If you’re running a small business, you already know the deal: Cash is king, cashflow dramas are a stress headache waiting to happen, and it only takes one quiet month to have you eyeing your office plants and wondering what you could sell on Marketplace.
That’s why, whether you’re just finding your rhythm or have been in business for years, one of the smartest financial moves you can make, especially if you’re juggling clients, family, and fifty tabs open in your brain, is to build a financial buffer.
It’s not something you sort out once you’ve “made it”. It’s your business’s safety net, a priority right now, especially if things already feel tight.
Why a buffer matters (even when business is good)
Cashflow is still the number one reason small businesses fail in Australia. Not a lack of customers. Not a lack of talent. Not even bad marketing. Just money not coming in fast enough. It’s that simple – and honestly, pretty heartbreaking.
Around 60 per cent of Australian businesses won’t make it past their third year – and nearly one in five will close their doors in the first. And more often than not, it’s not because the idea was bad. It’s because they ran out of runway.
A financial buffer gives you breathing room. It buys you time, options and peace of mind – so you’re not making panicked decisions (or maxing out a credit card) the moment something goes sideways.
What can go in your buffer – and what can’t
Let’s clear something up: A buffer isn’t your tax savings, your super, or the money you’ve mentally set aside for the laptop you’ve been eyeing since February.
Your buffer is ring-fenced for business survival. It’s there to cover the essentials if your income dries up for a bit – wages, rent, subscriptions, insurance, and other fixed costs that don’t magically disappear just because sales slow down.
It’s not your emergency chocolate fund (though that’s important too). Think of it as the safety gear, not the growth gear.
If you want to take it up a notch, you could even name the account something like “Business buffer” or “Do not touch” (whatever works for you!) so you’re mentally keeping it off-limits except in genuine need.
So, how much should you aim for?
The gold standard is 3–6 months’ worth of essential business expenses. Not your “nice-to-haves” – we’re talking the basics:
- Staff wages (including your own – yes, you count!)
- Rent or workspace costs
- Key subscriptions or tools
- Stock or materials
- Insurance
- Loan repayments
If that number makes you want to slam your laptop shut or hurl your phone across the room, don’t stress. Pause. Breathe. Start smaller. A buffer of $1000, $2000 or even $500 is a solid start. Momentum matters more than perfection.
Five ways to build your buffer without freaking out
Set up a separate savings account – One that’s not attached to your everyday business account. Out of sight, out of mind (and out of temptation when things feel tight). A widely popular model is the Profit First approach, but many small businesses struggle with the number of accounts it recommends. Start simple – one buffer account is enough to build the habit and create breathing room.
Automate a regular transfer – Just like your super or utilities, treat it as a business essential. Start with what you can manage – even a small amount each week adds up over time.
Put aside the wins = Landed a new client? Had a bumper month? Before you celebrate with new tech, pop some into your buffer. Future You will be grateful.
Speak to your accountant – Clients often call me saying they want to invest in new equipment. I’ll ask about their cash position, and they’ll say, “I’ve got $10,000 in the bank.” My reply? “That’s your cashflow”. Of course, there are other factors to consider – but if you’re not having these conversations with your accountant regularly, you should be. A good decision starts with knowing what you can actually afford, not just what’s in the bank that day.
Check in every quarter – As your business grows (and your expenses with it), update your financial buffer goal. It should scale with you.
What not to do
- Don’t rely on a credit card as your “just-in-case” plan. That’s not a buffer – that’s borrowing future stress.
- Don’t wait for a crisis to start saving. By then, it’s already too late.
- Don’t beat yourself up if it takes time to build. This isn’t about overnight success – it’s about steady progress.
- Don’t wait for a perfect time – it’s not coming. Start now.
The goal is stability, not perfection. And trust me, when the unexpected hits (because it always does), you’ll be so glad you gave yourself a cushion to land on.
Because cash might be king, stress might be queen… but with a little buffer in your corner, you’re the one wearing the crown.
