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Small Business Planning and Budgeting with Microsoft Excel

A small business budget! What is it?  Sadly, many small businesses do not have an annual revenue or expense budget let alone other specific budgets.  Through the omission of those items “money is being left on the table”.  This rarely exercised process can lead to increased profits, if used properly.  As in many cases, Microsoft Excel is a great place to begin the business planning process and develop budgets which will lead to maximized profits.  The following is a brief synopsis of Excel tools and techniques which can be used to plan, budget and forecast for small business.

Charts & Graphs

A chart is a visual representation of data. Charts quickly communicate trends, opportunities and pending pitfalls in the blink of an eye.  Charts can be used to track a business’s performance on a quarterly, monthly or daily basis.  The ability to quickly decipher historical patterns is important when creating a small business budget.  Dashboards are essentially charts and graphs which quickly tell a story about an organization in chart format.  The dashboards we’ve created for clients primarily involve charts and some tabular data. 

 Sales Forecasts

Functions are tools in Microsoft which are used to manipulate data.  One key function which can assist in the forecast of sales is a function called Forecast.  This function takes into account historical revenue to predict sales in the ensuing months or year(s).  This particular function uses a linear method of forecasting.  This simply means, sales are expected to follow a straight line of growth.  While this is a worthwhile tool to use I typically employ an assortment of forecasting methods.  The final result is a blended forecast usually taking from an average of several methods or the lowest prediction.  In essence, use Excel to come up with conservative and realistic sales projection.

Key Performance Indicators

What are your measures of business success?  Is it client’s served, net revenue generated, or is it your margin (profit as a percent of total sales)? In essence, it is all of the above and so many more specific to industry and organization type.  Excel is a great platform to monitor and improve key business metrics.  Let’s face it, you can’t improve what you are not aware of.  As the saying goes, “what gets measured gets done.”  One of our clients who is in search for a business loan is required to include key performance indicators with the loan request to the bank.  The lender will be looking at things like return on investment, liquidity ratios, debt-to-income ratios and loan repayment ability to name a few.  Performance indicators serve the needs of internal and external stakeholders.

Types of Budgets

Finally, Excel can be used to create intuitive tabular budget sheets by which the minute details of a business can be exposed, explored and capitalized to propel growth.  There are three types of tabular budget sheets which can quickly help a business. They are revenue budget, expense budget and cash budget.   It is important to mention here that a business budget, just like a personal budget should be something that is attainable and based on actual spending patterns.  As a rule of thumb, revenue should be conservative while expenses should have a small cushion.

Excel can be used in a myriad of ways to help small businesses to plan for the future.  Using Excel to plan and budget can increase profits in economic booms and stave off business failure in times of fiscal depression.

About the author



Othniel Denis is currently Principal of Excellent Ones Consulting LLC. He brings with him a background in finance, training, and information management systems. Prior to opening his own firm, Othniel spent the last 13 years in finance as an Analyst at organizations like New York University, Nassau County Government and Brookhaven National Laboratory to name a few...

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