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If your business isn’t operating with a budget, now is the perfect time to make one. Australian SMEs are facing increasing pressure as a result of inflation, and with financial experts warning of a recession to come, managing your business’s money has never been more important.

Setting a budget is an effective way to get ahead of challenging times and minimise the impacts on your business. An accurate budget allows you to take control of your savings and cash-flow, allowing you to strategize for growth.

Creating a budget may seem daunting, but it’s simpler than you may think. Essentially, it’s the process of calculating the difference between your total revenue and your total expenses, and working out how to manage the difference. Below, we break down this process into simple steps:

  1. Gather Your Financial Information
    Pull reports from your accounting software on your previous year’s performance, collect all of your invoices, bills, statements and any financial information relevant to your incomings and outgoings.

    For start-up businesses with no financial history, you can collect financial information based on industry averages instead.
  1. Estimate Your Total Revenue
    Now that you have all your paperwork together, add up your total revenue. This is any income earned, be it recurring or one-off, by your business.
  1. Calculate Your Fixed Costs
    Fixed costs are your expected expenses and are not affected by your income. These include things like rent, utilities and salaries. 
  1. Calculate Your Variable Costs
    Variable expenses are one-off or irregular business costs. These might include office supplies, new furniture and equipment or client gifts.
  2. Determine Your Profit and Loss
    To calculate your profit and loss, subtract all your expenses (fixed and variable) from your total revenue. If the result is positive, you have made a profit and if it’s negative, you have made a loss.

All businesses experience losses and periods of downturn, so it’s not something to be alarmed about. However, incurring a loss too frequently or for too long indicates you need to make significant changes within your business to improve its financial situation and ensure its survival.

If your business has made a profit, you can form a strategy on how to use the money, you may:

  • Build your savings
  • Re-invest it into the business
  • Add more balance into your life
  1. Test Different Scenarios
    It’s important to remember that some elements of a business budget are based purely on estimates. Therefore, it is important to make an allowance for different scenarios you may encounter, for example:
  • What if your business makes 10% more?
  • What if your business makes 10% less?
  • What if you find a more affordable utility provider?
  • What if you lose your biggest client?

By considering these possibilities and budgeting for them, you will be more financially prepared to handle any situation.

  1. Review Your Budget
    Having a budget is fantastic for your business, however if you do not assess your performance against it regularly, it becomes largely meaningless. 


Have a look at your businesses earnings and expenditure on a weekly, or at least monthly, basis. This will allow you to determine how closely you are sticking to your budget and make adjustments as required.

Are you struggling with business debt?

Our friendly team at Wisdom Business Consultants are experts at helping businesses establish feasible budgets, improve processes and increase profitability, allowing them to take control of their business debt. The sooner you take action on your debt, the better your business’s chances of success. Contact us today by calling 1300 277 148 or email help@wisdombc.com.au.

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