How to Budget for the Next Quarter Based on Last Quarter’s Numbers

How to Budget for the Next Quarter Based on Last Quarter’s Numbers

When you’re running a business, it’s easy to get stuck looking ahead—new goals, new expenses, new ideas. But smart planning starts by looking backward first.

Using your last quarter’s financials is the best way to build a realistic, data-driven budget for the next quarter. Here’s how to do it like a pro (no complicated spreadsheets required).

Step 1: Review Your Profit & Loss Statement (P&L)

Pull your last quarter’s P&L and look at:

• Total revenue – What did you actually bring in?

• Cost of goods sold (COGS) – What did it cost to deliver your product/service?

• Gross profit – Revenue minus COGS. This helps measure profitability before overhead.

• Operating expenses – What did you spend on rent, marketing, software, labor, etc.?

• Net income – Did you profit or take a loss?

Tip: Use this to spot patterns. What was higher than expected? What can be trimmed?

Step 2: Separate Fixed vs. Variable Costs

Break your expenses into two groups:

• Fixed costs – Stay the same month to month (rent, software, salaries)

• Variable costs – Change with activity (contractors, supplies, shipping, ads)

• Mixed/semi-variable costs – A combo of fixed and variable (like utility bills or commissions)

Knowing what’s fixed vs. flexible helps you build in breathing room and adjust if revenue changes.

Step 3: Identify Seasonal or One-Time Expenses

Did you have a one-time vendor payment? A big launch? A seasonal lull?

Don’t let those outliers skew your next quarter’s numbers. Note them so you can:

• Exclude them from your monthly average

• Plan for them if they’ll repeat (like quarterly insurance or tax payments)

• Account for prepaid expenses (like annual subscriptions) that affect cash flow differently

Step 4: Forecast Revenue Based on Trends

Look at:

• Last quarter’s revenue growth (or dip)

• Any big client projects or slow periods coming up

• Marketing efforts in the pipeline

• Leading indicators like sales inquiries, web traffic, or booked calls

Tip: Don’t overestimate. A conservative revenue forecast makes budgeting safer.

Step 5: Set Spending Goals by Category

Now that you’ve analyzed the past, plan the future:

• What’s your target spend for marketing, tools, payroll, etc.?

• Where can you reduce or reallocate?

• Do you want to invest more in growth or save for taxes?

Make sure your spending supports your current business goals—whether that’s expansion, cash flow stability, or prepping for tax season.

Step 6: Track Against Your New Budget

Don’t just set it and forget it! Revisit your budget monthly to:

• Compare actuals vs. projected

• Adjust spending if revenue changes

• Make sure you’re hitting profit and savings goals

Tools like QuickBooks, Xero, or a spreadsheet can help you keep it all in check.

Use budget vs. actual dashboards to catch overspending or missed targets early.

Final Thoughts

Budgeting doesn’t have to feel overwhelming—especially when you use real numbers from your own business. Last quarter holds all the clues you need to build a smarter, more strategic next quarter.

P.S. Don’t forget to check your cash flow—profit on paper doesn’t always mean cash in the bank.

And if you make estimated quarterly tax payments, factor those into your upcoming expenses.

Need help analyzing your financials or setting up a budgeting system that works? KB2 Bookkeeping & Tax is here to make it simple, clear, and totally doable. Let’s plan your next quarter with confidence.