aha!” 🤩

What is a Business Plan Template?

What makes a good business plan template, 1. clickup business plan template, 2. clickup sales plan template, 3. clickup business development action plan template, 4. clickup business roadmap template, 5. clickup business continuity plan template, 6. clickup lean business plan template, 7. clickup small business action plan template, 8. clickup strategic business roadmap template , 9. microsoft word business plan template by microsoft, 10. excel business plan template by vertex42.

A business plan template is a structured framework for entrepreneurs and business executives who want to create business plans. It comes with pre-arranged sections and headings that cover key elements like the executive summary , business overview, target customers, unique value proposition, marketing plans, and financial statements.  

A good business plan template helps with thorough planning, clear documentation, and practical implementation. Here’s what to look for:

• Comprehensive structure: A good template comes with all the relevant sections to outline a business strategy, such as executive summary, market research and analysis, and financial projections 
• Clarity and guidance: A good template is easy to follow. It has brief instructions or prompts for each section, guiding you to think deeply about your business and ensuring you don’t skip important details
• Clean design: Aesthetics matter. Choose a template that’s not just functional but also professionally designed. This ensures your plan is presentable to stakeholders, partners, and potential investors
• Flexibility : Your template should easily accommodate changes without hassle, like adding or removing sections, changing content and style, and rearranging parts 🛠️ 

While a template provides the structure, it’s the information you feed it that brings it to life. These pointers will help you pick a template that aligns with your business needs and clearly showcases your vision.

10 Business Plan Templates to Use in 2024

Preparing for business success in 2024 (and beyond) requires a comprehensive and organized business plan. We’ve handpicked the best templates to help you guide your team, attract investors, and secure funding. Let’s check them out.

If you’re looking to replace a traditional business plan document, then ClickUp’s Business Plan Template is for you!

This one-page business plan template, designed in ClickUp Docs , is neatly broken down into the following sections:

• Company description : Overview, mission, vision, and team
• Market analysis : Problem, solution, target market, competition, and competitive advantage
• Sales and marketing strategy : Products/services and marketing channels
• Operational plan : Location and facilities, equipment and tools, manpower, and financial forecasts
• Milestones and metrics: Targets and KPIs

Customize the template with your company logo and contact details, and easily navigate to different sections using the collapsible table of contents. The mini prompts under each section guide you on what to include—with suggestions on how to present the data (e.g., bullet lists, pictures, charts, and tables). 

You can share the document with anyone via URL and collaborate in real time. And when the business plan is ready, you have the option to print it or export it to PDF, HTML, or Markdown.

But that’s not all. This template is equipped with basic and enterprise project management features to streamline the business plan creation process . The Topics List view has a list of all the different sections and subsections of the template and allows you to assign it to a team member, set a due date, and attach relevant documents and references.

Switch from List to Board view to track and update task statuses according to the following: To Do, In Progress, Needs Revision, and Complete. 

This template is a comprehensive toolkit for documenting the different sections of your business plan and streamlining the creation process to ensure it’s completed on time. 🗓️

If you’re looking for a tool to kickstart or update your sales plan, ClickUp’s Sales Plan Template has got you covered. This sales plan template features a project summary list with tasks to help you craft a comprehensive and effective sales strategy. Some of these tasks include:

• Determine sales objectives and goals
• Draft positioning statement
• Perform competitive analysis
• Draft ideal customer persona
• Create a lead generation strategy

Assign each task to a specific individual or team, set priority levels , and add due dates. Specify what section of the sales plan each task belongs to (e.g., executive summary, revenue goals, team structure, etc.), deliverable type (such as document, task, or meeting), and approval state (like pending, needs revisions, and approved).

And in ClickUp style, you can switch to multiple views: List for a list of all tasks, Board for visual task management, Timeline for an overview of task durations, and Gantt to get a view of task dependencies. 

This simple business plan template is perfect for any type of business looking to create a winning sales strategy while clarifying team roles and keeping tasks organized. ✨

Thinking about scaling your business’s reach and operations but unsure where or how to start? It can be overwhelming, no doubt—you need a clear vision, measurable goals, and an actionable plan that every member of your team can rally behind. 

Thankfully, ClickUp’s Business Development Action Plan Template is designed to use automations to simplify this process so every step toward your business growth is clear, trackable, and actionable.

Start by assessing your current situation and deciding on your main growth goal. Are you aiming to increase revenue, tap into new markets, or introduce new products or services? With ClickUp Whiteboards or Docs, brainstorm and collaborate with your team on this decision.

Set and track your short- and long-term growth goals with ClickUp’s Goals , break them down into smaller targets, and assign these targets to team members, complete with due dates. Add these targets to a new ClickUp Dashboard to track real-time progress and celebrate small wins. 🎉

Whether you’re a startup or small business owner looking to hit your next major milestone or an established business exploring new avenues, this template keeps your team aligned, engaged, and informed every step of the way.

ClickUp’s Business Roadmap Template is your go-to for mapping out major strategies and initiatives in areas like revenue growth, brand awareness, community engagement, and customer satisfaction. 

Use the List view to populate tasks under each initiative. With Custom Fields, you can capture which business category (e.g., Product, Operations, Sales & Marketing, etc.) tasks fall under and which quarter they’re slated for. You can also link to relevant documents and resources and evaluate tasks by effort and impact to ensure the most critical tasks get the attention they deserve. 👀

Depending on your focus, this template provides different views to show just what you need. For example, the All Initiatives per Quarter view lets you focus on what’s ahead by seeing tasks that need completion within a specific quarter. This ensures timely execution and helps in aligning resources effectively for the short term.

This template is ideal for business executives and management teams who need to coordinate multiple short- and long-term initiatives and business strategies.

In business, unexpected threats to operations can arise at any moment. Whether it’s economic turbulence, a global health crisis, or supply chain interruptions, every company needs to be ready. ClickUp’s Business Continuity Plan Template lets you prepare proactively for these unforeseen challenges.

The template organizes tasks into three main categories:

• Priorities: Tasks that need immediate attention
• Continuity coverage: Tasks that must continue despite challenges
• Guiding principles: Resources and protocols to ensure smooth operations

The Board view makes it easy to visualize all the tasks under each of these categories. And the Priorities List sorts tasks by those that are overdue, the upcoming ones, and then the ones due later.

In times of uncertainty, being prepared is your best strategy. This template helps your business not just survive but thrive in challenging situations, keeping your customers, employees, and investors satisfied. 🤝

Looking to execute your business plan the “lean” way? Use ClickUp’s Lean Business Plan Template . It’s designed to help you optimize resource usage and cut unnecessary steps—giving you better results with less effort.

In the Plan Summary List view, list all the tasks that need to get done. Add specific details like who’s doing each task, when it’s due, and which part of the Business Model Canvas (BMC) it falls under. The By Priority view sorts this list based on priorities like Urgent, High, Normal, and Low. This makes it easy to spot the most important tasks and tackle them first.

Additionally, the Board view gives you an overview of task progression from start to finish. And the BMC view rearranges these tasks based on the various BMC components. 

Each task can further be broken down into subtasks and multiple checklists to ensure all related action items are executed. ✔️

This template is an invaluable resource for startups and large enterprises looking to maximize process efficiencies and results in a streamlined and cost-effective way.

The Small Business Action Plan Template by ClickUp is tailor-made for small businesses looking to transform their business ideas and goals into actionable steps and, eventually, into reality. 

It provides a simple and organized framework for creating, assigning, prioritizing, and tracking tasks. And in effect, it ensures that goals are not just set but achieved. Through the native dashboard and goal-setting features, you can monitor task progress and how they move you closer to achieving your goals.

Thanks to ClickUp’s robust communication features like chat, comments, and @mentions, it’s easy to get every team member on the same page and quickly address questions or concerns.

Use this action plan template to hit your business goals by streamlining your internal processes and aligning team efforts.

For larger businesses and scaling enterprises, getting different departments to work together toward a big goal can be challenging. The ClickUp Strategic Business Roadmap Template makes it easier by giving you a clear plan to follow.

This template is packaged in a folder and split into different lists for each department in your business, like Sales, Product, Marketing, and Enablement. This way, every team can focus on their tasks while collectively contributing to the bigger goal.

There are multiple viewing options available for team members. These include:

• Progress Board: Visualize tasks that are on track, those at risk, and those behind
• Gantt view: Get an overview of project timelines and dependencies
• Team view: See what each team member is working on so you can balance workloads for maximum productivity

While this template may feel overwhelming at first, the getting started guide offers a step-by-step breakdown to help you navigate it with ease. And like all ClickUp templates, you can easily customize it to suit your business needs and preferences.

Microsoft’s 20-page traditional business plan template simplifies the process of drafting comprehensive business plans. It’s made up of different sections, including:

• Executive summary : Highlights, objectives, mission statement, and keys to success
• Description of business: Company ownership and legal structure, hours of operation, products and services, suppliers, financial plans, etc.
• Marketing: Market analysis, market segmentation, competition, and pricing
• Appendix: Start-up expenses, cash flow statements, income statements, sales forecast, milestones, break-even analysis, etc.

The table of contents makes it easy to move to different sections of the document. And the text placeholders under each section provide clarity on the specific details required—making the process easier for users who may not be familiar with certain business terminology.

No business template roundup is complete without an Excel template. This business plan template lets you work on your business financials in Excel. It comes with customizable tables, formulas, and charts to help you look at the following areas:

• Highlight charts
• Market analysis
• Start-up assets and expenses
• Sales forecasts
• Profit and loss
• Balance sheet
• Cash flow projections
• Break-even analysis

This Excel template is especially useful when you want to create a clear and visual financial section for your business plan document—an essential element for attracting investors and lenders. However, there might be a steep learning curve to using this template if you’re not familiar with business financial planning and using Excel.

Try a Free Business Plan Template in ClickUp

Launching and running a successful business requires a well-thought-out and carefully crafted business plan. However, the business planning process doesn’t have to be complicated, boring, or take up too much time. Use any of the above 10 free business plan formats to simplify and speed up the process.

ClickUp templates go beyond offering a solid foundation to build your business plans. They come with extensive project management features to turn your vision into reality. And that’s not all— ClickUp’s template library offers over 1,000 additional templates to help manage various aspects of your business, from decision-making to product development to resource management .

Sign up for ClickUp’s Free Forever Plan today to fast-track your business’s growth! 🏆

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7 Tax Mistakes That Can Cost Small Business Owners Thousands

T ax season is a good time for small business owners to reflect upon their past year's business performance, and plan ahead for next year. As part of your tax planning, it's important to watch out for a few big tax mistakes. Small business owners work too hard to lose money to unnecessary taxes or bookkeeping mistakes. These tax mistakes could be separating you from too many of your hard-earned dollars -- and undermining your long-term financial wellness -- in your business and personal finances.

Let's look at a few big tax mistakes that any freelancer, solopreneur, or small business owner should aim to avoid.

Read more: we researched free tax software and put together a list of the best options here

1. Not separating your business and personal finances

Even if you're in the early days of starting a business, even if it's just a side hustle, try to separate your business income and expenses from your personal finances. Don't pay vendors from a personal checking account. Don't use business bank accounts for personal expenses.

If you do not have a clear, separate financial identity for your business and personal finances, you're making life harder for yourself. If your business and personal funds are intermingled, this makes it harder to keep track of your legitimate tax-deductible business expenses. You might forget to deduct hundreds of dollars that could've saved you money on taxes. Or worse -- you could try to deduct something that shouldn't be deducted, and end up making yourself vulnerable to an IRS audit.

2. Not tracking your business expenses

Too many small business owners get so excited about running the business that they get sloppy about bookkeeping. And there's no excuse for this anymore! There's so much great small business accounting software available now. It's easier than ever before to keep track of your deductible business expenses all year round, month after month.

And good business bookkeeping is not just about taxes or tracking expenses: it's a way to keep an eye on your business's performance. Where's your revenue coming from? Did you have a good week, month, or quarter? Who are your biggest clients, where are your biggest risks, strengths, weaknesses, and opportunities? Good bookkeeping helps you monitor the pulse of your business -- not just at tax time.

3. Not forming an LLC (or other business entity)

If you're serious about being a small business owner, and not just a hobbyist or side hustler, you should form a Limited Liability Company (LLC) or other legal business entity for your business. Make your business "official" and real in the eyes of the law by forming an LLC.

Setting up an LLC also helps you get an employer ID number (EIN) tax ID for tax purposes. It lets you open a business bank account and start to build business credit under the name of your company. Forming an LLC can also give you some other useful tax benefits -- because it gives you flexibility for how to handle your business income for tax purposes.

4. Not filing taxes as an S Corporation

If you have an LLC, and you have enough business income to be worth using this strategy, you should consider filing taxes as an S Corporation. This is a tax strategy that small business owners can use to get more advantageous tax treatment for their business income.

Instead of paying self-employment taxes on your full amount of business income like a sole proprietor or LLC would do, forming an LLC and then electing to file taxes as an S Corporation lets you pay yourself a salary, and then pay yourself a "distribution" of other business income -- but you don't have to pay self-employment taxes on that distribution amount. Like an LLC, an S Corp is a pass-through entity -- so the income also gets the federal 20% qualifying business income deduction .

Talk to an accountant for advice. Filing taxes as an S Corp might not be the right choice for every business owner or type of business.

5. Not hiring professional tax help

Speaking of accountants: you do have professional tax help, right? You're not trying to run a business and file your own taxes , are you?

Small business taxes are generally way too complicated to navigate yourself. Spend the money and get some help. It's a huge weight off your shoulders. Even if you love bookkeeping and taxes, it's beneficial to get professional tax help so you have an extra set of eyes on your tax return -- and someone you can go to for personalized advice.

6. Not getting a health savings account

If you have a high-deductible health plan (HDHP) that is eligible for a health savings account (HSA), you really should use it. Health savings accounts are versatile, powerful tax-advantaged accounts. It's like a traditional IRA, but for healthcare. For 2024, you can deduct up to $4,150 of HSA contributions (if you have single coverage) or $8,300 for family coverage. Don't make the mistake of missing out on this extra tax break -- and there are no income limits.

7. Not using a small business retirement plan

Small business owners also get an extra tax break from the IRS when saving for retirement. There are several types of tax-advantaged small business retirement plans that your company can use, depending on whether you have employees and other aspects of your business finances. Some of these plans, like a SEP IRA, can let you save more money for retirement than you could save as an employee with a 401(k).

Bottom line

Small business owners work too hard to lose money to tax mistakes. Use tax software , bookkeeping software, professional tax help, tax-advantaged accounts, and other tools to help you maximize your tax savings and build a stronger foundation for your business.

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IT Services

How to build a scalable IT budget

How much business could your business do without IT?

These days, “none” is far and away the most common answer.

Yet many organizations struggle with how to approach spending and budgeting related to IT. Information technology may be the backbone of a business, but it usually isn’t front and center in strategic discussions and high-level decision-making. And whatever spending is happening, the budgeting process underneath it often doesn’t scale well.

We know that IT budgets are growing: 57% of CIOs expected their IT budgets to increase last year. An effective IT budget is about more than just spending more money. It’s about spending that money wisely — and determining how much money should be spent on IT in the first place.

How often should an IT budget be evaluated?  

Many organizations with established IT budgeting procedures evaluate that budget yearly. 

Why yearly? Because the process can be lengthy, involving numerous stakeholders and significant amounts of documentation. And the larger your organization, the more complex this business process gets. It’s not uncommon for the evaluation process to take months, so it’s impractical to shorten the budget lifecycle.

For IT services firms supporting clients in the IT budget evaluation and creation process, a yearly cycle can prevent overburdening your team and allow you to stagger clients throughout the calendar year.

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Who should be involved in the process?   

Keeping the right stakeholders involved in the IT budgeting process helps ensure that the budget is holistic (covering everything necessary), realistic (within the company’s overall financial means), and well-managed (administered and allocated responsibly).

The personnel involved should include any of the following, where they exist:

Chief information officer (CIO)

Chief financial officer (CFO)

IT managers, IT directors, IT department heads

IT project managers and project leads

Representatives from major divisions/departments

If the organization has a project management office (PMO), that group should also play a role.

It’s worth noting that entities outside the CIO and IT domains play an increasing role in IT budgeting as the process gets democratized across lines of business. Teodora Siman, an IDC research manager , elaborates:

“We’re seeing more influence come from outside of IT, where the CIO orchestrates technology across the business, and [technology decisions] are a collaborative conversation with business leaders who are focused on outcomes and customer-centricity.”

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• Key items to include in an IT budget

Organizations differ in where certain expenses fall in the budget, but most IT budgets should include at least these five areas:

Physical employee equipment: IT money is used to purchase laptops, desktops, printers, phones, networking equipment, servers, and other hardware.

Staff salaries: Employees within the IT department or division are typically paid out of the IT budget

Cybersecurity, backup, and disaster recovery (DR): Preventive expenditures here help to hedge against disasters, natural or otherwise.

Infrastructure and maintenance: Money is allocated to repair and upgrade devices and infrastructure and to pay for ongoing IT infrastructure operational costs (internet access, cloud services, software licenses, etc.).

IT project management: IT project management costs that are not accounted for in your overall project management budget should appear here.

How to plan a budget that serves the future of the organization  

Planning an IT budget can be relatively simple for a startup or small professional services firm, a massive months-long process at an enterprise level, or anywhere in between.

Whatever the size and scope of your IT budget planning, we’ve boiled the process down to six key elements. Below, we’ll provide clear, concise planning tips to help you create an IT budget to propel your organization forward.

Assess the current landscape (internal and external)

One key strategy for planning is considering the context around your IT budget. Is business booming? Is your industry more broadly in flux? Are you growing (and if so, how quickly)? Or is this a year where it’s clear the purse strings need to tighten?

And what about the technology landscape? We aren’t necessarily seeing quantum leaps in computing power at the individual user or device level. But consider the capabilities of AI and machine learning to churn through data or for generative AI to enhance workflows and extend human capacity.

Any successful IT budget needs to be grounded in these realities. They inform how much is likely to be available and what sorts of changes that budget needs to accommodate.

Integrate business objectives and cross-department goals

Next, remember that your IT budget isn’t an island or a destination. It’s a way to achieve goals and objectives. So make sure your budget doesn’t live in a silo. Instead, it should be built atop existing business objectives and priorities. 

Including business objectives and cross-departmental goals in budget planning ensures that your IT division is growing with, not against, the broader organization. By building your IT budget around the business’s core objectives, you can avoid unnecessary spending on IT projects that don’t further the mission.

This improves the organization’s financial health, affects employee morale and effectiveness, and can even advance market competitiveness. 

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Set clear guidelines for expense categories

One principle is consistent for any kind of budgeting: the more clarity, the better.

It’d be preposterous to lump your entire IT budget into a single line item: you need to know where the money’s going more specifically than that. But true clarity requires more than a few vague expense categories. You’ll need to get as specific as possible and set clear guidelines with team members on what expenses go where.

With clearer and more numerous expense categories, it will be easier to understand IT spend after the fact, helping you create progressively more accurate IT budgets year after year.

Consider flexible purchase options

IT costs can be inconsistent and spiky: it’s easy enough to plan for an upgrade cycle on PCs for your workforce, but the cost of replacing a server is a different beast. Big technology investments are sometimes needed, and the larger your organization scales, the more unwieldy these IT expenditures can become.

So, as you plan your IT budget, consider flexible purchasing options for your IT investments, including fair market value leases, consumption-based billing, and installment payment agreements.

This is one reason so many organizations are turning to the cloud: procuring your computing and software needs from a cloud provider tends to flatten out these spikes. Managed IT service providers can provide a similar cost-leveling function, and in the right situations, this business model can deliver notable cost savings alongside better IT support and the broad expertise needed to meet diverse IT needs.

Use KPIs to monitor effectiveness

Next, make sure to track the effectiveness of your IT budget processes by tracking the right metrics. Key performance indicators (KPIs) can help here, but the trick is finding the KPIs that deliver the right information in the right way.

For example, IT project team efficiency , on-time project completion percentage, average hardware age, software utilization rate, and a few dozen other measures could all be helpful — but not all are helpful all the time. 

Which KPIs are right for monitoring budget effectiveness depends on what your business is trying to achieve. Cost savings, increased efficiency, greater accuracy, and better customer responsiveness are all fantastic priorities, but they may compete against one another in some ways. 

So first, you must establish which priorities take precedence. Only then can you select the KPIs to help you measure progress on those priorities. 

Educate stakeholders about IT spending

Last, make sure you continually educate stakeholders in the IT budget about how spending works in IT. You’ll be working with people across a spectrum of specialties and skill sets, and not everyone will be a financial or IT expert. 

It’s up to you to invest in these stakeholders. By teaching them about the mechanisms for IT spending (such as those flexible purchase options), your budgetary goals, and the tools you’ll use to measure success, you’ll garner better support and get more useful feedback.

Manage your IT projects and budgets effectively with Teamwork.com 

For a successful overall IT strategy, businesses and IT leaders must prioritize the IT initiatives that best fit a company’s business goals and strategic needs — while staying within appropriate levels of IT spending.

Because while digital transformation is key to continued growth, it’s neither easy nor inexpensive.

For most professional services firms, managing IT projects and budgets well requires understanding and adhering to the business’s strategic plan and creating a technology roadmap that supports the overall business strategy. It also demands the ability to plan, visualize, strategize, organize, and ultimately execute projects well.

Teamwork.com is project management software that’s perfect for IT project management — including IT budgeting projects.

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TABLE OF CONTENTS

• How often should an IT budget be evaluated?
• Who should be involved in the process?
• How to plan a budget that serves the future of the organization

Ben is a Senior Content Marketing Specialist at Teamwork.com. Having held content roles at agencies and SaaS companies for the past 8 years, Ben loves writing about the latest tech trends and work hacks in the agency space.

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Redfin expands redfin next agent pay plan to 25 additional markets.

Redfin Next offers agents the best of both worlds: big commission splits with zero expenses and free Redfin.com customer introductions, benefits and support

SEATTLE, May 17, 2024 --( BUSINESS WIRE )--(NASDAQ: RDFN) — Redfin announced today it is expanding the Redfin Next agent compensation plan to 25 additional markets. Under Redfin Next, agents in these markets earn competitive splits as high as 70%, have virtually all business expenses covered, and get technology, support, benefits and customer introductions from Redfin.com, the #1 brokerage site in the United States.

"Redfin Next has proven to be even better than we imagined at igniting our salesforce, helping us recruit new talent," said Jason Aleem, Redfin’s chief of real estate services. "When you pair a competitive traditional split with the technology, customer introductions, benefits and support that only we offer, there’s really no limit to what you can achieve at Redfin. We give agents everything they need to amplify their business and focus on serving their customers well. Redfin Next is also helping us gain market share faster in our early markets, which means we’re helping more customers get a better deal when they’re buying or selling. This expansion is a big step toward making this opportunity available to all Redfin agents as we continue to transform our brokerage and grow our presence nationwide."

Redfin initially announced the plan in San Francisco and Los Angeles in October 2023 and has since expanded it to San Diego, Orange County, Chicago, Connecticut, Dallas, Miami, New York, Palm Beach, and Washington, D.C. Since launch, the brokerage has recruited more than 140 top producing agents in Redfin Next markets. Because of this recruiting success and the positive reception among Redfin’s existing agents, the company is now expanding the plan to the following markets:

Coastal North Carolina

Grand Rapids

Indianapolis

Inland Empire, CA

Kansas City

Minneapolis

Palm Springs

Salt Lake City

San Antonio

The Redfin Next plan includes :

Big splits. Zero expenses: At Redfin, what you earn is what you keep because we cover all your necessary business expenses and cover benefits, mileage, payroll taxes and listing expenses.

Meet over 100 customers a year: By plugging into the Redfin platform and the 49 million people who use Redfin’s app and website every month, agents can grow their business rapidly.

Business in a box: Redfin's technology and staff handle qualifying new customers, scheduling tours, conducting follow-up tours, and coordinating sales & listings. Agents focus on closing deals for customers.

Top-tier benefits: Redfin’s benefits package includes medical, dental, and vision insurance; fertility benefits; 401(k) employer match and employee stock purchase program.

Define the future of real estate: Redfin puts the customer first, makes the industry more fair and transparent, and uses technology to modernize the real estate experience and make it better.

Agents in the Redfin Next plan will continue to work as employees, not independent contractors. Redfin’s unique employee agent model was built to put the customer first by ensuring agents are held to a high standard and have the support they need to deliver consistently great service. Redfin uses technology to make real estate more efficient, which is one reason Redfin has the most productive agents in the industry, closing more than twice as many transactions as the average agent every year.

Michael Odeh , a Redfin Premier agent in Chicago who has been on the Redfin Next plan since early May, said the new compensation plan is a welcome change. "Ever since I started at Redfin in 2019, I’ve thought that whoever could combine the financial rewards of a traditional brokerage with the efficiency of Redfin’s model would be the future of real estate," he said. "That’s what Redfin Next is. It gives agents the comfort and security of a traditional career by providing virtually unlimited earnings opportunities, while taking everything else off their plate so they can focus on what really matters: the client. I am so excited about the future and what Redfin Next will bring."

The 25 expansion markets will move to the Redfin Next pay plan on August 11. Redfin is actively recruiting experienced agents to join the company in markets around the country. Visit our site to start a conversation about how to grow your business and career at Redfin.

About Redfin

Redfin ( www.redfin.com ) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We run the country's #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix it up to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1.6 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

Redfin’s subsidiaries and affiliated brands include: Bay Equity Home Loans®, Rent.™, Apartment Guide®, Title Forward® and WalkScore®.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com . To learn about housing market trends and download data, visit the Redfin Data Center . To be added to Redfin's press release distribution list, email [email protected] . To view Redfin's press center, click here .

View source version on businesswire.com: https://www.businesswire.com/news/home/20240517491572/en/

Redfin Journalist Services: Erin Osgood [email protected] 206-371-1626

A 62-year-old boomer without a college degree can't land a higher-paying job — and she doesn't see herself ever being able to fully retire

• Crystal, 62, has struggled to earn more money while lacking a college degree.
• She anticipates having to work part-time in retirement to supplement Social Security.
• She didn't always expect to be relying on her sole income, and her savings are minimal.

Crystal doesn't see herself enjoying her "golden years" anytime soon.

At 62 years old, Crystal — who requested her last name be withheld for privacy — envisions an ideal world where she could soon set her sights on a comfortable retirement and begin collecting Social Security with enough extra money in the bank to cover all of her expenses.

But that's not the situation she's found herself in. She's worked as an administrative assistant for nearly two decades and said she's barely making more now than she did when she started the job. Her lack of a college degree and the challenges older adults face in the labor market have made it difficult for her to find work elsewhere.

With inflation driving prices up for her basic goods, along with her health expenses and mortgage payments, she sees work — whether full or part-time — in her future.

"I've had the 401(k), but I put pretty much the minimum in it because I need my paycheck to survive," Crystal told Business Insider. "It's a one-income house here, so it's up to me, and there's no extra, really, to save for retirement. And I was always counting on Social Security, knowing I can't live on it only, but I just thought it would be more than what it's going to be."

Crystal has just over $70,000 in savings, according to documents verified by BI, and she anticipates getting around $1,200 a month in Social Security. That would barely be enough to cover her health insurance, she said — and while her mortgage payments on her townhouse are low, she has a ways to go before she will own the house free and clear.

Additionally, she didn't always know she would be relying on just her sole income to get by. Before she got divorced 19 years ago, Crystal said her then-husband was making good wages at his job, and while she was still working during that time, her earnings were "secondary income," used for day-to-day expenses like groceries.

Crystal's concerns are shared widely across her age group. A recent survey from AARP found that, among Americans aged 50 and above, one in five of them reported having no retirement savings — and over half of them don't think they'll have enough money to sustain them in retirement. Separately, a report from the Alliance for Lifetime Income's Retirement Income Institute found that over half of a cohort called "peak boomers," or those born between 1959 and 1964, have $250,000 or less in assets.

It means that a lot of them will primarily rely on Social Security — and the program is projected to no longer be able to pay out full benefits by 2035 unless Congress intervenes.

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Crystal said that with all of her daily expenses, her finances are strained, and she doesn't think she'll ever be able to fully retire.

"We're all struggling with food and utilities. Bills are like $65 a month for water, about $80 to $100 for electricity and things like that," she said. "So I'm one of these people that walk around the supermarket with the calculator on my phone and keep track of each thing as I put it in the cart. It's a tight budget."

'It's scary out there'

It's not for a lack of trying. Crystal said that she's done just about all she could to earn more income — she sent out her résumé and filled out dozens of online applications and almost never heard back.

"With my age, I was just not attractive on paper, and not having a college degree was always a factor, too," Crystal said. "I could send out 200 applications and résumés and maybe get two calls and then not even be invited in for an interview."

According to a Wall Street Journal analysis of US Census Bureau data from 2022, 67.2% of adults 55 and older do not have a bachelor's degree. While some jobs, like Walmart, have removed degree requirements from their job postings, the physical demands of that type of work are often unsustainable for older adults.

"I go to the grocery store and I see several of the cashiers here are seniors, quite a bit older than me, and they look so uncomfortable," Crystal said. "I know they're struggling to stand on this concrete floor and bag groceries all day. You can tell they're not happy, but they need that extra money."

Other "peak boomers" have echoed Crystal's concerns. Diane Senffner, a 63-year-old, previously told BI that her age has made it especially challenging to find full-time work after losing her job during the pandemic, and her physical constraints limit what she can do.

"I just say to my friends as a cautionary tale, if you are my age and you have a job, you better stay with it, because nobody is hiring you," Senffner said.

With uncertainty surrounding the future of Social Security — and confusion regarding how much workers actually need to be saved up for retirement — Crystal said that all she can do is hope she'll have enough money to keep her afloat as she gets older.

"It's scary out there," she said. "I want to retire, but I feel like I'm never going to be able to."

Are you concerned about retirement, or have you found a way to prepare? Share your story with this reporter at [email protected].

Watch: Nearly 50,000 tech workers have been laid off — but there's a hack to avoid layoffs

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