How to budget for a new financial year: Planning for FY27

Published Monday 24 August 2026

Table of contents

• What is a financial year budget?
• How to review your current financial year
• How to create a business budget for FY27
• Types of budgets for small businesses
• Tips for sticking to your FY27 budget
• How accounting software simplifies budgeting
• Simplify your FY27 budget with Xero
• FAQs on budgeting for a new financial year

Key takeaways

• Reviewing your current financial year's actual results against your budget gives you a clear starting point for FY27 planning.
• A step-by-step approach to budgeting, from estimating revenue to calculating expected profit, helps you build a realistic plan you can act on.
• Checking your budget monthly, rather than once a year, keeps your spending on track and lets you adjust when things change.
• Accounting software automates much of the tracking and reporting, so you spend less time on spreadsheets and more time running your business.

What is a financial year budget?

A business budget is a financial plan that estimates your income and expenses over a set period, helping you decide how to allocate your money. For Australian businesses, the financial year (FY) runs from 1 July to 30 June, so your FY27 budget covers 1 July 2026 to 30 June 2027.

Having a budget gives you a roadmap for the year ahead. It helps you manage cash flow, plan for tax obligations, and make spending decisions based on real numbers rather than guesswork. Without one, it's easy to lose sight of where your money's going.

A budget doesn't need to be complicated. At its core, it's a document that sets out how much you expect to earn, how much you plan to spend, and what profit you're aiming for. You can adjust it as your circumstances change throughout the year.

Why budget for the new financial year?

The start of a new financial year is a natural reset point. It's when your tax obligations begin fresh, and it's the ideal time to set targets based on what you've learned from the year just passed.

Budgeting for the new financial year helps you in several practical ways:

• It gives you a clear picture of expected cash flow, so you can plan for quieter months.
• It highlights areas where you might cut costs or invest more.
• It prepares you for tax time by tracking deductible expenses throughout the year.
• It helps you set realistic revenue targets and measure your progress against them.

How to review your current financial year

Before you start planning for FY27, it's worth looking back at how the current year went. A review of your FY26 results gives you a factual foundation to build on, rather than relying on assumptions.

1. Compare your actual income and expenses against your original budget. Pull your profit and loss statement and look at where you came in higher or lower than expected. This comparison tells you which parts of your budget were realistic and which need rethinking.
2. Identify seasonal patterns. If you run a retail business, you might notice that December and January brought in more revenue, while February and March were quieter. Identifying these trends helps you forecast cash flow more accurately for FY27.
3. Look for unexpected costs that threw your budget off track. Maybe a piece of equipment broke down, or a supplier raised their prices mid-year. Noting these surprises helps you build a more realistic buffer into your next budget.
4. Finally, check whether you hit your revenue targets. If you fell short, consider why. Was it a pricing issue, a drop in customer demand, or higher-than-expected competition? Understanding the cause shapes how you set your FY27 targets.

How to create a business budget for FY27

Creating a business budget doesn't have to be overwhelming. Breaking it into clear steps makes the process manageable, and you'll end up with a plan you can actually use throughout the year.

The following six steps walk you through building an FY27 budget from start to finish.

1. Estimate your revenue

Start with how much money you expect to bring in. Look at your FY26 revenue as a baseline, then adjust for anything you know is changing. If you're planning to raise prices, launch a new product, or expand into a new market, factor that in.

Be conservative with your estimates. It's better to be pleasantly surprised than to budget around income that doesn't materialise. If your revenue varies by season, break your estimates down by month or quarter so you can plan for the quieter periods.

2. List your fixed costs

Fixed costs are the expenses that stay roughly the same each month, regardless of how much you sell. These typically include rent, insurance, loan repayments, salaries, and software subscriptions.

List every fixed cost you can identify and note the monthly amount. These are your baseline expenses; they need to be covered before you spend on anything else. If any fixed costs are increasing for FY27, such as a rent review or a salary rise, update the figures now.

3. Estimate your variable expenses

Variable expenses change depending on your business activity. They might include raw materials, shipping costs, sales commissions, or casual wages. The more you sell, the higher these costs tend to be.

Use your FY26 data to estimate what these will look like in FY27. If you're expecting higher sales volume, your variable costs will likely rise too. Try to express variable expenses as a percentage of revenue where possible; this makes it easier to adjust your budget if your sales projections change.

4. Plan for one-off and seasonal expenses

Some costs don't fit neatly into monthly categories. You might need to replace equipment, invest in a website redesign, or pay for a one-off marketing campaign. Seasonal expenses, like end-of-financial-year sales or holiday staffing, also belong here.

Map out any known one-off and seasonal costs across the 12 months of FY27. Even rough estimates are helpful. The goal is to avoid being caught off guard by a large expense in a month when cash is tight.

5. Set aside a contingency fund

No budget can predict everything. A contingency fund gives you a financial safety net for unexpected costs, whether that's a sudden repair, a slow sales month, or a change in regulations.

A common approach is to set aside 5-10% of your total budgeted expenses as a contingency. If that feels like too much, start smaller. Even a modest buffer is better than none. The Australian Government's business planning guide recommends building a reserve as part of sound financial planning.

6. Calculate your expected profit

Once you've estimated your revenue and totalled your expenses, including fixed costs, variable expenses, one-off costs, and your contingency, subtract the total expenses from your expected revenue. The result is your projected profit for FY27.

If the number is negative or lower than you'd like, go back through your budget and look for areas to adjust. Can you reduce a variable cost? Is there a fixed expense you could renegotiate? Could you increase prices without losing customers?

Your budget is a living document. The first version doesn't need to be perfect; it just needs to be realistic enough to guide your decisions.

Types of budgets for small businesses

Not every business needs the same type of budget. Depending on your priorities, you might use one or a combination of these common formats:

• Operating budget: This covers your day-to-day income and expenses. It's the most common type and the one most small businesses start with. It tracks revenue, cost of goods sold, and overheads to show whether your core operations are profitable.
• Cash flow budget: This focuses on when money comes in and goes out, rather than just how much. It's especially useful if you invoice clients and wait for payment, because it helps you spot months where you might run short. Take your opening cash balance, add expected income for the period, and subtract expected expenses for your closing cash balance.
• Capital expenditure budget: This plans for larger purchases like equipment, vehicles, or technology upgrades. These items are usually one-off costs that aren't part of your regular operating expenses, but they still need to be funded from somewhere. A capital budget helps you time these purchases and plan how to pay for them.

Choosing the right budget depends on where your business is at. If you're just getting started, an operating budget is a solid first step. If cash flow timing is a challenge, add a cash flow budget alongside it.

Tips for sticking to your FY27 budget

Building a budget is only half the job. The real value comes from using it consistently throughout the year.

Here are some practical ways to keep your FY27 budget on track:

• Review monthly. Set a regular time each month to compare your actual figures against your budget. This helps you catch problems early, before they become bigger issues.
• Track expenses in real time. Waiting until the end of the month or quarter to log expenses means you're always looking backwards. Real-time tracking gives you a clearer picture of where you stand right now.
• Adjust when things change. Your budget isn't locked in. If you win a big contract or lose a major client, update your projections so the budget stays useful.
• Involve your accountant or bookkeeper. They can help you interpret your numbers, spot trends you might miss, and ensure your budget aligns with your tax and compliance obligations.
• Keep it visible. A budget that sits in a drawer or a forgotten spreadsheet doesn't help. Make it part of your regular business routine.

How accounting software simplifies budgeting

Managing a budget manually, whether in spreadsheets or on paper, takes time and leaves room for error. Accounting software takes over much of the repetitive work, so you can focus on the decisions that matter.

Here's how it helps with budgeting:

• Automated tracking: Income and expenses are recorded automatically through bank feeds, so you don't have to enter transactions by hand.
• Real-time reporting: You can compare your actual figures against your budget at any time, not just at month-end. This makes monthly reviews faster and more accurate.
• Cash flow visibility: Most accounting platforms include cash flow reports and forecasting tools, giving you a clear view of when money's coming in and going out.
• Invoicing and payment tracking: You can see which invoices are outstanding and chase late payments, which directly affects your cash flow budget.
• Reduced errors: Automated calculations and bank reconciliation reduce the manual mistakes that creep in with spreadsheets.

If you're still budgeting with a spreadsheet, switching to accounting software can reduce the time you spend on manual financial tasks and give you more confidence in your numbers.

Simplify your FY27 budget with Xero

Planning your FY27 budget is easier when your financial data is organised, up to date, and accessible in one place. Xero's cloud accounting software is built for small businesses. It gives you the tools to track income and expenses, reconcile bank transactions and monitor cash flow in real time.

With Xero, you can pull reports that compare your actuals against your budget, spot trends across months, and share your numbers with your accountant or bookkeeper directly. Features like automated bank feeds and invoicing reduce the manual work that slows budgeting down, while payment reminders help you stay on top of cash flow.

Trusted by over 4.6 million subscribers worldwide, Xero helps you spend less time on bookkeeping and more time making decisions that grow your business.

Ready to simplify your FY27 budget? Get one month free

FAQs on budgeting for a new financial year

Here are some common questions about business budgeting for the new financial year.

How often should you review your business budget?

Monthly reviews are the most effective approach. They let you compare actual performance against your plan and make timely adjustments before small variances turn into bigger problems.

What’s the difference between a budget and a forecast?

A budget sets out your planned income and expenses for a period, based on your targets and decisions. A forecast is an updated projection of what you expect to actually happen, based on current performance and trends. Budgets guide; forecasts predict.

Do you need an accountant to create a business budget?

You don't need an accountant to create a basic budget, but working with one can add value. An accountant can help you identify tax-saving opportunities, benchmark your figures against industry norms, and ensure your budget supports your compliance requirements.

What’s a cash flow statement and why does it matter for budgeting?

A cash flow statement tracks the actual movement of money in and out of your business over a specific period. It matters for budgeting because it shows whether you have enough cash on hand to cover your expenses, even if your profit-and-loss statement looks healthy.