4 Phases of a Budget Cycle (2023)

Typically used to describe government budgeting, the four-phase budget cycle also applies to small businesses that operate based on a budget. Each step or phase of the process is, in and of itself, valuable to your business. Each requires consideration of your business' expenses and how they will affect your company's profitability.


The four phases of a budget cycle for small businesses are preparation, approval, execution and evaluation.

(Video) 4 Stages of Budget Cycle

A budget cycle is the life of a budget from creation or preparation, to evaluation. Most small businesses don’t use the term “budget cycle” but they use the process and go through each of its four phases — preparation, approval, execution and evaluation.

Prepare Your Budget

The first step of the budget process is to create it. Done right, this process starts with careful thought at the ground level. How much income is needed and what new initiatives can be started should be considered.

As the small-business owner, your leadership and vision will guide what’s included and what's excluded from the budget. You’ll consider anticipated revenues; expenses for employee wages, operations and materials; and costs for any improvements you plan to make to your company.

(Video) The 4 Phases of Philippine Budget Process

Get Your Budget Approved

While the political budgeting process is a bit messy, one of its underlying principles is very meaningful for your business. Budgets aren't approved on a yes or no basis. Instead, they're the subject of debate.

While, at times, the political process can distort budgetary priorities, businesses don't have to fall prey to that problem. Instead, the approval process can be an opportunity for you to step back and take another view of how your company is spending its funds.

Most small-business owners handle all four phases of their budget’s cycle themselves. This is fine but don’t do it in a vacuum. Have your accountant or a trusted peer look at it before you stamp it “Approved.”

(Video) The Philippine Budget Process

Execute Your Budget

Once a budget is approved, it’s time to implement it. Unlike the federal government, business owners like you can’t impound funds to prevent wasteful spending. But you can adjust your your business tactics to handle increases in spending or lower than expected revenues.

Most of the time money comes in and goes out in accordance with the budget. A good budget isn't a limitation on what your company can spend. It's a financial embodiment of your company's strategy and tactics for the year.

Evaluate Your Budget Regularly

Even the best planned budget should be reevaluated from time to time and, if need be, revised. Changes in revenue, adjustments to costs and new information about your customer base are examples of things that may require budget revisions.

(Video) National Government Budget Cycle of the Philippines

The government audits and evaluates spending to ensure that money is being spent lawfully. But ongoing evaluation of your business’ budget requires a wider lens. You’ll want to keep an eye on how effectively money is being spent. But what really matters in business is whether you’re operating at a profit.

Think of your business’ budget as a living document that can help you define your goals. The four phases of a budget cycle provide the framework for achieving those goals.


1. Government Budgeting Cycle
2. Budgeting Process
3. 4 Phases Of A Rental Property Business Plan
(Real Estate Stiles)
4. 4 Stages Of Snowmobiling
(Charlie Berens)
5. 4 Stages of Project Life Cycle | Phases of Project Management Life Cycle | Knowledgehut
(KnowledgeHut upGrad)
(Zelna Jansen Consultancy)
Top Articles
Latest Posts
Article information

Author: Clemencia Bogisich Ret

Last Updated: 12/20/2022

Views: 5465

Rating: 5 / 5 (80 voted)

Reviews: 87% of readers found this page helpful

Author information

Name: Clemencia Bogisich Ret

Birthday: 2001-07-17

Address: Suite 794 53887 Geri Spring, West Cristentown, KY 54855

Phone: +5934435460663

Job: Central Hospitality Director

Hobby: Yoga, Electronics, Rafting, Lockpicking, Inline skating, Puzzles, scrapbook

Introduction: My name is Clemencia Bogisich Ret, I am a super, outstanding, graceful, friendly, vast, comfortable, agreeable person who loves writing and wants to share my knowledge and understanding with you.