Budget spreadsheet for entrepreneurs
If you are looking for a budget spreadsheet where you can enter your projected income and expenses and the spreadsheet automatically calculates cash flow, tax liabilities and analyzes the numbers with some important metrics then this spreadsheet is for you.
When budgeting it is not only important to project income and expenses but how this projection affects your desired outcome. Budgeting an increase in revenue without the corresponding increases in expenses or effect on cash flow is not very effective. In this spreadsheet, you can modify the budget by making assumptions in the what if analysis tab.
Budgeting is about you telling your business where it’s going rather than going with the wind. Without a handle on your finances you can still end up broke. In order to do this, you must learn to manage your margins. This budget spreadsheet attempts to manage the following margins:
Gross Margin
Your gross margin is your revenue less your cost of goods sold. Your gross margin percentage is your gross margin as a percentage of revenue. Your gross margin tells you how much you make after you deduct directly what it cost you to purchase the product.
Let us say you buy 1,000 units of widgets for $10 each and you sell them for $40 each. Your direct profit on each unit will be $30. This $30 is your gross margin and it is profit before any other business expenses. The goal of the gross margin is to determine your direct profitability.
At $30 profit per unit, your gross margin percent is 75% (30/40). This means for each unit you sell, you keep 75% of the profits before other expenses are accounted for. Remember, gross margin only has to do with the direct cost of buying and selling the product.
| Revenue | $40,000 | 100% |
| Cost of goods sold | $10,000 | 25% |
| Gross Margin | $30,000 | 75% |
Cost of goods sold is usually the biggest expense most manufacturers and retailers have.
Net profit margin
Net profit is defined as revenue minus total expenses. Or we could restate it by saying net profit is gross margin minus operating expenses.
| Revenue | $40,000 | 100% |
| Cost of goods sold | $10,000 | 25% |
| Gross Margin | $30,000 | 75% |
| Other expenses (Selling & Admin expenses) | $25,000 | 63% |
| Net profit | $5,000 | 13% |
In the example above, we can compute net sales either by subtracting cost of goods sold and other expenses from revenue, or by subtracting other expenses from gross margin. Either way we will arrive at net profit. We see percentage wise, this business owner only keeps 13% of the revenue he or she brings in. Whether this is a good or bad number depends on the industry the business owner operates in or the owners’ goal.
After tax profit margin
Taxes are paid on net profit margin and is computed by subtracting the tax you pay from your net profit as shown below:
| Revenue | $ 40,000 | 100% |
| Cost of goods sold | $ 10,000 | 25% |
| Gross Margin | $ 30,000 | 75% |
| Other expenses (Selling & Admin expenses) | $ 25,000 | 63% |
| Net profit | $ 5,000 | 13% |
| Taxes (15%) | $ 750 | 2% |
| Profit after taxes | $ 4,250 | 11% |
In the example above, the owner only gets to keep 11% of total revenue.
It is important you keep track of the tax rate and what tax changes affect your business. Some questions to consider that could help you reduce your tax rate are:
- Is there any credit available, you are not taking?
- Are you paying taxes on income that could be deferred to a year when your tax rate will be potentially lower?
The budget spreadsheet and free course makes suggestions about credits and how adjustments affect your liability
Managing revenue, expenses and taxes all simultaneously can help increase your cash flow. But be careful to choose the strategy that will maximize your profits first and then find ways to minimize your taxes.
Metrics
In addition to managing margins, the budget spreadsheet illustrates metrics that point you to where you should direct your attention. Metrics are a great way to measure and optimize your financial system over time. What gets measured, gets improved. Without a system to measure how your system is doing, you are less likely to improve them. Some of the metrics discussed in this spreadsheet are:
Financial metrics:
| What are the key areas of performance | KPIS | |
| 1. Managing growth | Return on asset | |
| Debt coverage ratio | ||
| 2.Managing assets | Receivable days | |
| Inventory days | ||
| Payable days | ||
| Cash Conversion cycle | ||
| Changes in working capital | ||
| Cash surplus | ||
| Borrowing capacity |
Questions for Consideration:
Are you wondering what the point of this budget worksheet is? Here are some questions this worksheet might answer:
- How does my accounts receivable and payable practices affect my cash flow?
- Should I take a loan to accelerate growth: If there is an area that is churning cash quickly, it might be worthwhile to take a loan to expand that area?
- What will my five-year growth rate look like?
- What areas are at risk for fast decline and where should I focus my attention.
- What tax savings strategies should I consider?
Get the budget spreadsheet by clicking here
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