By Kim Stewart-Smith; CEO Stewart & Smith Advisory
As we head into the 2026 financial year (for Australian businesses on a 30 June year-end), budgeting season is officially here! For a CFO, a budget is never just a compliance exercise. It’s your strategic blueprint, your accountability tool, and your clearest roadmap for growth and financial stability.
Here’s what to look out for, how to approach it, and the smart tools that can elevate your budgeting beyond basic spreadsheets this cycle:
Common Budgeting Pitfalls to Avoid:
- “Set and Forget” Mentality: Your budget is a living document. Business conditions change rapidly, and your budget needs to adapt. Regular review and rolling forecasts are key.
- Overly Optimistic Revenue Projections: Hope isn’t a strategy. Ground your revenue forecasts in realistic market trends, solid sales pipelines, and historical performance, not just ambition.
- Underestimating Expenses (Especially Variable & Contingency): Don’t forget the ‘what ifs’ and the costs that scale with your growth. Always factor in a realistic contingency for the unexpected.
- Ignoring Cash Flow: A profit on paper doesn’t pay your bills. Your budget must clearly articulate cash inflows and outflows to prevent liquidity issues, even if you look profitable.
The CFO’s Approach to Budgeting:
- Start with Strategy: Every line item should directly support your core strategic objectives for 2026. What are your key initiatives? How will they be funded?
- Collaborate Widely: Involve department heads, sales, and operations. Their input ensures realism, fosters ownership, and aligns teams.
- Build from Key Drivers: Identify the 3-5 critical non-financial drivers (eg, number of customers, units produced, staff headcount) that truly impact your revenue and costs. Budget based on these drivers for greater accuracy.
- Scenario Planning: Don’t just create one budget. Model ‘best-case,’ ‘worst-case,’ and ‘most-likely’ scenarios to prepare for all possibilities and build resilience.
Tools Beyond Excel (Especially for Xero Users): While Excel has its place, dedicated 3-way budgeting and forecasting tools offer superior collaboration, deeper insights, and automation, especially when integrated with Xero:
- Fathom: Excellent for powerful 3-way forecasting (P&L, Balance Sheet, Cash Flow), scenario analysis, and generating visually stunning, board-ready reports. It integrates seamlessly with Xero for real-time data.
- Calxa: A strong option for detailed budgeting, multi-entity consolidations, grant reporting (if relevant), and robust cash flow forecasting, also with deep Xero integration.
- Float: Ideal for visual cash flow forecasting and management, helping you see where your cash is going and when. It provides a clear, intuitive interface that syncs with Xero.
These tools transform budgeting from a tedious chore into a powerful advisory tool.
Timing for Your 2026 Budget:
- Now is the perfect time to start: Begin gathering historical data, review performance against your current 2025 budget, and outline strategic priorities for 2026.
- Next 1-2 months (May-June 2025): Draft initial budgets, conduct departmental reviews, and refine projections.
- Late June 2025: Finalize and approve the budget before the new financial year.
- Post-July 1, 2025: Crucially, monitor performance against your new 2026 budget with regular (monthly or quarterly) reviews and make agile adjustments.
A well-executed budget is your most powerful tool for financial control and strategic growth. If you would like to discuss the budgeting process within your business please reach out to a member of our CFO Advisory team on info@stewartsmithadvisory.com.
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