Budgets don’t need to be perfect — just useful.

In Xero, you can build a simple budget that helps you keep track of income and expenses — and it doesn’t have to be full of complicated formulas. Here’s how to create a budget in Xero that’s practical and easy to stick to.

Step 1: Go to the Budget Manager

• In Xero, click Reporting, then all reports find → Budget Manager.
• Choose the financial year you want to create the budget for. NZ tax year runs from April to March.

Step 2: Add Income Targets

• List out your main sources of income (sales, services, contracting, etc.).
• Estimate how much you expect each month.
• Keep it realistic — think about seasonality (quiet months vs busy months).

Step 3: Add Expenses

• Start with your fixed costs: rent, insurance, subscriptions.
• Then add variable costs: fuel, advertising, supplies.
• Use your past bank statements or Xero reports as a guide.

Step 4: Keep It Simple

• Don’t try to budget every little thing. Stick to big categories that matter (e.g. Advertising, Fuel, Wages).
• Too many small categories = too hard to manage.

Step 5: Run Budget vs Actual Reports

• Once your budget is set, Xero lets you compare it with your actual results each month.
• This shows you if you’re overspending, or if income is on track.

Pro Tips

• Review your budget quarterly — business changes fast.
• Use “tracking categories” if you want to compare parts of your business (e.g. different farms, projects, or product lines).
• Don’t be afraid to adjust your budget — it’s a tool, not a rule.

Budgets in Xero don’t need to be complicated. With just a few categories, you can build a simple budget that helps you keep your business on track — without the overwhelm.

☕ Over Coffee Example: A yarn shop business owner avoided budgeting, but we made a simple 6-category budget in Xero. It gave her clarity in 15 minutes.

Coffee Chat Tip: Treat budgets as a guide, not a prison. Review quarterly.