As the new financial year begins, many Australian business owners focus on lodging tax returns, catching up on paperwork, or getting back to work after the EOFY rush. According to John Saade, CEO of Latitude Accountants, July should also be the time to create one of the most valuable business tools you’ll use all year—a realistic business budget.

In this episode of The CEO Breakdown, John builds a complete 12-month budget for a fictional electrical business called Sparkline Electrical. Rather than relying on guesswork, he demonstrates how revenue, staffing, marketing, equipment purchases, overheads, tax, and profit all work together to determine whether a business will thrive or struggle.

While the example focuses on an electrical contractor, the lessons apply to virtually every Australian trade business, service company, and growing small business. A well-prepared budget gives you confidence to make informed decisions before financial pressure hits—not after the damage has already been done.

Why Every Business Should Build a Budget Every July

A budget is much more than a spreadsheet filled with numbers.

It provides a financial roadmap that allows business owners to make smarter decisions throughout the year. Without a budget, every decision—from hiring employees to purchasing equipment—becomes a guess.

John explains that businesses without a budget often experience one of two problems:

• They become overly optimistic and underestimate future expenses.
• They become overly cautious and avoid investing in growth because they lack financial clarity.

Creating a budget each July gives you a central place to measure every financial decision before committing your money.

Whether you’re considering hiring another employee, buying a new vehicle, increasing advertising, or investing in equipment, your budget should help answer one simple question:

Can the business comfortably afford this decision?

Start with Realistic Revenue Assumptions

Every successful budget begins with realistic revenue forecasting.

Using Sparkline Electrical as an example, John estimates annual revenue of approximately $1.259 million, averaging around $100,000 per month. Rather than assuming every month will perform equally, he factors in seasonal fluctuations, allowing for reduced revenue during periods with public holidays such as December, January, and April.

As marketing efforts increase and the business grows, monthly revenue gradually rises throughout the financial year.

This approach creates a far more realistic financial forecast than simply dividing annual revenue into equal monthly amounts.

Budget for Direct Costs Before Counting Profit

Revenue alone doesn’t determine whether your business is successful.

You also need to understand your Cost of Goods Sold (COGS), which includes expenses directly related to the delivery of your products or services.

For many trade businesses, these costs include:

• Materials
• Consumables
• Subcontractors
• Other direct job expenses

John allocates 30% of revenue to materials and 3% to subcontractors, resulting in a healthy gross profit margin of approximately 67%.

Monitoring gross profit helps identify problems early. If material costs begin to increase or labour is consistently underquoted, profitability quickly declines—even if revenue continues to grow.

Plan Your Workforce Before You Hire

One of the biggest advantages of budgeting is the ability to plan staffing decisions before they become urgent.

Sparkline Electrical’s budget includes:

• The business owner
• Two qualified electricians
• One second-year apprentice
• A planned third-year apprentice hired later in the financial year

The budget also accounts for annual wage increases, superannuation contributions, and workers’ compensation insurance.

Rather than hiring reactively, John demonstrates how businesses should forecast employment costs before making recruitment decisions. This gives owners confidence that future wages can be supported by projected revenue.

Invest in Marketing to Support Growth

One of John’s strongest messages is aimed directly at business owners who expect revenue to grow without investing in marketing.

His advice is straightforward.

If customers don’t know your business exists, revenue won’t magically increase.

Sparkline Electrical commits to a minimum monthly Google Ads budget while also ensuring marketing represents approximately 6% of revenue as the business grows.

This allows advertising investment to grow alongside turnover, creating a consistent pipeline of new work.

For many trade businesses, marketing shouldn’t be viewed as an expense—it should be viewed as an investment in future revenue.

Budget for Equipment, Vehicles and Overheads

Major purchases should never be surprises.

John includes the planned purchase of a new work vehicle within the annual budget, factoring in:

• Vehicle deposit
• Finance repayments
• Loan interest
• Fuel
• Insurance
• Maintenance
• Depreciation

Beyond vehicle expenses, every business also needs to budget for ongoing overheads, including:

• Rent
• Software subscriptions
• Phone and internet
• Accounting and bookkeeping
• Tools and equipment
• Training and licences
• Uniforms and PPE
• Bank and merchant fees
• Office administration

Accounting for these expenses upfront creates a much more accurate picture of profitability throughout the year.

Understand the Difference Between Profit and Cash

One of the most valuable lessons from John’s budget is understanding that profit and cash are not the same thing.

Your Profit and Loss statement measures business performance, but it doesn’t always reflect the cash available in your bank account.

John also reminds business owners that GST isn’t your money.

Because GST is collected on behalf of the Australian Taxation Office, it shouldn’t be treated as business income when preparing a budget. Instead, budgeting should focus on figures excluding GST to provide a clearer picture of actual profitability.

Review Your Budget Every Month

A budget isn’t something you create once and forget.

Business conditions change throughout the year.

Sales increase or decrease.

Hiring plans change.

Marketing performance improves.

Unexpected expenses arise.

John recommends reviewing and updating your budget every month so it continues reflecting your current business reality. By comparing actual performance against your budget, you can make adjustments early instead of discovering problems at the end of the financial year.

Increase Your Prices and Know Your Numbers

Another important takeaway is the importance of reviewing your charge-out rates annually.

Costs continue rising because of inflation, wage increases, insurance, and supplier pricing.

If your prices remain unchanged, your profit margin slowly disappears.

John explains that even a modest 5% annual increase in charge-out rates can make a significant difference to overall profitability.

Business owners should also understand:

• Their monthly break-even point
• Gross profit margin
• Cash flow position
• Minimum cash buffer required
• Which jobs generate the highest profits

For businesses like Sparkline Electrical, maintaining approximately two to three months of overhead expenses in reserve provides valuable protection during quieter periods or unexpected challenges.

Finally, John highlights the value of job costing. Tracking income and expenses for individual projects allows business owners to identify which jobs are profitable and which are reducing margins, helping them make better pricing and operational decisions in the future.

Frequently Asked Questions About Creating a Business Budget

When should I prepare my business budget?

The beginning of each financial year, particularly in July, is the ideal time to prepare or update your annual business budget.

Why is budgeting important for small businesses?

A budget helps forecast revenue, manage expenses, improve cash flow, support hiring decisions, and prepare for tax obligations before financial pressure occurs.

Should GST be included in my business budget?

Generally, Profit and Loss budgets are prepared excluding GST because GST is collected on behalf of the ATO and does not represent business income.

How often should I review my budget?

John recommends reviewing your budget every month and updating assumptions as business conditions change throughout the financial year.

Why should businesses increase their prices annually?

Regular price increases help offset inflation and rising operating costs, protecting your profit margins and supporting long-term business sustainability.

Build Your 2027 Budget with Latitude Accountants

Creating a profitable budget isn’t just about forecasting numbers—it’s about making better business decisions with confidence.

At Latitude Accountants, John Saade and the team help Australian business owners understand their numbers, improve cash flow, minimise tax, and build practical budgets that support long-term growth.

Whether you’re running a trade business, professional service, or growing company, our experienced Chartered Accountants can help you build a financial plan that works.

📍 Sydney Olympic Park | Marrickville | Melbourne | Loxton
📞 1300 706 597
📧 info@latitudeaccountants.com.au

Book your free consultation today and start planning for a more profitable 2027.

Disclaimer

This article is intended for general informational purposes only and should not be considered financial, taxation, accounting, or legal advice. Every business has different circumstances. Before making financial decisions, speak with a qualified Chartered Accountant or trusted professional adviser to obtain advice specific to your situation.