Start 2023 with Smart Budget Tips for Your Small Business

January 2023

Cashflow challenges affect 9 in 10 small businesses in Australia, according to accounting software company Xero. Key to addressing such cashflow challenges is a robust budget.

A budget that’s fit for 2023 will give you insights into when and where your business can:

  • Limit spending
  • Access extra funds to minimise debt
  • Give staff a pay increase
  • Plan to increase services, product lines or employee numbers
  • Outsource some activities
  • Invest in more inventory or equipment, etc.
  • Cover your costs once you’ve achieved your sales target.

Position your business for sustainability and growth this year with these five smart budgeting tips.

1. Determine your fixed and variable costs

Establish which of your costs are variable or fixed. Variable costs can make financial forecasts more challenging because they may change month-to-month. Variable costs involve operating expenses and the cost of goods sold.

Variable costs could include:

  • Equipment repairs
  • Labour
  • Commissions
  • Packaging
  • Utility bills
  • Transportation costs
  • New fees or specific taxes
  • Variable costs of raw materials or outsourced services that affect the production of goods or services you sell.

While variable costs will always be part of doing business, there are ways to minimise them. Your options include negotiating with providers for discounts, adopting lean management principles, finetuning your production and sales processes, or leveraging business technology.

2. Know your risks

Define and understand your risks. Business risks generally fall within a few categories:

  • Financial – cashflow, leveraging debt and credit
  • Economic – market and growth
  • Competitive, i.e., from your existing and would-be competitors
  • Reputational
  • Natural disasters.

Business Queensland offers a four-point checklist for managing your risks (applicable to every state):

  1. Map out your risk exposure
  2. Decide on each risk
  3. Protect your business with insurance coverage
  4. Assess your risks and revisit them regularly.

They also have risk management templates to help your business get started.

3. Set your budget and regularly revisit it

Generally, there are three sets of figures required in a business budget:

  • A profit and loss report to show if you’re in the red or black
  • A balance sheet revealing what you owe and own
  • A trial balance showing the entire balance of your business accounts (debits, credits, assets and liabilities).

4. Have an emergency fund

Consider setting up an automatic transfer to establish an emergency fund. Aim to save between three and six months of business expenses. It should cover your payroll, office supplies, rent, etc., while your business is disrupted.

Top up the account when business is buoyant. Every contribution, no matter how small, counts.

5. Work with a broker

Securing access to finance may help with cashflow, depending on your circumstances. A finance broker can customise options that clarify the fine print regarding fees, charges and penalties.

We are here to support you in finding better ways of operating and help you join the ranks of small businesses in control of their cashflow.

The information in this post is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information as at the date of publication, Geared Finance, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information for any reason, including due to the passage of time, or any loss or damage suffered by any person directly or indirectly through relying on this information.