Do you know where your money’s going — or just where it went?
For many business owners, budgeting still feels like something you do after the year is over. A report you review at tax time. A box to check.
But that kind of budgeting doesn’t help you grow.
A smarter budget is a living tool. It helps you understand what’s normal in your business, decide how you want to grow next and make confident choices as your team, expenses and ambitions expand.
At True North Accounting, we see budgeting as a way to bring direction and calm to growth — not restriction.
Start with a baseline: What does a “normal” month look like?
Most growth conversations start the same way:
“Next year, the goal is to continue to grow our revenue.”
That’s a great goal. The next question is the one that really matters: How?
Before you talk about growth, you need a baseline. What does a normal month actually look like in your business? Not a great month. Not a disaster month. Just a month where nothing went wrong — and nothing went exceptionally right.
That baseline becomes your reference point. It shows you:
- What your typical advertising spend looks like
- What your ongoing operating costs are
- What “expected” really means in dollars
Once you know what normal looks like, it’s much easier to spot when something changes — and why.
Why do you actually want to budget?
Not all budgets serve the same purpose. Being clear about why you want one helps determine how much effort it deserves.
For some businesses, budgeting is about compliance. A bank, landlord, or grant application is asking for a budget, and you need to produce one. That’s valid — but it doesn’t require a complex system.
For others, the goal is to trim the fat. Maybe you’re coming out of a rough period. Cash feels tight. Expenses have crept up over time. A budget becomes a way to reset, realign spending with strategy, and identify what no longer earns its place.
And for many growing businesses, budgeting is about clarity, measurement and decision-making. You want a roadmap. Guardrails on spending. Someone (or something) to keep you accountable when costs creep up — and to give you the green light when it’s time to invest in something new.
The purpose of your budget matters. It determines the method, the effort and the value you’ll get from it.
Be honest about effort vs. reward
There’s no universal “right” way to budget. There is a right way for your current reality.
Some budgets take 30 to 60 minutes once a year and a quick check-in every quarter. Others require a focused setup and a monthly rhythm. The best budget is the one you’ll actually maintain.
Before choosing a method, be honest:
- How much time are you willing to invest?
- Do you want a one-time snapshot — or an ongoing decision tool?
- Will you review it monthly, or only when something feels off?
Clarity here prevents wasted effort later.
Choosing the right budgeting method for your business
Once you know why you’re budgeting and how much effort you’re willing to commit, choosing a method becomes straightforward.
Historical (incremental) budget — “Last year, plus or minus X%”
This approach uses last year’s numbers as a starting point and adjusts for growth or inflation. It’s fast, familiar and low-effort. Best for stable businesses or compliance-driven needs — but limited when strategy or growth is changing.
Zero-based budget — “Every dollar must be justified”
Instead of starting from last year, you start from zero. Each expense must earn its place. This method is powerful when you’re coming out of a rough period or feel like cash is leaking everywhere. It requires more upfront effort, but delivers immediate clarity.
Rolling forecast — a 12-month living roadmap
This is a forward-looking budget that’s updated regularly, always showing the next 12 months. It’s ideal for growth, hiring or uncertainty.
While it requires clean bookkeeping and a monthly review habit, it offers the highest value for decision-making.
How to build a historical budget
A historical budget is the fastest way to get started. You take what actually happened last year, clean it up and make thoughtful adjustments for what’s changing.
It’s simple, practical and often “good enough” for stable businesses or compliance needs.
1. Choose your timeframe
Decide how detailed the budget needs to be:
- Monthly: Best for real decision-making and cash visibility
- Quarterly: OK for stable businesses, quicker to compile
- Annually: Mostly for compliance, weak for day-to-day decisions
Tip: If you’re unsure, choose monthly. You can always roll it up later.
2. Set up your tools and inputs
Tools
- Budget module in Xero or QuickBooks Online, or
- Excel or Google Sheets
Inputs
- Last year’s monthly Profit & Loss
- A blank budget template
Assumptions
- Expected sales growth
- Cost inflation
- Known changes (new staff, rent increases, cancelled subscriptions, one-offs)
3. Build a clean baseline
- Populate the budget with last year’s actuals (by month, by account)
- Remove one-time or unusual expenses
- Add any new recurring costs
- Fix obvious anomalies so the numbers reflect a “normal” year
This baseline is your reference point for decision-making.
4. Apply growth and inflation
- Revenue: Apply a realistic growth rate (adjust for seasonality if needed)
- Variable costs: Scale with sales, clients, or headcount
- Fixed costs: Apply inflation or leave flat where appropriate
Using simple formulas makes it easy to adjust later.
5. Use the budget (don’t just file it away)
- Optional: import the budget into Xero/QBO for budget vs. actual reports
- After each bookkeeping period:
- Review variances
- Identify overspends or under-investment
Decide what to cut, delay or invest in next month
How to build a zero-based budget
A zero-based budget (ZBB) is a reset. Instead of starting from last year’s numbers, you start at zero and rebuild spending intentionally. This method works best when you need to cut costs, improve profit or regain control after a rough period.
1. Define the purpose and timeframe
Start with why you’re doing this:
- Cut costs
- Improve profit
- Free up cash
Then choose the timeframe:
- Typically a 12-month budget, broken down monthly
Being clear on the goal helps guide tough decisions later.
2. Set top-level targets
Before listing expenses, define your boundaries:
- A conservative revenue assumption
- A target profit (or profit percentage)
- Your owner pay requirement
These targets create your spending envelope — the total amount you can afford to spend.
3. Build from zero (not last year)
Ignore last year’s budget entirely.
- List your key activities:
- Delivery
- Marketing and sales
- Admin and compliance
- Under each activity, list required costs:
- People
- Tools and software
- Space
- Other essentials
Tag every item as Must-Have or Nice-to-Have.
4. Assign amounts and cut ruthlessly
For each line, ask:
- Do we truly need this?
- Is there a cheaper or simpler way?
- Set amounts based on real quotes or estimates
- Remove or reduce anything that doesn’t clearly support your goals
This step is where the value — and discomfort — usually shows up.
5. Turn it into a monthly budget
- Create a simple template (rows = accounts, columns = months)
- Allocate revenue and expenses based on timing:
- Monthly
- Annual
- Seasonal
Then sanity-check the result:
- Does profit still meet your target after-owner pay?
If not, revisit your assumptions or cuts.
6. Implement, review, and adjust
- Optional: import the budget into Xero or QuickBooks Online for budget-vs.-actual reporting
- Monthly: Close the books, review variances, decide specific actions
- Quarterly or annually: Justify new expenses and refresh the zero-based review
A ZBB only works if you’re willing to act on what it reveals.
How to build a rolling forecast
A rolling forecast is a living budget. Instead of locking in a plan once a year, you update it every month so it always shows the next 12 months of revenue, expenses and profit. This method is ideal for growing businesses or anyone using their numbers to make real decisions.
1. Get clear on what you want it to answer
Start with the decisions you need help making, such as:
- Can I afford to hire?
- How much can I safely spend on marketing?
- When might cash get tight?
Clarity here keeps the model focused and usable.
2. Choose your timeframe and tool
- Timeframe: the next 12 months, laid out monthly
- Tool: Excel, Google Sheets, or your accounting software
The tool matters less than keeping it simple and easy to update.
3. Put the right foundations in place
A rolling forecast only works with clean, up-to-date data.
You’ll need:
- Accrual-based bookkeeping (not quick-and-dirty cash basis)
- All sales and expense invoices entered for the period
- Bank and credit card accounts fully reconciled
- No unresolved bookkeeping questions holding things up
If you want to compare forecast vs. actual for a month, that month’s books must be complete.
4. Build your first 12-month forecast
Revenue
- Start with last year’s monthly pattern
Adjust for expected growth and seasonality
Costs
Separate expenses into clear categories:
- Fixed costs: rent, loans, payroll, insurance
- Variable costs: per client, per sale, or per employee
Build simple formulas based on key drivers.
Be sure to include:
- Owner or management pay
- Staff bonuses
- Loan payments
- Tax instalments
Profit
- Review the result and adjust assumptions if profit isn’t realistic or sustainable
5. Create a simple monthly routine
Once bookkeeping is done each month (10–20 minutes):
- Update last month with actual numbers
- Compare forecast vs. actual
- Identify 1–3 clear actions:
- Invest
- Hold
- Cut or delay
6. Roll it forward and tune it up
- Each month, drop the oldest month and add a new one at the end
- Quarterly (or as needed), update assumptions for:
- Known changes
- Owner pay
Profit targets
Budgeting is about direction, not just dollars
A budget isn’t about limiting your growth — it’s about guiding it.
When you know your numbers, you can make smarter moves with confidence. You can see how today’s decisions affect future cash flow. You can invest intentionally instead of hoping it all works out.
That’s what separates reactive businesses from well-run ones. Growth becomes planned, not chaotic.
Budget vs. actual: Where the real insight lives
One of the most useful budgeting habits is simple: compare what you planned to what actually happened.
Going over budget isn’t a failure. It’s information.
If advertising was higher than expected, was it because you pushed harder on a campaign? If expenses jumped, was it tied to growth — or creep?
That budget-to-actual comparison tells a story. And when you review it regularly, small issues stay small.
Cash flow makes budgeting real
Budgeting becomes especially powerful when it’s paired with cash flow planning.
You can be profitable on paper and still feel stressed if cash timing isn’t clear — especially if you’re hiring, making a large purchase or navigating seasonality.
A smart budget reflects reality:
- Heavier spending periods
- Quieter months
- Expected dips and recoveries
When you plan for those patterns, surprises turn into expectations — and expectations are much easier to manage.
Real-time tracking equals real control
Technology has changed how budgeting works. You no longer have to wait until the books close to understand how your business is performing. Real-time tracking lets you see what’s happening today.
That visibility lets you course-correct before issues start to grow.
Real-time tracking equals real control. And control is what turns chaos into clarity.
The right tools (without overcomplicating it)
You don’t need a complicated tech stack to budget well. You just need the right layers.
First: your core accounting system.
This is your source of truth. Tools like QuickBooks or Xero keep your books up to date and give you real numbers to work with.
Second: a forecasting tool.
This is what turns today’s numbers into tomorrow’s plans. Tools like Syft help you model scenarios, plan for growth and get ahead of cash flow surprises.
Third: a dashboard for visibility.
Think of this as your daily snapshot. You might use built-in dashboards in QuickBooks or Xero, or even internal reporting you build yourself.
A clear dashboard helps you make decisions with confidence.
And if you’re just getting started? A well-built spreadsheet is still a perfectly valid place to begin.
Good budgeting starts with good data
The tool matters far less than the foundation. Accurate, up-to-date bookkeeping is what makes budgeting useful. Without clean data, even the best forecast is just guesswork.
That’s why budgeting works best when it’s supported by solid bookkeeping and someone who can help interpret the numbers — not just report them.
How True North Accounting helps
At True North Accounting, we focus on clarity first.
We help business owners:
- Build budgets from real numbers
- Forecast growth with confidence
- Use tools that fit their business — not overcomplicate it
Whether you’re using software, dashboards or spreadsheets, our role is to help you understand what the numbers are telling you and adjust course as your business evolves.
Want to build a better budget?
Budgeting is about direction, not just dollars. When you know your numbers, you can make smarter moves with confidence.
If you need help with your bookkeeping or budgeting, contact us. We’re here to guide you.
