Creating a budget for your business requires more than just subtracting expenses from income. Your company's budget should provide you a glimpse of your company's financial future. Having a budget is an essential aspect of a business, especially if you’re looking to apply for SBA recovery loans, as you need to keep track of the money you've borrowed.

However, for many small businesses, developing a comprehensive budget can fall by the wayside. It's estimated that 61% of small business owners fail to create a formal budget. What's more, around 37% of companies that develop budgets spend more than what was budgeted.

Not having a budget can be a considerable problem, given that it's goal is to help with long-term financial planning and surprise expenses. Budgeting in the current environment may seem impossible, but it's an important part of preparing for your company’s future.

How to plan your 2021 budget

Developing your budget for the next year amid a pandemic and teetering economy can be difficult, but not impossible.


The coronavirus pandemic hit businesses differently depending on their industry and ability to adapt and pivot. Some companies can plan for growth in 2021, while others need to reevaluate and lean into 2021 conservatively.

However, there are questions that every business owner should ask themselves when preparing a 2021 budget.

  1. Can I expect 2021 sales to be above, below, or about the same as 2019?

  2. What products and services are essential to consumers in a typical environment?

  3. During the pandemic, what was our level of customer service and engagement?

  4. How significant is growth in 2021?

  5. How much am I willing to invest in people and systems to grow in 2021?

2. Create “What If” Budgets

The key to a successful budget is ensuring enough cash flow, which is particularly important in 2021. Forecasting has so many uncertainties and requires a little finessing. Creating worst-case and best-case budgets and determining how much cash flow is needed in both scenarios is a necessary element. It allows you to think about what your cash flow will look like and determine if you need more funding. It always will give you peace of mind; as you know, there are things to be done in each scenario.

3. Think Big Picture

For many companies, budgeting is all about minutiae. It allows you to plan the business's financial details on a month-to-month or year-to-year basis, which helps you plan inventory, pricing, and cash flow.

Many owners are focused on the small details when it's just as important to focus on the large ones. It can help look beyond the current budget year and think about where you are trying to go with your business. Placing yourself in both mindsets will give you a perspective when developing your budget. Think of what you need to grow, and then attach a budget to those buckets. Whether it's gaining more clients or increasing current ones' spending, this will help you achieve those goals.

4. Review and Change Your Budget Regularly

As COVID-19 continues to impact business, you can expect changes in your expenses and revenues. It's essential to monitor the money that comes in and out of your business. Understanding the ins and outs will allow you to adjust your budget plan more accordingly.

5.Consult a Financial Professional

Creating a budget can be overwhelming. However, you have options. If your schedule is full of tasks and deadlines, consider scheduling an appointment with a trusted advisor, such as an outsourced accountant. They can help you identify risks, provide solutions, and create a more detailed financial forecast and budget.

If 2020 taught us anything, it's to expect the unexpected. That mindset doesn't go way in 2021. Small business owners who plan for different scenarios will have a better chance of riding out the storm versus those who eschew planning and only develop one budget.

In 2021 you need to be 100% adaptable. Usually, you'd set a budget and stick to the plan; however, now, to stay afloat. You need to be open to changing your budget every month, if not weekly.