How to build a 3-month safety buffer this new financial year
If you sometimes feel like you’re always chasing money — paying suppliers and wages while you wait on progress claims or retentions — you’re not alone.
According to UNSW Sydney, 80% of Australian small-to-medium businesses experienced significant cash flow impacts in the 12 months leading into early 2025. Construction is consistently named as one of the worst-affected sectors, alongside hospitality and retail.
These aren’t abstract numbers. They’re the daily reality for many tradies: irregular project income, long payment cycles, upfront material costs, variations that drag on, weather delays, and clients who pay slowly. When cash gets tight, owners often take on the wrong jobs at the wrong price just to keep the team busy — which only makes the problem worse.
As FY27 begins, set yourself a challenge: don’t be one of these statistics. Make it your goal to build a three-month working capital buffer in your business this year.
Why a 3-Month Buffer Is Such a Powerful FY27 Goal
A working capital buffer is simply cash set aside to cover all your normal operating costs for three full months — even if no new money comes in the door.
Why three months specifically?
- It covers typical project delays and slow-paying clients — very common in construction.
- It gives you breathing room during seasonal dips and unexpected breakdowns.
- It stops you making desperate decisions, like discounting heavily or taking on nightmare jobs.
- It dramatically reduces stress and improves your mental health and decision-making.
- It lets you negotiate from strength and take on better work when opportunities arise.
Many successful trades businesses aim for this level of resilience. It’s achievable when you treat it as a deliberate FY27 goal rather than something that “might happen one day.”
My 5-Step Method to Make It Happen
Step 1 — Make sure your business is profitable
Build a financial budget designed for you. If your business isn’t profitable, it simply won’t be able to build a cash flow buffer — there’s nothing left over to set aside.
Step 2 — Build your own wage into the budget
Whether a commercial wage for you is $80k or $160k, the figure must be built into your budget. You’re only fooling yourself with a budget that shows a profit but ignores your own wage — because once you account for it, that “profit” may actually be a loss.
Step 3 — Calculate your 3-month buffer target
This is simpler than most people think. Add up your average monthly cash outflows over the last 6–12 months (or your most recent 3–6 months for a current view). Include everything that leaves your operating account: wages and subcontractors, materials, fuel, vehicle and plant costs, insurance, rent or yard costs, loan repayments, marketing, utilities, software, and a realistic amount for owner drawings and tax provisions.
Then multiply that average monthly figure by three.
Example: A typical electrical or plumbing business might have average monthly outflows of $45,000. Their three-month working capital buffer target would be $135,000.
That’s the amount you want sitting in a dedicated buffer account by 30 June 2027. It’s not “extra” money — it’s your business’s insurance policy and freedom fund.
Pro tip: If you’d like expert help, talk to Next Level Accountants about a complimentary 45-minute cash flow analyser session to test that your numbers stack up.
Step 4 — Set it as a clear, trackable FY27 goal
Don’t just say “we’ll try to save more this year.” Make it specific and trackable.
Target: Have $135,000 in a dedicated Working Capital Buffer account by 30 June 2027.
Milestones (example for a $135k target):
- 30 September 2026: $45,000 (1 month buffer)
- 31 December 2026: $90,000 (2 months buffer)
- 30 June 2027: $135,000 (3 months buffer)
Step 5 — Hold yourself accountable
Review your buffer balance against these milestones every quarter. If you’re falling behind, you’ll know early enough to adjust pricing, chase outstanding invoices, or tighten spending — long before it becomes a crisis.
Ready to Fix Your Cash Flow for Good?
I’m offering a limited number of complimentary Cashflow Analyser Sessions (normally valued at $350) to Trade Insights readers. In this 45-minute session we’ll:
- Calculate your exact 3-month working capital target.
- Review your current cash flow and identify the biggest leaks.
- Build a simple 90-day action plan tailored to your trades business.
Spots are limited. To claim one, get in touch with Next Level Accountants and mention the subject line “Cashflow Game Changer.”
Written by Lyndon Russell FIPA FFA
Principal, Next Level Accountants — Author of Know Your Numbers
