How to prepare a budget for a company: Guide for AU businesses

Every business reaches a point where the numbers feel unclear. You look at your accounts, notice higher costs, and feel unsure about how to plan the next quarter. Many Australian businesses face the same uncertainty.

According to the Australian Bureau of Statistics, nearly 46% of all businesses experienced increases in operating expenses¹ in a recent reporting period. These cost pressures often build quietly when a company works without a clear and structured budget.

A well-prepared budget helps reduce this stress. It offers clarity. It sets limits. It shows how much money enters the business, how much leaves, and what the company can confidently invest in next. With a clear budget, decisions feel steadier and less reactive.

If you want a simple and practical way to understand how to prepare budget for a company, this guide walks through each step. You will learn how to plan, allocate, and monitor your budget in a way that supports long-term stability, even when the market shifts.

What is a business budget?

A business budget is a plan that shows how much money a company expects to earn and how much it expects to spend in a period. It gives a clear view of the company’s financial limits and priorities. A good budget outlines expected income, fixed costs, variable costs, one-off expenses, and the amount set aside for future plans.

This structure helps the business understand what it can support right now, what it must prioritise, and what it may need to delay. It also shows how much money each department or project can use.

You can see the value of a budget when you compare two similar businesses:

1. One business prepares a budget. It sets limits, tracks its main costs, and allocates money for important plans. When sales drop for a month, the owners know which expenses they can pause because they have a clear plan.
2. The second business has no budget. It reacts to each month without a clear view. When sales drop, the owners feel unsure about which costs they can cut or what they can fund. This creates stress and forces last-minute decisions.

A budget also supports accountability. Each team knows its limits, and leaders can adjust early when costs shift.

In simple terms, a business budget helps the company stay organised, control expenses, and plan with more confidence.

Why is it best for businesses to prepare a budget?

A clear budget helps a business stay in control of its money and day-to-day decisions. It sets limits, shows priorities, and reduces guesswork. Here are the main reasons a business needs a proper budget:

• It allows the business to create a plan for how much money they will earn and spend in the future.
• It ensures that a business's expenses are aligned with its objectives/goals.
• It minimizes waste and other non-value-adding expenses.
• It provides clear expense limits and greater accountability for each team.
• It identifies cash-flow problems early by highlighting periods of no revenue.
• It enables more fact-based decision-making rather than assumption-based decision-making.
• It results in more efficient operation throughout the year.
• It allows new businesses to develop good financial habits so they do not undergo unnecessary financial strain.

How to prepare budget for a company - Guide

A clear budget helps a business understand how much money it can use across the year. It shows expected income, essential expenses, and how funds flow across teams or projects. A good budget also gives leaders a steady view of priorities and limits.

The steps below offer a practical way to build a budget that supports stable operations and better financial decisions.

1. Set clear business goals

Start by deciding what the company aims to do this year. These goals help you see which areas need more attention and which plans can pause. Once you know the priorities, the budget takes shape more easily. It also becomes clearer why certain teams need more funds than others.

2. Estimate expected revenue

Look at past sales, current demand, and any new opportunities to form a realistic income figure. This shows how much money the business can depend on. A steady estimate helps you avoid pressure later and tells you whether the company has room to support new ideas.

3. List all expenses

Write down every cost the business faces, from rent and salaries to materials and one-off items. A complete list helps you avoid surprises later in the year. It also shows which costs stay fixed and which ones you can adjust. The more detailed the list, the clearer the budget becomes.

4. Review past financial data

Check old budgets and monthly reports to see patterns in costs and revenue. This helps you understand what worked well and what caused strain. Past data gives you a realistic base for the new budget. It also helps you avoid repeating earlier mistakes.

5. Speak with department leads

If you have multiple teams, ask each lead about the costs they expect in the year ahead. They can point out important needs and upcoming plans. This makes the budget more accurate and avoids missing key expenses. Their input adds real-world detail to the overall plan.

6. Draft the first version

Bring your income estimate and expense list into one place. Then outline how money may flow across teams or projects. This first version helps you notice gaps or overlaps early. It also gives you a full view of the year before you make final adjustments.

7. Prepare for risks

Look ahead and note what may affect the budget, such as higher costs, slow sales, or sudden repairs. Set aside a small buffer so the business can handle these moments without stress. This reserve allows the company to respond calmly instead of reacting in a rush. A simple risk buffer keeps the plan steady throughout the year.

8. Finalise and approve the plan

After adjusting the draft, share it with the people who make financial decisions. Explain why each area receives its amount and how it supports the company’s goals. Once they agree, the budget becomes the official guide for the year. This step makes sure everyone works from the same plan.

9. Communicate the budget

Share the final budget with all teams so they understand their limits and priorities. Clear communication prevents confusion and helps each team plan ahead. When everyone knows the numbers, coordination improves. This helps the company move in one direction.

10. Review and adjust

Check the budget throughout the year. Compare what you expected with what actually happened. If sales shift or expenses rise, adjust the plan early. This keeps the budget relevant and useful, not just a document you set aside. Regular reviews give the business better control.

Best practices when creating a business budget

Certain habits make a budget more reliable and easier to manage across the year. These points help the company stay prepared, avoid surprises, and use money with more intention.

• Set clear priorities: Decide which goals or projects matter most before you assign money. Clear priorities guide the entire budget and prevent confusion later.
• Keep revenue estimates realistic: Use numbers you can trust. A careful estimate protects the business from stretching too far and supports steadier decisions.
• Create a simple tracking process: Use tools or templates to monitor expenses and income. Clear tracking makes the budget easier to follow and reduces errors.
• Set aside a buffer: Unexpected costs appear in every business. A small reserve helps you handle repairs, slow months, or rising prices without stress.
• Communicate the budget across teams: Make sure everyone understands the final numbers. When teams know their limits, they plan better and avoid unnecessary requests.
• Factcheck your assumptions: Markets change, suppliers shift prices, and plans evolve. Review assumptions across the year so the budget stays relevant.
• Plan for cross-currency costs: If the business deals with suppliers, contractors, or platforms overseas, currency shifts can affect expenses. Exchange rates may rise without warning and increase your costs. You can manage this by comparing fees, setting clear limits for international payments, and using tools that reduce FX markups.

Wise Business: Better visibility for global costs

When building a budget, accounting for international costs is often difficult due to fluctuating exchange rates and unexpected bank fees.

Wise Business helps solve this uncertainty by providing a transparent view of your global spending using the mid-market exchange rate without hidden markups. By allowing you to hold and pay in multiple currencies, it becomes easier to forecast expenses and keep your financial plan on track.

Additionally, seamless integration with major accounting tools ensures that your transaction data flows automatically into your books for more accurate reporting.

A Wise Business account allows users to can send, receive, and hold in multiple currencies. Experience hassle-free global transactions by transacting like a local business. Here's what you get with a Wise Business account:

• Free to register — Hold and convert between 40+ currencies. Send to 140+ countries
• Debit cards for you and your team, which you can use in 150+ countries
• Multi-user access for team members, with ways to control and manage permissions
• Pay up to 1,000 recipients at once with the Wise batch payments feature
• Integrate with your favourite cloud accounting solutions like Xero, QuickBooks, and more
• Get account details to receive in 8+ currencies for a one-time fee of 65 AUD

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This general advice does not take into account your objectives, financial circumstances or needs and you should consider if it is appropriate for you.

FAQs

1. How can I create a budget to account for seasonal fluctuations in income?
Understanding the historical patterns of your sales data will better help you plan. Analyzing prior history based on peak months can help you determine what months provide the most revenue for the company to be used to build up a reserve to provide stability for the company and pay to support the operating expenses of the company during slow months.

2. Who is responsible for creating the annual budget for their company?
This depends on the size of the company. Usually, the business owner will undertake the entire process in small companies, whereas in larger companies, all of the staff from finance and senior management to department heads participate in the annual budget creation. The CEO or CFO ultimately approves the annual budget.

3. What is the optimal budget methodology for start-up or small business owners?
Start-ups and small business owners benefit from developing an annual budget that is simple and easy to follow, yet flexible to enable frequent modifications. The simple annual budget aids in controlling the start-up expenses of the business, as well as enforces the discipline of reviewing every dollar spent, thereby supporting a zero-based budgeting approach.

Source:

1. Operating expense