Small business owners: The best way to budget for the future of your business

Any business that isn’t planning for the future is planning to get left behind.

While most business owners know that budgeting is a critical part of their planning, there is some confusion about which components should be included in a budget.

There are three critical elements. Together, they provide the oversight you need for your business - and the key targets to work towards.

They will allow you to make informed decisions based on the reality on the ground, and realistic projections of what will happen in the future.

Just like a pilot monitors a flight plan and may need to change it according to prevailing conditions and advice received from air traffic control, your budget becomes your business’s path into the future.

Remember: what gets monitored gets managed. Budgeting is about preparing for what lies ahead. This is rarely steady and constant, so it needs to be consistently monitored and forecasts managed according to the reality.

This will help you gain an edge over the many businesses out there that are not so agile or prepared for what’s around the corner.

Here’s what your three-way budget should include:

1. Profit and loss

Budgets should begin with a detailed look at profit and loss. What are the costs and revenue-drivers in your business? When these change what is the impact? How many existing customers do you have and what is the average invoice value, for instance?

Use past and present information from management accounts and financial statements to work out your anticipated profit for the next 12 months; and be aware of industry changes that might affect the business.

NOTE: Profitable businesses can go broke! When budgets are solely designed as profit and loss predictions, potential problems can be overlooked; alone, the projected profitability of your business doesn’t consider managing growth and it won’t help you avoid cash flow problems.

There’s a saying, “Profit is theory, cash is fact,” which leads us to the second element of your three-way forecast…

2. Cashflow forecast

One of the main reasons that small businesses fail is poor cash flow management.

As already noted, it is possible to make a good profit but not have enough cash in the bank account to pay bills or repay loans.

Unless the profit is converted to cash in your bank account (e.g. you are invoicing regularly, customers are paying you promptly for services delivered, and your money is not tied up in stock), you may be at risk of insolvency. After all, you pay staff and bills with cash—the money in your bank account—not with the profit figure that appears on a financial statement.

So cash really is the ‘life blood’ of a business. By adding a cash flow forecast element to your budget, you create more consistency in your business. You will make it more ‘future-proof’ and be better equipped to ride things out when cash flow hits harder times. You are prepared and can take corrective measures in the business before a full-blown crisis develops.

Planning ahead for the timing of your likely cash inflows and outflows allows you to identify the need for a capital injection, an increase in credit or to boost your cash flow in some other way.

3. Balance sheet

A balance sheet provides a projected statement of assets, liabilities and owners’ or shareholders’ equity and is the final piece of your budget jigsaw. A simple way of describing what your balance sheet summarises is: what does the business own (its assets), what does it owe (its liabilities) and what’s the difference in those amounts, which is the equity.

You may have heard the phrase, “a healthy balance sheet.” This refers to a balance sheet where the assets well exceed the liabilities and the business is able to comfortably meet its obligations.

It’s important to track the health of your balance sheet because looking only at your revenue and cash flow and not taking into account your level of liabilities would be like only caring about how many goals your team scores, and not keeping an eye on how many goals are scored against you. The “for and against” ratio matters in business, just as it does in sport.

The three parts of your three-way budget complement each other. Together, they provide a complete picture of the financial health of your business AND your future targets on three fronts:

Your anticipated profit;
How much cash should be sitting in your bank account;
What the net worth of your business will be.

How often should you revisit your 3-way budget?

The purpose of your three-way budget is to try to realistically predict future numbers and to give you targets to work towards.

You may not get this right immediately. In fact, it’s likely that you’ll need to revisit it multiple times before you become adept at accurate forecasting.

Even then, things change. So it’s a good idea to review the budget on a monthly or, at least, quarterly basis.

You’ll need to recognise and interpret differences between actual and forecast results, and decide on actions to keep your business on track.

In business it can often become a case of ‘not being able to see the forest for the trees,’ where you get caught up in the day-to-day operational details of your business, and lose sight of the bigger picture and how your business is travelling compared with expectations.

That’s where it pays to have an independent advisor help you:

Create your three-way forecast,
Monitor and update your three-way forecast with your actual results, and
Discuss with you ways of keeping your business’ performance on track.

Just as any sport involves players, coaches and scorekeepers, so does business. You and your team are the players in the heat of the battle, and you need not just independent scorekeepers but also the support and guidance of an experienced coach.

That’s where we come in for you, as that support.

Are you prepared for the future?

What happens if your circumstances change? If costs go up or sales and revenue goes down?

Changing circumstances are a given in any business. While it’s impossible to predict the future, it’s how you react to change that will ultimately determine the success or failure of your business.

Rather than simply estimating figures based on last year’s numbers plus a few percent growth, put work into a three-way budget. This will help you take the necessary action and adjust your business practices according to actual results and future changes.

This type of budget will provide a full overview of the impact on your business and you’ll be in a position to make informed decisions based on this new ‘reality’. It may even help you to receive financial backing from banks or investors.

You will be able to pre-empt any number of scenarios and assess where your business can improve, avert problems before they develop into crises, and take advantage of growth opportunities that arise.

This is the real power of the three-way budget. Implement it in your business and see what a difference it makes to your decision-making, motivation levels, performance, and ultimate success.

< Older Post Newer Post >

Need help with your accounting?

Find Out What We Do

What Registrations Do I Actually Need When Starting a Business?

February 13, 2026

Starting a business is an exciting milestone, but the paperwork can quickly become overwhelming. At Ascent Accountants, we often see new business owners get caught in the "registration trap"—either registering for everything at once (and creating unnecessary admin) or missing critical deadlines that lead to penalties. Knowing which registrations are mandatory and which are optional depends on your business structure, turnover, and whether you have a team. Here is our high-level guide to the essential registrations you need to consider. 1. The Foundations ABN & TFN. Australian Business Number (ABN): Your ABN is your business’s unique 11-digit identifier. While not strictly compulsory for everyone , you almost certainly need one. Without an ABN, other businesses must withhold 47% of any payments they make to you. Tax File Number (TFN): Sole Traders: You use your personal TFN. Companies, Partnerships, and Trusts: You must apply for a separate business TFN. 2. Tax Registrations (ATO) Goods and Services Tax (GST): You must register for GST if your business has a GST turnover of $75,000 or more ($150,000 for non-profits). If you drive a taxi or provide ride-sourcing services (like Uber), you must register regardless of your turnover. Fuel Tax Credits: If your business uses fuel in heavy vehicles, machinery, or for other eligible activities, you can claim a credit for the excise or customs duty included in the price. Note: You must be registered for GST before you can register for Fuel Tax Credits. 3. Employer obligations when hiring a team. If you’re moving from a "solo-preneur" to an employer, your registration requirements change significantly: PAYG withholding: You must register for Pay As You Go (PAYG) withholding before you make your first payment to employees or certain contractors. This allows you to withhold tax from their wages and send it to the ATO. Superannuation: You don't "register" for super in the traditional sense, but you have a legal obligation to pay the Superannuation Guarantee (currently 12% on July 1, 2025) for eligible employees. We recommend setting up a Superannuation Clearing House to streamline these payments. On 1st July 2026, super will be required to be paid each payday. Workers’ compensation insurance: This is a mandatory insurance policy for almost all employers in Australia. It protects you and your employees in the event of a work-related injury. Each state has different rules; for example, in WA, you must have a policy if you employ anyone defined as a "worker." 4. Business Identity: ASIC If you want to trade under anything other than your own legal name (e.g., "John Smith" vs. "Smith’s Landscaping"), you must register the name with the Australian Securities and Investments Commission (ASIC). Our advice? Don’t over-register too early. We often see clients register for GST before they reach the $75k threshold. While this allows you to claim GST credits on your setup costs, it also means you must lodge regular Business Activity Statements (BAS). Speak with us before you hit "submit" on your registrations. We can help you determine the most tax-effective timing for your specific situation. Contact the team today.

Protecting Your Property Investment With Title Insurance.

February 13, 2026

When you find your dream home, the process often feels like a whirlwind of inspections, mortgage documents, and packing boxes. Most buyers are diligent about checking for termites or structural cracks, but there is one significant risk that a physical inspection can’t uncover: legal defects in the property’s title. When it comes to real estate, one of the most effective ways to safeguard your equity is through Title Insurance. What is title insurance? Unlike standard home and contents insurance—which covers future events like fires, storms, or theft—Title Insurance is a specialised policy that protects you against existing but unknown legal risks that occurred before you bought the property. It is a one-off premium paid at the time of settlement that provides cover for as long as you own the home. Despite its value, statistics suggest only about 50% of buyers currently opt-in. How it works: real-world scenarios. Title insurance steps in when "discrepancies" surface after you’ve already moved in. Here are the most common ways it protects you: Illegal building work & conversions: It’s common to find a garage that was converted into a bedroom or a deck built without council approval. If the local council discovers this later and demands you bring it up to code or demolish it, Title Insurance can cover the legal and construction costs. Boundary & encroachment issues: Imagine discovering your fence, garage, or driveway is actually sitting on your neighbour’s land or Crown land. The cost of surveys, new building plans, and reconstruction can be staggering. Title insurance handles these expenses. Unpaid rates or taxes: If the previous owner left behind land tax or council rate debts that weren't discovered during settlement, the policy can cover these outstanding costs. Planning & zoning violations: Protection against loss if you cannot live in the house because it doesn't comply with local zoning laws. Is it worth It? These problems often stay hidden for years. You might buy a house that looks perfect, only to find out it has issues when you apply for your own renovation permits. For a relatively low, one-time fee, Title Insurance offers "peace of mind for your purchase." However, it is not a substitute for due diligence. Before you sign: Consult your conveyancer: They can help you finalise the policy during the settlement process. Research the provider: Ensure the company has a strong history of payouts and longevity in the market. Review the coverage: Understand what is specific to your property type (e.g., strata vs. green title). The Ascent perspective. From a financial planning standpoint, an unexpected $20,000 council-ordered demolition or a boundary dispute can derail your investment strategy. Title insurance is a small price to pay to ensure your property remains a secure asset rather than a legal liability. Are you planning a property purchase? Talk to the team at Ascent Property Co and Ascent Accountants to ensure your tax and financial structures are as solid as the roof over your head.

Understanding the New Payday Superannuation Requirements (1 July 2026).

February 13, 2026

From 1 July 2026, the way employers make superannuation guarantee (SG) contributions will change. The Australian Taxation Office (ATO) has introduced Payday Super . This reform requires employers to pay super at the same time they pay employees’ wages. This is a significant update to the timing of super payments, and it’s important that your payroll processes and software are prepared well before the new rules commence. For full details, including eligibility and exceptions, see the ATO’s information on Payday Super. Key changes. Current requirements. Under the existing system, employers can make Super Guarantee payments to an employee’s fund up to 28 days after the end of the quarter. SG can be paid quarterly or more frequently (for example, monthly), and the current quarterly due dates are 28 October, 28 January, 28 April, 28 July. From 1 July 2026 Under the new Payday Super regime, Super Guarantee payments must be paid to an employee’s super fund at the same time as paying qualifying earnings (QE) — that is, on the employee’s payday . The payment must be received by the super fund within 7 business days of payday. There are limited exceptions to this 7-day deadline, such as for new employees. What you should do now. To ensure compliance with the new requirements, we recommend the following steps: 1. Review your payroll software and processes Confirm that your current systems can support on-payday super payments. If updates or changes are required, plan for implementation well in advance of July 2026. 2. Adjust internal procedures Update payroll calendars and workflows to align with the new payment timing, and ensure responsibilities and deadlines within your team are clear. 3. Seek advice if needed If you are unsure how the changes affect your business, or if your current setup requires modification, please contact us! We are here to help. 4. Review business cashflow. Ensure that the business cashflow will allow you to pay the superannuation on time, each payday. If not, you’ll need to put plans in place. We’re here to support you. These changes will affect all employers with staff and will require planning and preparation. If you have any questions or need assistance reviewing your systems and processes, please get in touch with the Ascent team.