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How to improve your business spending plan

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Presented by

Irais Urias

Content Marketing Manager

The most common reason businesses fail is running out of cash, according to U.S. Bank. Without sufficient liquidity, you can’t pay bills and employees, and activity grinds to a halt. In practice, running a business requires keeping a close eye on revenues and costs, balancing the two to maintain a stable and consistent cash flow. This starts with your business spending plan.

Done correctly, a business spending plan gives you visibility over your available cash, upcoming obligations, and potential financial risks. The best business budgeting methods are those that understand a business’s unique market position, customers, and opportunities to leverage available cash to its fullest extent. However, these methods require proper planning, data, and processes. 

Here we look at how to prepare a budget for a company that can deliver the results you need in any given circumstance. 

What is a business spending plan? 

A business spending plan is a financial breakdown, usually based on historical income, expenses, and known changes, that enables a company to accurately manage and project spending. The best business spending is detailed, specific, and timely – most businesses will project their spending for a certain period, such as a year, with additional levels of planning and revision periodically – usually by quarter. Your business spending plan should always be based on the most accurate data available, drawing insights from your sales performance, team spending, and growth targets. 

Why is a business spending plan important? 

Businesses need to spend to survive and grow – but as the old expression goes, cash is king. Without it, businesses are limited in how they can achieve their goals. Keeping control of your cash and ensuring you have sufficient working capital starts with estimating and matching what you spend (expenses) to what you make (revenue). 

By balancing the two, business owners can deliver better spend management, ensuring they have enough cash to enable their operations, power potential expansion, and generate income for themselves and their teams. Without sufficient planning and visibility, though, spending can either surpass available capital — leaving a company in debt  — or fall short of the levels required to achieve growth targets. 

Steps to create a business budget 

Creating an effective business budget requires combining a range of data points, including internal metrics and market context. This is often the most time-consuming aspect of building a spending plan but can be greatly accelerated by using digital tools, such as an online spend management platform, to automate data collection and analysis.

By managing the two, you can gauge your available working capital and allocate resources effectively between priorities in line with market conditions and business goals.  

1. Look at your numbers  

When deciding how to prepare a budget for your company, start by reviewing your historical spending in each of your spending categories. This retrospection is not just an essential aspect of understanding your past financial situation but also serves as the foundation for your future business spending plan.

Data points should include:

1. Historical revenue

Assess your past revenue sources. This could be driven by the number of users, the number of contracts you've signed, the type of clients you have, and other factors.

2. Historical expenses

Review your past expenditures. Some expenses could be driven by the number of employees, and the number of items you sell, while others may be fixed and not vary over time, such as rent for office space.

Once you have a comprehensive understanding of what drives your revenues and expenses, you can model them based on how you expect your business to evolve in the upcoming year. This includes potential changes in the market, such as customer demand fluctuations or alterations in raw material prices, as well as any internal business decisions. For instance, you may decide to invest in a new machine, expand your team, or embark on a different strategic direction.

Remember that your historical data is not a perfect predictor of future performance, but it does provide a valuable benchmark. It can help you identify trends, spot opportunities for cost savings, and ensure your future spending plan is grounded in the reality of your business's past performance. Ultimately, a detailed analysis of your numbers gives you a clear roadmap to manage and project spending effectively.

2. List sources of income/estimated revenue 

This includes all your available options for generating revenue from goods or services – your top-line revenue opportunities and, ultimately, the first line on your business spending plan. 

If you have an established business, you can base this on the last year’s numbers or the same quarter the previous year, revised for any changes in market conditions. If you’re just getting started, however, base this on industry averages matched to your services or product and level of scale.

3. List fixed costs 

Fixed costs are the regular expenses that don’t change according to your revenue and stay consistent month over month and year over year. Since these remain the same and are often hard to reduce, they should be the baseline for the costs you need to cover on a periodic basis. This includes outgoings such as building fees, insurance costs, ground rent, fixed taxes, licensing, and retainer services such as accounting or legal. You should consider current as well as expected new fixed expenses. 

4. List variable expenses 

Slightly more challenging to predict are variable expenses – those that vary with your activity, such as production costs, marketing campaigns, or logistics. While these can change, that’s not the same as being random – there should be a clear logic to how your costs rise and fall, ideally focused on activity that will bring a corresponding increase in revenue. Key areas to consider include raw materials, storage and inventory, shipping costs, and variable taxes. Salaries can also be a variable expense in the event of adding extra team members temporarily or bringing in advisors. You should consider current as well as expected new variable expenses.

5. List predicted one-time spends 

Alongside predictable, regular spending, every business experiences one-off costs, including new equipment purchases, building work, research and development projects, and consulting engagements. 

6. Add it all into an income statement 

Once you have determined all the potential costs your business might face, you can add them into a single statement that shows your spending for the year, ready to compare with your projected income and growth plan.

7. Review your budget often 

A vital attribute of a good business spending plan is that it should evolve with your business – market conditions change, sales rise and fall, and unexpected costs crop up. Keeping control of your cash position requires you to regularly review your assets and income, ensuring you have enough cash to keep moving forward.

Types of business spending plans

Different parts of your business require cost visibility and control, meaning you will often need multiple spending plans by department, function, or use case. Choosing the right system for each goal will give you more granular detail about crucial areas while generating more specific insight to feed into your overall visibility.

Master budget

Sitting above all your spending plans is a master budget that combines data from lower-level budgets generated by other functional areas in an organization. It’s primarily used by management teams to make decisions at a high level for the business, providing holistic visibility about major trends and results. Once you finalize a master budget, you can review it and break it down into more specific allocations according to plans. 

Cash budget

Cash budgets primarily focus on managing liquidity over a set period of time. This budget uses revenue predictions and cost projections to estimate the amount of working capital available in the business, driving day-to-day decision making around operations and investment. 

Operating budget

An operating budget is a high-level summary report covering fixed costs, variable costs, capital costs, and non-operating expenses to ensure that spending remains in line with existing plans. Since its goal is to ensure operational continuity, this document must be updated throughout the year, either monthly or quarterly.

Labor budget

For businesses with significant human capital requirements, whether for service provision or production, a labor budget helps you project future payroll needs and ensure that your team contributes to revenue generation goals.

Financial budget

While all budgets are, to an extent, financial, a financial budget tracks spending and revenue to plan saving, spending, and borrowing – the key financial decisions that underpin business operations.

Static budget

More common with non-commercial enterprises such as charities, foundations, and public bodies, a static budget works on fixed allocations of resources to meet specific goals independent of revenue generation. 

Capital budget

A capital budget focuses on fixed asset purchases or project investments – major uses of capital – to determine which options can deliver the best return for the business in the short and long-term by expanding capabilities, efficiency, or customer value.

Sales budget

A sales budget estimates a company's projected revenue within a specific timeframe. It's primarily based on two elements - the expected quantity of products or services sold and the price at which they're sold. It provides a snapshot of potential revenue, allows companies to plan resource allocation effectively, and serves as a benchmark for performance evaluation. This budget is crucial in operational planning and, ultimately, in predicting how the company will perform financially.

Production budget

A production budget is a tool for businesses involved in manufacturing or production, providing an estimate of the total production costs for a given period. It considers the number of items to be produced and factors like raw material costs, labor expenses, overhead, and other production-related expenditures. 

Overhead budget

An overhead budget estimates the ongoing operational expenses necessary to run the business. It can include costs such as salaries of non-production staff, office rent, utilities, and administrative expenses. This budget helps companies to account for these necessary but often overlooked costs, ensuring a more comprehensive understanding of total business expenses and helping to maintain profitability.

Extend business budgeting tools

Smart budgeting can make the difference between a business that soars and one that fails. The challenge is that many business owners lack the tools to effectively track, manage and analyze their spend across the company. 

With businesses facing a rapidly changing commercial environment spurred on by new technology, changing working habits, and new competition, digital spend management is now a must-have for leaders to manage company spending. Digital tools make it easier for teams to track spending in real-time, taking the guesswork out of building a business spending plan and giving you concrete, reliable data to tackle the future. 

Extend’s spend management platform gives business owners and finance teams the visibility, control, and tools to build better business spending plans, implement them across organizations, and confidently track the results.  

Through the platform, you can: 

  • Manage employee spending at scale using virtual cards for each team member.
  • Set budgets by department, function, or employees for full peace of mind.
  • Keep cash on hand longer and preserve valuable working capital while maximizing interest on idle cash.
  • Generate detailed spend reports across your business to compare budgets with actual performance, find where investment matters most, and avoid wasteful budget surpluses.

In a fast-moving market, businesses need spending plans that can evolve with their needs. To learn more about how Extend can improve your business spending plan, contact one of our payment experts today.  

Presented by

Irais Urias

Content Marketing Manager
Blog

How to improve your business spending plan

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The most common reason businesses fail is running out of cash, according to U.S. Bank. Without sufficient liquidity, you can’t pay bills and employees, and activity grinds to a halt. In practice, running a business requires keeping a close eye on revenues and costs, balancing the two to maintain a stable and consistent cash flow. This starts with your business spending plan.

Done correctly, a business spending plan gives you visibility over your available cash, upcoming obligations, and potential financial risks. The best business budgeting methods are those that understand a business’s unique market position, customers, and opportunities to leverage available cash to its fullest extent. However, these methods require proper planning, data, and processes. 

Here we look at how to prepare a budget for a company that can deliver the results you need in any given circumstance. 

What is a business spending plan? 

A business spending plan is a financial breakdown, usually based on historical income, expenses, and known changes, that enables a company to accurately manage and project spending. The best business spending is detailed, specific, and timely – most businesses will project their spending for a certain period, such as a year, with additional levels of planning and revision periodically – usually by quarter. Your business spending plan should always be based on the most accurate data available, drawing insights from your sales performance, team spending, and growth targets. 

Why is a business spending plan important? 

Businesses need to spend to survive and grow – but as the old expression goes, cash is king. Without it, businesses are limited in how they can achieve their goals. Keeping control of your cash and ensuring you have sufficient working capital starts with estimating and matching what you spend (expenses) to what you make (revenue). 

By balancing the two, business owners can deliver better spend management, ensuring they have enough cash to enable their operations, power potential expansion, and generate income for themselves and their teams. Without sufficient planning and visibility, though, spending can either surpass available capital — leaving a company in debt  — or fall short of the levels required to achieve growth targets. 

Steps to create a business budget 

Creating an effective business budget requires combining a range of data points, including internal metrics and market context. This is often the most time-consuming aspect of building a spending plan but can be greatly accelerated by using digital tools, such as an online spend management platform, to automate data collection and analysis.

By managing the two, you can gauge your available working capital and allocate resources effectively between priorities in line with market conditions and business goals.  

1. Look at your numbers  

When deciding how to prepare a budget for your company, start by reviewing your historical spending in each of your spending categories. This retrospection is not just an essential aspect of understanding your past financial situation but also serves as the foundation for your future business spending plan.

Data points should include:

1. Historical revenue

Assess your past revenue sources. This could be driven by the number of users, the number of contracts you've signed, the type of clients you have, and other factors.

2. Historical expenses

Review your past expenditures. Some expenses could be driven by the number of employees, and the number of items you sell, while others may be fixed and not vary over time, such as rent for office space.

Once you have a comprehensive understanding of what drives your revenues and expenses, you can model them based on how you expect your business to evolve in the upcoming year. This includes potential changes in the market, such as customer demand fluctuations or alterations in raw material prices, as well as any internal business decisions. For instance, you may decide to invest in a new machine, expand your team, or embark on a different strategic direction.

Remember that your historical data is not a perfect predictor of future performance, but it does provide a valuable benchmark. It can help you identify trends, spot opportunities for cost savings, and ensure your future spending plan is grounded in the reality of your business's past performance. Ultimately, a detailed analysis of your numbers gives you a clear roadmap to manage and project spending effectively.

2. List sources of income/estimated revenue 

This includes all your available options for generating revenue from goods or services – your top-line revenue opportunities and, ultimately, the first line on your business spending plan. 

If you have an established business, you can base this on the last year’s numbers or the same quarter the previous year, revised for any changes in market conditions. If you’re just getting started, however, base this on industry averages matched to your services or product and level of scale.

3. List fixed costs 

Fixed costs are the regular expenses that don’t change according to your revenue and stay consistent month over month and year over year. Since these remain the same and are often hard to reduce, they should be the baseline for the costs you need to cover on a periodic basis. This includes outgoings such as building fees, insurance costs, ground rent, fixed taxes, licensing, and retainer services such as accounting or legal. You should consider current as well as expected new fixed expenses. 

4. List variable expenses 

Slightly more challenging to predict are variable expenses – those that vary with your activity, such as production costs, marketing campaigns, or logistics. While these can change, that’s not the same as being random – there should be a clear logic to how your costs rise and fall, ideally focused on activity that will bring a corresponding increase in revenue. Key areas to consider include raw materials, storage and inventory, shipping costs, and variable taxes. Salaries can also be a variable expense in the event of adding extra team members temporarily or bringing in advisors. You should consider current as well as expected new variable expenses.

5. List predicted one-time spends 

Alongside predictable, regular spending, every business experiences one-off costs, including new equipment purchases, building work, research and development projects, and consulting engagements. 

6. Add it all into an income statement 

Once you have determined all the potential costs your business might face, you can add them into a single statement that shows your spending for the year, ready to compare with your projected income and growth plan.

7. Review your budget often 

A vital attribute of a good business spending plan is that it should evolve with your business – market conditions change, sales rise and fall, and unexpected costs crop up. Keeping control of your cash position requires you to regularly review your assets and income, ensuring you have enough cash to keep moving forward.

Types of business spending plans

Different parts of your business require cost visibility and control, meaning you will often need multiple spending plans by department, function, or use case. Choosing the right system for each goal will give you more granular detail about crucial areas while generating more specific insight to feed into your overall visibility.

Master budget

Sitting above all your spending plans is a master budget that combines data from lower-level budgets generated by other functional areas in an organization. It’s primarily used by management teams to make decisions at a high level for the business, providing holistic visibility about major trends and results. Once you finalize a master budget, you can review it and break it down into more specific allocations according to plans. 

Cash budget

Cash budgets primarily focus on managing liquidity over a set period of time. This budget uses revenue predictions and cost projections to estimate the amount of working capital available in the business, driving day-to-day decision making around operations and investment. 

Operating budget

An operating budget is a high-level summary report covering fixed costs, variable costs, capital costs, and non-operating expenses to ensure that spending remains in line with existing plans. Since its goal is to ensure operational continuity, this document must be updated throughout the year, either monthly or quarterly.

Labor budget

For businesses with significant human capital requirements, whether for service provision or production, a labor budget helps you project future payroll needs and ensure that your team contributes to revenue generation goals.

Financial budget

While all budgets are, to an extent, financial, a financial budget tracks spending and revenue to plan saving, spending, and borrowing – the key financial decisions that underpin business operations.

Static budget

More common with non-commercial enterprises such as charities, foundations, and public bodies, a static budget works on fixed allocations of resources to meet specific goals independent of revenue generation. 

Capital budget

A capital budget focuses on fixed asset purchases or project investments – major uses of capital – to determine which options can deliver the best return for the business in the short and long-term by expanding capabilities, efficiency, or customer value.

Sales budget

A sales budget estimates a company's projected revenue within a specific timeframe. It's primarily based on two elements - the expected quantity of products or services sold and the price at which they're sold. It provides a snapshot of potential revenue, allows companies to plan resource allocation effectively, and serves as a benchmark for performance evaluation. This budget is crucial in operational planning and, ultimately, in predicting how the company will perform financially.

Production budget

A production budget is a tool for businesses involved in manufacturing or production, providing an estimate of the total production costs for a given period. It considers the number of items to be produced and factors like raw material costs, labor expenses, overhead, and other production-related expenditures. 

Overhead budget

An overhead budget estimates the ongoing operational expenses necessary to run the business. It can include costs such as salaries of non-production staff, office rent, utilities, and administrative expenses. This budget helps companies to account for these necessary but often overlooked costs, ensuring a more comprehensive understanding of total business expenses and helping to maintain profitability.

Extend business budgeting tools

Smart budgeting can make the difference between a business that soars and one that fails. The challenge is that many business owners lack the tools to effectively track, manage and analyze their spend across the company. 

With businesses facing a rapidly changing commercial environment spurred on by new technology, changing working habits, and new competition, digital spend management is now a must-have for leaders to manage company spending. Digital tools make it easier for teams to track spending in real-time, taking the guesswork out of building a business spending plan and giving you concrete, reliable data to tackle the future. 

Extend’s spend management platform gives business owners and finance teams the visibility, control, and tools to build better business spending plans, implement them across organizations, and confidently track the results.  

Through the platform, you can: 

  • Manage employee spending at scale using virtual cards for each team member.
  • Set budgets by department, function, or employees for full peace of mind.
  • Keep cash on hand longer and preserve valuable working capital while maximizing interest on idle cash.
  • Generate detailed spend reports across your business to compare budgets with actual performance, find where investment matters most, and avoid wasteful budget surpluses.

In a fast-moving market, businesses need spending plans that can evolve with their needs. To learn more about how Extend can improve your business spending plan, contact one of our payment experts today.  

Blog

How to improve your business spending plan

Spend Management
Author
Irais Urias
Content Marketing Manager
Virtual Card Spend
No items found.
Share post

The most common reason businesses fail is running out of cash, according to U.S. Bank. Without sufficient liquidity, you can’t pay bills and employees, and activity grinds to a halt. In practice, running a business requires keeping a close eye on revenues and costs, balancing the two to maintain a stable and consistent cash flow. This starts with your business spending plan.

Done correctly, a business spending plan gives you visibility over your available cash, upcoming obligations, and potential financial risks. The best business budgeting methods are those that understand a business’s unique market position, customers, and opportunities to leverage available cash to its fullest extent. However, these methods require proper planning, data, and processes. 

Here we look at how to prepare a budget for a company that can deliver the results you need in any given circumstance. 

What is a business spending plan? 

A business spending plan is a financial breakdown, usually based on historical income, expenses, and known changes, that enables a company to accurately manage and project spending. The best business spending is detailed, specific, and timely – most businesses will project their spending for a certain period, such as a year, with additional levels of planning and revision periodically – usually by quarter. Your business spending plan should always be based on the most accurate data available, drawing insights from your sales performance, team spending, and growth targets. 

Why is a business spending plan important? 

Businesses need to spend to survive and grow – but as the old expression goes, cash is king. Without it, businesses are limited in how they can achieve their goals. Keeping control of your cash and ensuring you have sufficient working capital starts with estimating and matching what you spend (expenses) to what you make (revenue). 

By balancing the two, business owners can deliver better spend management, ensuring they have enough cash to enable their operations, power potential expansion, and generate income for themselves and their teams. Without sufficient planning and visibility, though, spending can either surpass available capital — leaving a company in debt  — or fall short of the levels required to achieve growth targets. 

Steps to create a business budget 

Creating an effective business budget requires combining a range of data points, including internal metrics and market context. This is often the most time-consuming aspect of building a spending plan but can be greatly accelerated by using digital tools, such as an online spend management platform, to automate data collection and analysis.

By managing the two, you can gauge your available working capital and allocate resources effectively between priorities in line with market conditions and business goals.  

1. Look at your numbers  

When deciding how to prepare a budget for your company, start by reviewing your historical spending in each of your spending categories. This retrospection is not just an essential aspect of understanding your past financial situation but also serves as the foundation for your future business spending plan.

Data points should include:

1. Historical revenue

Assess your past revenue sources. This could be driven by the number of users, the number of contracts you've signed, the type of clients you have, and other factors.

2. Historical expenses

Review your past expenditures. Some expenses could be driven by the number of employees, and the number of items you sell, while others may be fixed and not vary over time, such as rent for office space.

Once you have a comprehensive understanding of what drives your revenues and expenses, you can model them based on how you expect your business to evolve in the upcoming year. This includes potential changes in the market, such as customer demand fluctuations or alterations in raw material prices, as well as any internal business decisions. For instance, you may decide to invest in a new machine, expand your team, or embark on a different strategic direction.

Remember that your historical data is not a perfect predictor of future performance, but it does provide a valuable benchmark. It can help you identify trends, spot opportunities for cost savings, and ensure your future spending plan is grounded in the reality of your business's past performance. Ultimately, a detailed analysis of your numbers gives you a clear roadmap to manage and project spending effectively.

2. List sources of income/estimated revenue 

This includes all your available options for generating revenue from goods or services – your top-line revenue opportunities and, ultimately, the first line on your business spending plan. 

If you have an established business, you can base this on the last year’s numbers or the same quarter the previous year, revised for any changes in market conditions. If you’re just getting started, however, base this on industry averages matched to your services or product and level of scale.

3. List fixed costs 

Fixed costs are the regular expenses that don’t change according to your revenue and stay consistent month over month and year over year. Since these remain the same and are often hard to reduce, they should be the baseline for the costs you need to cover on a periodic basis. This includes outgoings such as building fees, insurance costs, ground rent, fixed taxes, licensing, and retainer services such as accounting or legal. You should consider current as well as expected new fixed expenses. 

4. List variable expenses 

Slightly more challenging to predict are variable expenses – those that vary with your activity, such as production costs, marketing campaigns, or logistics. While these can change, that’s not the same as being random – there should be a clear logic to how your costs rise and fall, ideally focused on activity that will bring a corresponding increase in revenue. Key areas to consider include raw materials, storage and inventory, shipping costs, and variable taxes. Salaries can also be a variable expense in the event of adding extra team members temporarily or bringing in advisors. You should consider current as well as expected new variable expenses.

5. List predicted one-time spends 

Alongside predictable, regular spending, every business experiences one-off costs, including new equipment purchases, building work, research and development projects, and consulting engagements. 

6. Add it all into an income statement 

Once you have determined all the potential costs your business might face, you can add them into a single statement that shows your spending for the year, ready to compare with your projected income and growth plan.

7. Review your budget often 

A vital attribute of a good business spending plan is that it should evolve with your business – market conditions change, sales rise and fall, and unexpected costs crop up. Keeping control of your cash position requires you to regularly review your assets and income, ensuring you have enough cash to keep moving forward.

Types of business spending plans

Different parts of your business require cost visibility and control, meaning you will often need multiple spending plans by department, function, or use case. Choosing the right system for each goal will give you more granular detail about crucial areas while generating more specific insight to feed into your overall visibility.

Master budget

Sitting above all your spending plans is a master budget that combines data from lower-level budgets generated by other functional areas in an organization. It’s primarily used by management teams to make decisions at a high level for the business, providing holistic visibility about major trends and results. Once you finalize a master budget, you can review it and break it down into more specific allocations according to plans. 

Cash budget

Cash budgets primarily focus on managing liquidity over a set period of time. This budget uses revenue predictions and cost projections to estimate the amount of working capital available in the business, driving day-to-day decision making around operations and investment. 

Operating budget

An operating budget is a high-level summary report covering fixed costs, variable costs, capital costs, and non-operating expenses to ensure that spending remains in line with existing plans. Since its goal is to ensure operational continuity, this document must be updated throughout the year, either monthly or quarterly.

Labor budget

For businesses with significant human capital requirements, whether for service provision or production, a labor budget helps you project future payroll needs and ensure that your team contributes to revenue generation goals.

Financial budget

While all budgets are, to an extent, financial, a financial budget tracks spending and revenue to plan saving, spending, and borrowing – the key financial decisions that underpin business operations.

Static budget

More common with non-commercial enterprises such as charities, foundations, and public bodies, a static budget works on fixed allocations of resources to meet specific goals independent of revenue generation. 

Capital budget

A capital budget focuses on fixed asset purchases or project investments – major uses of capital – to determine which options can deliver the best return for the business in the short and long-term by expanding capabilities, efficiency, or customer value.

Sales budget

A sales budget estimates a company's projected revenue within a specific timeframe. It's primarily based on two elements - the expected quantity of products or services sold and the price at which they're sold. It provides a snapshot of potential revenue, allows companies to plan resource allocation effectively, and serves as a benchmark for performance evaluation. This budget is crucial in operational planning and, ultimately, in predicting how the company will perform financially.

Production budget

A production budget is a tool for businesses involved in manufacturing or production, providing an estimate of the total production costs for a given period. It considers the number of items to be produced and factors like raw material costs, labor expenses, overhead, and other production-related expenditures. 

Overhead budget

An overhead budget estimates the ongoing operational expenses necessary to run the business. It can include costs such as salaries of non-production staff, office rent, utilities, and administrative expenses. This budget helps companies to account for these necessary but often overlooked costs, ensuring a more comprehensive understanding of total business expenses and helping to maintain profitability.

Extend business budgeting tools

Smart budgeting can make the difference between a business that soars and one that fails. The challenge is that many business owners lack the tools to effectively track, manage and analyze their spend across the company. 

With businesses facing a rapidly changing commercial environment spurred on by new technology, changing working habits, and new competition, digital spend management is now a must-have for leaders to manage company spending. Digital tools make it easier for teams to track spending in real-time, taking the guesswork out of building a business spending plan and giving you concrete, reliable data to tackle the future. 

Extend’s spend management platform gives business owners and finance teams the visibility, control, and tools to build better business spending plans, implement them across organizations, and confidently track the results.  

Through the platform, you can: 

  • Manage employee spending at scale using virtual cards for each team member.
  • Set budgets by department, function, or employees for full peace of mind.
  • Keep cash on hand longer and preserve valuable working capital while maximizing interest on idle cash.
  • Generate detailed spend reports across your business to compare budgets with actual performance, find where investment matters most, and avoid wasteful budget surpluses.

In a fast-moving market, businesses need spending plans that can evolve with their needs. To learn more about how Extend can improve your business spending plan, contact one of our payment experts today.  

About the author

Irais Urias

Content Marketing Manager

Irais is the Content Marketing Manager at Extend. An ambitious and performance-driven professional, Irais brings over five years of experience in journalism, content marketing, social media, and communications. Before Extend, she was the Marketing Communications Specialist at DATAMARK, where she led content marketing and social media campaigns, further deepening her skills in strategic storytelling and augmenting brand affinity. She earned a B.S. in Multimedia Journalism with a minor in Marketing from The University of Texas at El Paso.

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How to improve your business spending plan

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Irais Urias

Content Marketing Manager

The most common reason businesses fail is running out of cash, according to U.S. Bank. Without sufficient liquidity, you can’t pay bills and employees, and activity grinds to a halt. In practice, running a business requires keeping a close eye on revenues and costs, balancing the two to maintain a stable and consistent cash flow. This starts with your business spending plan.

Done correctly, a business spending plan gives you visibility over your available cash, upcoming obligations, and potential financial risks. The best business budgeting methods are those that understand a business’s unique market position, customers, and opportunities to leverage available cash to its fullest extent. However, these methods require proper planning, data, and processes. 

Here we look at how to prepare a budget for a company that can deliver the results you need in any given circumstance. 

What is a business spending plan? 

A business spending plan is a financial breakdown, usually based on historical income, expenses, and known changes, that enables a company to accurately manage and project spending. The best business spending is detailed, specific, and timely – most businesses will project their spending for a certain period, such as a year, with additional levels of planning and revision periodically – usually by quarter. Your business spending plan should always be based on the most accurate data available, drawing insights from your sales performance, team spending, and growth targets. 

Why is a business spending plan important? 

Businesses need to spend to survive and grow – but as the old expression goes, cash is king. Without it, businesses are limited in how they can achieve their goals. Keeping control of your cash and ensuring you have sufficient working capital starts with estimating and matching what you spend (expenses) to what you make (revenue). 

By balancing the two, business owners can deliver better spend management, ensuring they have enough cash to enable their operations, power potential expansion, and generate income for themselves and their teams. Without sufficient planning and visibility, though, spending can either surpass available capital — leaving a company in debt  — or fall short of the levels required to achieve growth targets. 

Steps to create a business budget 

Creating an effective business budget requires combining a range of data points, including internal metrics and market context. This is often the most time-consuming aspect of building a spending plan but can be greatly accelerated by using digital tools, such as an online spend management platform, to automate data collection and analysis.

By managing the two, you can gauge your available working capital and allocate resources effectively between priorities in line with market conditions and business goals.  

1. Look at your numbers  

When deciding how to prepare a budget for your company, start by reviewing your historical spending in each of your spending categories. This retrospection is not just an essential aspect of understanding your past financial situation but also serves as the foundation for your future business spending plan.

Data points should include:

1. Historical revenue

Assess your past revenue sources. This could be driven by the number of users, the number of contracts you've signed, the type of clients you have, and other factors.

2. Historical expenses

Review your past expenditures. Some expenses could be driven by the number of employees, and the number of items you sell, while others may be fixed and not vary over time, such as rent for office space.

Once you have a comprehensive understanding of what drives your revenues and expenses, you can model them based on how you expect your business to evolve in the upcoming year. This includes potential changes in the market, such as customer demand fluctuations or alterations in raw material prices, as well as any internal business decisions. For instance, you may decide to invest in a new machine, expand your team, or embark on a different strategic direction.

Remember that your historical data is not a perfect predictor of future performance, but it does provide a valuable benchmark. It can help you identify trends, spot opportunities for cost savings, and ensure your future spending plan is grounded in the reality of your business's past performance. Ultimately, a detailed analysis of your numbers gives you a clear roadmap to manage and project spending effectively.

2. List sources of income/estimated revenue 

This includes all your available options for generating revenue from goods or services – your top-line revenue opportunities and, ultimately, the first line on your business spending plan. 

If you have an established business, you can base this on the last year’s numbers or the same quarter the previous year, revised for any changes in market conditions. If you’re just getting started, however, base this on industry averages matched to your services or product and level of scale.

3. List fixed costs 

Fixed costs are the regular expenses that don’t change according to your revenue and stay consistent month over month and year over year. Since these remain the same and are often hard to reduce, they should be the baseline for the costs you need to cover on a periodic basis. This includes outgoings such as building fees, insurance costs, ground rent, fixed taxes, licensing, and retainer services such as accounting or legal. You should consider current as well as expected new fixed expenses. 

4. List variable expenses 

Slightly more challenging to predict are variable expenses – those that vary with your activity, such as production costs, marketing campaigns, or logistics. While these can change, that’s not the same as being random – there should be a clear logic to how your costs rise and fall, ideally focused on activity that will bring a corresponding increase in revenue. Key areas to consider include raw materials, storage and inventory, shipping costs, and variable taxes. Salaries can also be a variable expense in the event of adding extra team members temporarily or bringing in advisors. You should consider current as well as expected new variable expenses.

5. List predicted one-time spends 

Alongside predictable, regular spending, every business experiences one-off costs, including new equipment purchases, building work, research and development projects, and consulting engagements. 

6. Add it all into an income statement 

Once you have determined all the potential costs your business might face, you can add them into a single statement that shows your spending for the year, ready to compare with your projected income and growth plan.

7. Review your budget often 

A vital attribute of a good business spending plan is that it should evolve with your business – market conditions change, sales rise and fall, and unexpected costs crop up. Keeping control of your cash position requires you to regularly review your assets and income, ensuring you have enough cash to keep moving forward.

Types of business spending plans

Different parts of your business require cost visibility and control, meaning you will often need multiple spending plans by department, function, or use case. Choosing the right system for each goal will give you more granular detail about crucial areas while generating more specific insight to feed into your overall visibility.

Master budget

Sitting above all your spending plans is a master budget that combines data from lower-level budgets generated by other functional areas in an organization. It’s primarily used by management teams to make decisions at a high level for the business, providing holistic visibility about major trends and results. Once you finalize a master budget, you can review it and break it down into more specific allocations according to plans. 

Cash budget

Cash budgets primarily focus on managing liquidity over a set period of time. This budget uses revenue predictions and cost projections to estimate the amount of working capital available in the business, driving day-to-day decision making around operations and investment. 

Operating budget

An operating budget is a high-level summary report covering fixed costs, variable costs, capital costs, and non-operating expenses to ensure that spending remains in line with existing plans. Since its goal is to ensure operational continuity, this document must be updated throughout the year, either monthly or quarterly.

Labor budget

For businesses with significant human capital requirements, whether for service provision or production, a labor budget helps you project future payroll needs and ensure that your team contributes to revenue generation goals.

Financial budget

While all budgets are, to an extent, financial, a financial budget tracks spending and revenue to plan saving, spending, and borrowing – the key financial decisions that underpin business operations.

Static budget

More common with non-commercial enterprises such as charities, foundations, and public bodies, a static budget works on fixed allocations of resources to meet specific goals independent of revenue generation. 

Capital budget

A capital budget focuses on fixed asset purchases or project investments – major uses of capital – to determine which options can deliver the best return for the business in the short and long-term by expanding capabilities, efficiency, or customer value.

Sales budget

A sales budget estimates a company's projected revenue within a specific timeframe. It's primarily based on two elements - the expected quantity of products or services sold and the price at which they're sold. It provides a snapshot of potential revenue, allows companies to plan resource allocation effectively, and serves as a benchmark for performance evaluation. This budget is crucial in operational planning and, ultimately, in predicting how the company will perform financially.

Production budget

A production budget is a tool for businesses involved in manufacturing or production, providing an estimate of the total production costs for a given period. It considers the number of items to be produced and factors like raw material costs, labor expenses, overhead, and other production-related expenditures. 

Overhead budget

An overhead budget estimates the ongoing operational expenses necessary to run the business. It can include costs such as salaries of non-production staff, office rent, utilities, and administrative expenses. This budget helps companies to account for these necessary but often overlooked costs, ensuring a more comprehensive understanding of total business expenses and helping to maintain profitability.

Extend business budgeting tools

Smart budgeting can make the difference between a business that soars and one that fails. The challenge is that many business owners lack the tools to effectively track, manage and analyze their spend across the company. 

With businesses facing a rapidly changing commercial environment spurred on by new technology, changing working habits, and new competition, digital spend management is now a must-have for leaders to manage company spending. Digital tools make it easier for teams to track spending in real-time, taking the guesswork out of building a business spending plan and giving you concrete, reliable data to tackle the future. 

Extend’s spend management platform gives business owners and finance teams the visibility, control, and tools to build better business spending plans, implement them across organizations, and confidently track the results.  

Through the platform, you can: 

  • Manage employee spending at scale using virtual cards for each team member.
  • Set budgets by department, function, or employees for full peace of mind.
  • Keep cash on hand longer and preserve valuable working capital while maximizing interest on idle cash.
  • Generate detailed spend reports across your business to compare budgets with actual performance, find where investment matters most, and avoid wasteful budget surpluses.

In a fast-moving market, businesses need spending plans that can evolve with their needs. To learn more about how Extend can improve your business spending plan, contact one of our payment experts today.  

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