How To Create The [Year-End] Budget

An entrepreneur’s quick-guide to keeping the budget on track through the year-end.


We need to face the reality that budgeting is a must for any and every entrepreneur. Let me be very clear on this topic: the person with the least amount of money is the one who needs a budget the most. The person with the most money will only keep their money by using a budget. I believe this covers all of us. The year-end timetable comes with big sales projects, holiday planning and parties, Christmas gifts for the office staff and the family, and so many more atypical costs than a regular month like June. How in the world are we going to be able to keep a budget much less keep our sanity? 

What is a [year-end] budget?

The year-end budget is the same as any other budget from the previous months, but we can modify it to include and account for the extra spending that will most definitely occur. The year-end budget begins with the foundation of the regular budget and then builds up by adding several key categories into the expenses, like; the cost of holiday project goods sold, holiday party budget, holiday gift budget, holiday take-home pay. All we must do now is focus on these categories, create the numbers that we are willing to spend as extra expenses this season, and then add them to the regular budget. Of course, your income should also increase as a result of the holiday sales projects but more on that in just a bit

How to Create the [Year-End] Budget

1. Begin with the regular monthly budget:

The regular monthly budget may not be a regular company by any means at all. You may not even have a budget just yet. Do not worry as Barklee has so many resources coming out on how to build the budgets. Let us focus first on how to quickly build a regular, or average, monthly budget.

Expense Categories
  1. First, grab your bank statements from at least 3 prior months of business operations this year.
  2. Next, use a highlighter to mark all the deposits that are income to the business for 3 months.
  3. Total up each month’s income and then take the average by dividing the total sum of all 3 months and dividing by 3. This will become your average monthly income to budget with.
  4. For expenses, we are going to do the same thing, however, you need to find the common categories that your business spends money on.
  5. Create the categories on a sheet of paper, and then assign them a highlighter color. Need help thinking of categories to use? Check out the image located here in the blog for direction.
  6. Go through the 3 months statements and highlight the expenses with the corresponding categories color.
  7. Total up each month’s categories onto your piece of paper, and then calculate the average of each category for the 3 months. 

You have done it. You now have a very quick, efficient, but not perfectly accurate budget. Can budgets be accurate? Usually not because they are only an expectation of what you are going to do with your money. This method gets you the closest possible in the fastest amount of time.

2. Create your Holiday Season [Year End] categories

The Holiday Season provides the best opportunity for a busted budget because there are so many additional, yet unexpected, costs. This leads to me asking if they were ever unexpected, however? NO, is the answer. We know that we want to have a holiday party. We know that we want to buy gifts for the family and staff this year. We know that we are going to spend extra money on products and shipping to fulfill our holiday promotional sales. So, why don’t we just write those costs down right now?

Christmas Budget Categories
Christmas Budget Example
  • Holiday Promotional Sales Cost of Goods Sold: Cost of Goods Sold (COGS) is not a new category, however, we are going to increase this category by quite a bit if we are expecting increased sales this season. You do not have to create a whole new budget for this category, you simply need to add to the existing COGS by increasing the COGS by the percentage of projected sales increase.
  • Holiday Advertising Costs: same as above. You know how much you want to ramp up your advertising to achieve an expected sales goal. So, simply increase your advertising budget by the percentage increase in projected holiday sales.
  • Holiday Event Planning: This is absolutely a new budget item on the list. This is the one that takes some discipline and restraint. Do not plan your holiday event out of the increase from projected holiday sales. This will get you into major trouble. You only use cash that is in the bank, and not set aside for other budgeted items, to pay for the holiday events. Be smart, make some phone calls, use a party planner, or dedicate a staff member to planning the party within the budget, and then DO NOT DEVIATE FOR ANY REASON. I hope I was clear.
  • Holiday staff gifts: This one is simple to create. I tell my clients that they can only write off $25 per employee, per year. So, simply multiply your staff headcount by $25 or less. This is your budget, and you can only use it if there is excess cash in the bank before the holiday season. If you want to spend more on next year’s gifts start budgeting a little earlier.
  • Holiday take-home pay: This one is a crucial add-on to your typical monthly take-home pay. You need to be able to purchase your family gifts and cash flow family holiday events, so begin planning now. My wife and I have an excel sheet with all the names of people for which we buy gifts.  We have a budget column and a spent column, and we make sure that our total budgeted amount is not exceeded by our spent column. Try it this year, it works.
  • Any other additional costs? Add them to the budget as you see fit.

3. Subtract Expenses from Income for a zero-dollar budget

Around here we advise on zero-dollar budget systems. That means that the income minus the expenses will always be zero at the end of the month. If there is money left over on our sheet then we apply it to an additional needed expense, capital expenditures, or savings. That way we always have zero dollars of income left at the end of the month, and every dollar we make has a purpose. If we have a negative income balance after subtracting the expenses, then we know that we need to reduce the spending in one of our categories.

4 Tips for Year-End Budgeting

This is a quick and simple way of getting your year-end budgeting on track. Let me throw a few reminders your way.

  • Debt and the Holidays: never use the holiday spirits as an excuse to bust out the credit card or take out loans. Loans and consumer debt have a drastically negative impact on the enjoyment of the holidays.
  • Existing Debt and the Holidays: if you have existing personal or business debt then you need to completely cut out the holiday expenditures for parties, events, and staff gifts. I know this sounds terrible, but you will never be able to give your staff the office Christmas party of their dreams if you don’t get out of debt now. Need help? Call me immediately. I got strategies for days.
  • If your budget is negative after your first round of deciding where to spend money, then you have just proven the primary reason for needing a budget. You just saved yourself from creating a negative balance in your bank account come to January. This is a good find, and now you can correct your mistakes before they materialize.
  • Do not forget to save some money for your tax liability. Need a tax projection? Schedule one with your tax preparer today.

In Conclusion…..

We did it. We created a holiday budget for this year-end. It is a little prehistoric, but it will get us where we need to be in a pinch. Now, we need to talk about a New Year’s resolution. Why not save yourself the year-end heartache by having your budget and financials ready and prepared to perfection before the next holiday season? Well, you are in luck because Barklee will soon be launching its budgeting campaign for small business owners. Stay tuned for more.

What’s Next

Have a question? Please comment below! Have a suggestion for the improvement of a step above? The community and I are always listening. Do not forget to sign up for the upcoming blogs that will finish out the final 2 “DO NOTS” of the year-end process.

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