A proper expense budget serves as a tool to disburse funds and as a means to track the actual outflow of cash against the projections. Good budgeting helps in determining whether the business strategy is workable or not. It also highlights important areas that require improvement. For efficient operation of a business requires ways to assess existing expenditure and keep it within set budget limits.

Price of goods sold:
When making the expense budget, you need to consider the cost of items that you are selling. These costs include the cost of payroll of direct labor, purchase of inventory and/or raw goods, purchase of non-inventory items such as packing materials and lubricants, and outside services that produce or sells the product, and other direct costs. Cost of inventory varies from one month to another.

Tracking and Budgeting Expenses:
To create a proper expense budget, you need to tease the price of goods sold from the operating expenses. Small business budget templates help a beneficial tool to track expenses.

Operating Expenses:
Expenses that do not go into "COGs" gets budgeted and tracked. These expenses are referred to as operating expenses. These expenses include the payroll for support and administrative staff, non-inventory materials that are not related to the goods production. Office supplies, administrative services, utilities, rent, loan, travel, and entertainment, come under this category.

Advantages to track expenses
Here are several good reasons to implement proper budget tracking in your business:

Realize new opportunities for investment of money and time:
Purchasing inventory in bulk batches reduces the price per unit. You will require to enlarge storage facilities to take the best benefit of the cost break. A budget will aid in finding out and planning for it as well as identifying other opportunities to lessen costs and increase revenues. It tells you the right time period to borrow money to boost the growth of your business. A budget can be designed for a family, person, business, group of people, a country or a government which is used to ensure planning, financial security, and foresight.

Streamline overspending:
By tracking actual expenses, you will figure out whether you are overspending or not. If you are overspending, then you have two options. The first option is to restore your operations to streamline the overspending. You need to make amendments to the amounts and sources of non-inventory and inventory items that you buy every month, size of the payroll, the amount spent on travel and entertainment and use of outside services.
The second option helps in enhancing your budget for those items that cannot be streamlined. Most of the businesses use both options to track their expenditure.

Evaluate spending patterns with time:
Budget tracking assists in recognizing trends of a business. It is useful in identifying seasonal spending patterns that are very important in planning the amount of cash that you will need for the upcoming period.

Conclusion
An effective budgeting aids in supervising and controlling the various business operations. All these techniques will definitely assist you to track your business budget effectively.