8 Tips For How To Successfully Manage A Business Budget

Budgets sometimes get a bad rap. They can feel constraining. New managers may fear repercussions if they struggle to stay on budget. They may also worry that a lack of experience in finance sets them up for failure. Meanwhile, business owners may feel too overworked to make time for monthly reviews and end up literally paying for it later when spending veers off track. Crunching the numbers to prepare the next annual budget can turn into a dreaded chore.

Of course, none of these problems are the budget’s fault! Inaccurate or incomplete information, neglected budgets, and obsolete (and error-prone) systems are all indicators that it’s time to shake up your relationship with your business budget.

Fortunately, there’s a lot you can do to work more effectively with your budget. In this article, we’ll discuss ways to track expenses more promptly and keep your budget connected to your actual business operations. We’ll also discuss ways to share budget management responsibilities so one person isn’t taking on the full load.

Business Budget Management Process

All too often, when people imagine business budget management, they picture filling out an annual spreadsheet that’s meant to hold all the financial details for the business. Keeping budgets in the finance department and over-relying on spreadsheets can open you up to serious risk.

For one, your budget can’t reach its full effectiveness if it’s siloed in the finance department. Any decision-maker in your company should consult and update budgets to keep bookkeeping accurate. Businesses may need distinct budgets for specific departments or even individual projects. That means you need the flexibility and confidence to let managers take ownership of the budgets for their department.

About 63% of businesses are still using Excel as a primary budgeting tool, but successful budget management needs to go way beyond the spreadsheet. Spreadsheets, although helpful for some aspects of organization, are highly prone to error. As in, an estimated 90% of spreadsheets have errors. A missed minus sign or extra zero copy-pasted into a cell could translate to a multi-million-dollar mess. Not all businesses have the ability to recover from a serious budget mistake.

Instead, make your budget a fully-integrated, iterative tool that helps guide multiple aspects of your business, from high-level strategy to daily operations. Here’s how to build a more effective process.

The 4 Step Budget Management Process

Effective budget management combines several skills. Ideally, each step in the budgeting process helps improve your control and accuracy, helping you create even better budgets over time.

1. Preparation: Budgets guide spending and predict revenue for a particular period of time. You may have a short-term budget that covers no more than a year, a mid-term budget (2-3 year), or a long-term budget that forecasts your business finances for 4 years or more. Many businesses create multiple budgets. They may rely more heavily on a short-term budget to guide daily operations and a long-term budget for high-level planning, for example. Gather your best estimates of cash flow, revenue, and expenditures to allocate resources wisely.

2. Delegation: After putting in the work to build a budget, it would be a shame for it to sit in a file folder for months. Senior management should designate who will be responsible for maintaining and updating localized budgets. You’ll also need a management plan for these point people so all budget updates can come together into a cohesive whole.

3. Monitoring and collaboration: Regular monitoring is essential to maintaining a healthy budget. This is where you note over- or underspending, make corrective adjustments, and take note for future predictions. Collaborating with staff in specific departments can highlight any discrepancies between high-level expectations and actual daily needs. Ultimately, this step is your best chance to follow cash flow, monitor variable costs, and catch errors.

4. Forecasting: Planning business strategy starts with a clear picture of where you currently are and where you want to go. Accurate, up-to-date figures from your routine budget monitoring last year help you understand where you met or exceeded expectations, and where you hit unexpected difficulty. At the end of the year, your data can help inform your next annual budget to be more fitted to your actual operational needs.

>> Related: Strategic Business Spend Management for Growing Businesses <<

Who manages your budgets?

As we’ve discussed, budget management isn’t always limited to the accounting department. Here is a partial list of people who may need to be involved in some elements of the budgeting process:

When people rise to a management position, they don’t always come to the role with formal training on managing an operating budget. They may need guidance on correct bookkeeping procedure and how to weave budget monitoring in with other job responsibilities. For that reason, it can be helpful to develop training documents or protocols along with the actual budget. The goal is for any individual supervising part of the budget to understand how to track and update their sections properly.

8 Tips for Business Budget Management

Knowing why a budget matters and knowing how to implement successful business budget management in the midst of daily operations are two different things. Let’s look at a few suggestions to turn high-level understanding into actionable tasks you and your management team can do.

Set budget details appropriately

Budgets come in different forms. Designing a successful budget starts with understanding how detailed it’s worth making this particular version. You’ll most likely want to break budgets down at least to the department level. Often, though, it’s not especially helpful to get too deep into line items. Managers or even specific employees may be better equipped to know the granular details of frequent purchases. You also want room for managers to adjust budgets based on performance. A marketing manager may need flexibility to shift spending between social media platforms, for example.

Delegate effectively

In the early stages of opening a business, owners may clear most spending personally. As businesses grow, one milestone is reaching the point where the volume of decisions exceeds the owner’s capacity to handle solo.

Entrusting financial decisions to someone else is a big move! It can be difficult at first to let someone else have the power to spend the company’s money. Delegating will eliminate the bottleneck of forcing every purchase decision past the owner’s desk. Departments can respond to their needs more nimbly. Having budget management training tools available can help managers continue to improve their skills.


Departments need a certain amount of independent control over their own budgets. It’s equally important to encourage communication between related departments. The marketing team and the sales team have overlapping objectives, so working in conjunction can help each team operate more effectively. Finance may do well to work closely with IT to plan the best strategies to keep systems up-to-date without overspending. HR may need to connect with the travel management team to determine cost-effective recruiting strategies.

Standardize budget reporting

At this point, if you’re following steps in order, you have a budget that spreads over multiple departments. Each department spends some time managing its budget independently and some time collaborating with various other teams. The problem that may come to mind at this point is, “Who’s keeping track of all these different updates?”

It’s essential to keep a centralized “home” for budget management so executives can get a cohesive, high-level view when they need to. You can achieve this by working with a central system that all budget users can access. Even if individual departments handle their own budget monitoring, they should record expenses the same way. That way, you won’t stumble over how to combine all records into one master budget record.

Collect complete, accurate numbers

Monitoring actual business expenses is the lifeblood for your budget. Without this step, a budget is a purely theoretical document that can’t hold any real power to steer business decision-making. Collect thorough, accurate updates throughout each period to see how your intended budget performs in practice.

Two ways to do this are to set clear spend categories and make submitting expenses as convenient as possible.

When it comes to categories, context matters. The same restaurant meal can fall under a variety of categories depending on the purpose of the outing. An interview with someone you’re recruiting is an HR expense. A meal with a client is sales. A business traveler’s meal comes out of your travel budget. Set your system up to categorize these expenses appropriately so you have an accurate view of each type of expense.

You’re more likely to get complete information when submitting an expense report only takes a few minutes. Choosing a budget management tool with features like photo capture for receipts and automatic categorization can streamline the process.

Choose nimble accounting software

The more time managers have to spend chasing employees for expense reports, the higher the likelihood that expenses will start to fall through the cracks. Your choice of accounting software can make a big difference on how easy it is to record and share budget data.

Cloud-based technology is optimal to connect various departments or locations. It’s easier to invite someone from another department to hop over and view an expense that affects multiple teams. Everyone views the same up-to-date information, so you don’t get confused between versions of the same document.

Modern tech solutions often include automated processes that can reduce the risk of errors. Data entry on spreadsheets is highly susceptible to human error. Automation can save time for employees and produce more accurate reports.

Set budget update appointments

We’ve all been in situations where it seems like every project is due at the same time. During a crunch period, it can be tempting to drop every task that isn’t immediately relevant to handling an intense workload.

If you want to keep your business’ finances on track, though, you have to treat budget management as an essential task. It’s all too easy to keep pushing back a review until next week, “when things calm down.” The longer you leave a budget on the back burner, the greater the chances are that soon you’ll have a new fire to put out.

Decide how often you’ll close books and update department heads on any course corrections they need to take. A quarterly or monthly check can help catch overspending early enough to correct the issue.

Keep looking forward

The insights you gain from actual spend versus planned spend on one budget can inform how you prepare the next one. Make creating your next budget easier in the coming year by keeping notes from your reviews of financial statements.

Review notes can illuminate patterns you might not notice day to day. Did you have a surplus in some areas and feel stretched too thin in others? Are there patterns in spending that you could anticipate going forward, as well? Your own budget data is one of your best resources to build future plans and projections.

Additional Considerations for Successful Budget Management

Depending on your role within a company, your approach to budget management may vary. Whether you’re new to managing a budget for your team or an experienced business owner seeking to maximize the results of your efforts, you’ll find ideas for you.

For new managers

If you’ve recently moved up into a management position, handling finances for your department can be intimidating. Many managers come into their position with little or no official training in budget management — so if finance isn’t in your background, you’re not alone. Beat imposter syndrome and start off on the right foot with these tips:

Make friends in accounting: You may not be a finance expert, but chances are, you know some. Schedule a meeting with your company’s accounting manager to get up to speed. The accounting team may appreciate a chance to walk you through their preferred formatting, and you can get answers to your questions.

Track expenses yourself: Don’t depend on your supervisors to keep you appraised of your department’s financial performance. Block out time to prepare your own monthly reports. If you’re struggling to stay on budget, the news won’t catch you by surprise, and you may even have insights to make a case for why you need additional funds.

Fill in your knowledge gaps within your department. If you worked in marketing, maybe your role was Brand Strategist but you’re not sure how much typical spend is across your social media channels. Utilize your team to get insight into particular line items in the budget.

For department heads

As you get more comfortable leading your team, don’t neglect developing your budget management skills.

Seek out continuing education opportunities: A workshop, conference, or even a community college class can add formal instruction to the knowledge you’ve gained on the job. (This can also be a great tactic for new managers.)

Practice strategic thinking: Work with your team to come up with ideas to allocate funds more frugally. If you have a surplus, rather than blow it on last-minute purchases to secure next year’s budget, connect with your supervisor to discuss “back burner” projects you might have the resources to launch.

Keep asking for help: Just because you have more managerial experience under your belt doesn’t mean you won’t need help on occasion. Many finance professionals would much rather answer a basic question than fix an easily-avoided mistake later. Peers in other departments may also be good sounding boards for how to approach new tasks.

For small businesses

Small business owners stay busy managing multiple aspects of their company. Daily to-do lists can overshadow the importance of stepping back to plan for the long term. One critical task you face is bringing a sense of leadership and strategy to your budget planning, instead of just crunching numbers.

Start with priorities: Before you dive into the nuts and bolts of the budget, write out the overarching goals for the business. As a business owner, you’re responsible for tying the budget back to the entire company’s objectives. The first page of your budget should lay out the goals you intend to reach.

Include context: A high-level look demands broader perspective than a department lead would have to bring. Your budget needs a breakdown of your company’s stats (locations, number of staff, number of campaigns or products you’re preparing) and information about outside companies that affect you (e.g., vendor contracts). If a vendor were to increase their rates, you need a clear, quick way to assess whether to stay or pursue a new option. If you’re preparing to scale, having information about how costs break down by location and how much start-up costs were will be important.

Find expense management software that works for you: Even a business with minimal staff needs a streamlined way to enter expenses and submit budget updates. Small businesses may especially need these solutions because the owners need to fulfill so many roles, and because if you’re working with limited resources, you may suffer more from financial miscalculations.

Final Thoughts

Whether you’re in your first year of management or confidently leading your business, managing your resources wisely is essential to your success. Successful budget management requires a balance between decisive leadership and a collaborative spirit with other management within the business. A well-prepared budget that you use thoughtfully throughout the year can inform smarter decisions and lead to stronger performance.