Creating a business budget is an important part of helping your company grow and succeed. A clear and realistic budget helps you keep track of your cash flow, use your resources wisely, and make smart business choices.

However, many business owners find managing finances difficult. You might have a busy schedule and little or no formal training in finance, which can make budgeting feel overwhelming.

While there is a bit of learning involved, making a budget is not as hard as it may seem. Here are six steps you can follow to build a solid business budget for 2025.

1. Collect Your Financial Records
Start by gathering your company’s financial records from past months or years, depending on how long your business has been running. This includes your past income statements, balance sheets, and cash flow statements.

Looking at your past financial data will help you spot patterns in your business, such as changes in sales or rising costs. For instance, you might see that your inventory costs have slowly gone up, which could be hurting your profits.

With this information, you might decide to look for new suppliers or stop selling items that are not performing well. Without reviewing this data, it’s hard to make smart choices. You can also use this information to estimate your revenue for the coming year.

2. Set Clear Financial Goals
Once you have a clear view of your business’s current financial position, you can set your goals for the year ahead. Financial goals act like a guide to help your business stay on track.

Think about both short-term and long-term goals. Short-term goals might include increasing sales by a certain amount, improving your cash flow, or cutting costs. Long-term goals could include entering new markets or adding new products.

Make sure your goals are specific and easy to measure so you can track your progress. This will also help you come up with a clear action plan with steps and deadlines to follow.

3. Estimate Your Future Income
Now it’s time to project your income for the next year. Look at your total revenue from last year and divide it by 12 to get an average monthly income. Be sure to account for seasonal changes, such as lower sales after the holidays.

Use this information to make a reasonable estimate of what you expect to earn each month in the year ahead.

4. Calculate Your Expenses
After figuring out your expected income, you need to estimate your business expenses. Start with fixed costs like rent, insurance, and loan payments — these amounts usually stay the same every month, so they’re easier to budget for.

Next, look at your variable costs. These change based on your business activity and may include things like shipping, hourly wages, and utilities. Don’t forget to plan for one-time costs, like buying new equipment or starting a marketing campaign.

5. Prepare for the Unexpected
No matter how carefully you plan, unexpected things can still happen. That’s why it’s important to set aside money for emergencies.

Open a business savings account and build an emergency fund. You can choose a standard savings account or a money market account, which may offer better returns.

Make sure this money is easy to access when you need it. An emergency fund can help cover costs if your income suddenly drops or if an unexpected issue comes up.

6. Put Your Budget Together
Once you’ve worked out your income and expenses, you’re ready to create your budget. It doesn’t need to be complex. A simple spreadsheet in Excel or Google Sheets can do the job. There are also free templates you can use. If you prefer, budgeting software like QuickBooks can help you track expenses and create financial reports.

Remember, your budget isn’t something you set and forget. You’ll need to check it regularly and adjust it as needed. For example, if you notice you’re spending more in one area, you might need to shift money from another part of your budget. Or if sales are slower than expected, you may have to reduce certain variable expenses.

Building your budget may take time, but it’s worth the effort. A solid budget gives you a better understanding of how your business is doing and helps you make smart decisions.

Budgets should be flexible, so make changes as your business or the market shifts. It’s also wise to talk to an accountant who can help you with tax planning and other financial matters.