Last Updated: February 16, 2024, 1:55 pm by TRUiC Team


How to Forecast Business Expenses for Your Small Business

Ch1. 11

Forecasting business expenses for your small business is a critical skill for maintaining fiscal health. This chapter covers various strategies and techniques to accurately predict your company's expenditures, enabling you to create a more solid and reliable financial plan.

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Accurate Forecasting of Business Expenses for Small Businesses

This section will delve into the nuances of expense forecasting, from understanding the fixed and variable costs to considering unexpected expenditures. We'll provide you with strategies and practical examples, helping you get a clear picture of your small business's financial future.

How to Forecast Business Expenses for Your Small Business – Transcript

We're moving through creating financial projections for your small business on LivePlan.com.

At TRUiC our mission is to offer all our resources and information for free - but we support our work by using affiliate links, meaning we earn a commission on many of the amazing deals we’ve negotiated for you. Full transparency, LivePlan.com is one such affiliate partner. Link in description below. 

And so far, we figured out how to account for your revenue, direct costs, and labor. Well, what about all of the other expenses of business will incur? How could you possibly get all of these items straight in your head and account for them to be able to plan your business? Not to worry. We're going to be covering that in this video.

Hey everybody, Will Scheren here from Small Business Startup Guide by TRUiC. This video is part of a larger course dedicated to helping small business owners cut through the noise and get to the essentials of starting and operating their business. If that sounds really useful to you, be sure to like and subscribe.

Simply put, business expenses are costs incurred in the ordinary course of business. They include direct costs and labor costs, which we've already accounted for using LivePlan.com, but they also include all of your other company's expenses like rent, insurance, marketing, office supplies, and so on.

If your company is just getting started, when planning out your business expenses, be sure to think about any of the one-time or short-term startup expenses incurred in the early months, as these are considered expenses as well. Expenses do not include items that your business will purchase whose value will last longer than a year. These items are called assets, and we'll be discussing them in the next video.

Depending on what type of business you're in, the thought of planning out each of the business expenses your company will occur over the next couple of years in order to put together a financial projection can be an intimidating task. To get everything ironed out, we have three tips for you.

One, do it chronologically. To get started with thinking through your business expenses, start by thinking of the first expense your business will incur and then continue to plan out your steps from there. When is the next time you'll need to pull out your business, debit, or credit card to accomplish what you're trying to accomplish? Research each of the purchases you plan to make over the next year. As you do this, make sure to create a list of all the expenses that you run into along the way.

Two, look at a list of common business expenses. After considering the list of expenses that you'll incur chronologically, it may be beneficial to consult a list of common business expenses like this one just to see if there's anything you left out. Comb through a list like this to do your best to make sure that your expense planning is complete.

And three, group your expenses. For our last tip, we'd encourage you that, in the planning stage of your business, you shouldn't get too into the weeds of your expenses. You don't need to account for the cost of every single pen that you plan to purchase for your business. Simply creating a budget for office expenses would likely suffice.

After creating a list of your expenses that include the cost of the expense and the date that your expense will be incurred, You should get them imported into LivePlan.com to continue your business forecast. Open up LivePlan.com and click the “Forecast” tab and the “Expenses” sub-tab before entering your first expense, Be sure to read through the list of expenses to not include on this tab, as LivePlan will ask you to account for these types of expenses elsewhere as they automatically build out your financial forecast documents for you.

After checking your list against LivePlan’s list of expenses to ensure that you don't include on this tab, click on the “Add Expenses” button. Then name the expense, then tell LivePlan whether this will be a cost associated with revenue or a direct revenue stream, whether this is an expense that will have a constant cost each month or year, will have a varying cost each month or year, or if it will be a one-time cost. Fill in the related cost and calendar information and mark it as a rent- or lease-related expense, as a marketing expense, or as other, and then save the expense. Repeat this process for each of the expenses that you plan to incur over the time that you're forecasting. After adding each expense, you'll see that the costs have been added to your dashboard.

In the next video of the course, we'll be taking a look at one of the purchase categories that LivePlan recommended you leave off of your expenses list: assets — or large purchases for your business that will retain some portion of their value over the time that you hold them.

This video is part of a step-by-step course that gives business owners all of the essential information to start and operate their business. We've provided a link for you to get access to all of the free and discounted business tools we mentioned in the course below this video.

Be sure to like and subscribe to get more of this content. See you in the next video, and if you have any questions, let us know.