9 ways to protect your margins when costs keep climbing

Inflation hit 4.6% in March 2026, its highest level since September 2023. Electricity prices are up 25.4% after government rebates expired. The RBA cash rate has risen to 4.35% following three consecutive hikes this year. If your margins feel tighter than they did six months ago, the numbers confirm it.

That said, small businesses aren’t standing still. Xero’s Small Business Insights data shows small business sales grew 7.2% year on year in the first quarter of 2026, with construction up 10.4% and employment growing across most industries. Businesses are adapting, and many are finding ways to grow through the pressure.

The real squeeze is in the gap between costs and what businesses feel they can charge. Research from the Australian Industry Group found that the number of businesses expecting input cost rises is double those planning to increase their prices, the widest gap ever recorded in the survey’s history.

Here are nine strategies to help you protect those margins, from quick wins you could act on this week to longer-term moves that set you up for a stronger second half of the year. We’ve included a quick diagnostic at the end of this article that lets you score your business across all nine areas. Two minutes, and you’ll know exactly where your margins have the most room to improve.

Focus on your most profitable products and services

You might be flat out, turning over solid numbers, but if most of your time is going to low-margin jobs, the effort isn’t translating to money in your pocket. The gap between revenue and profit is where a lot of margin opportunity hides.

Set aside 30 minutes and work through these steps:

1. List every product or service you offer.
2. Rank them by profit margin, not by revenue or volume.
3. Note how much of your time each one takes up.
4. Flag any where you’re spending the most time but making the least money.
5. For each one you’ve flagged, decide: reprice it, bundle it with something more profitable, or drop it altogether.

Most business owners who do this find at least one service line that’s keeping them busy without actually building their profit margins. Our Customer Value Calculator can help you take this further by measuring the true profitability of individual clients and services.

Get more from your team

Wages are the largest single expense for most small businesses, so getting more from your existing team makes a real difference. The goal isn’t to stretch your team thinner, but to use them differently. Cross-train staff so they can cover multiple roles, schedule around your actual busy periods, and use casual or contract workers for seasonal peaks instead of carrying extra hours year-round.

One area worth exploring is AI. Tools like ChatGPT can help your existing staff take on tasks that directly protect your margins. Your office manager could upload your P&L and ask AI to flag where costs have shifted. Your apprentice could draft client quotes in minutes instead of hours, so you stop losing margin on unbilled quoting time. And anyone on the team could compare supplier pricing or write payment reminder emails without it eating into their day.

Review and adjust your pricing

If it’s been more than 12 months since your last pricing review, there’s likely room to recover margin you’ve been leaving on the table. Costs have moved, but for many small businesses, pricing hasn’t kept pace.

When it comes to how you adjust, a flat 10% increase across everything risks overpricing the products that are still competitive while underpricing the ones where your costs have risen the most. Adjusting prices on the products or services that have been hit hardest by rising input costs protects your customer relationships and your bottom line at the same time. You might also consider introducing tiered pricing, where customers can choose between a standard and a premium option. This gives people a sense of control while lifting your average transaction value.

Give customers notice before changes take effect, and be upfront about why prices are moving (“Our supply costs have increased by 15% this year, and we’ve absorbed as much as we can”). Where any of your supplier costs have actually come down, consider passing that on too. Being able to say “we’ve reduced X while adjusting Y” makes the increases feel fair, because they are.

Tighten your invoicing and payment collection

One in six Australian small businesses now lose more than $2,500 a month to late payments, and that figure has nearly doubled since 2024. At that rate, you’re giving up $30,000 a year before you even look at your margins.

A few changes that make a real difference: shorten your payment terms from 30 days to 14 (or even 7 for smaller jobs). Set up automated reminders so invoices don’t fall through the cracks. Offer a small discount for early payment, say 2% if paid within 7 days, which costs you far less than chasing the money for weeks.

Our guide to getting paid faster covers more strategies, including expert tips from a chartered accountant and a downloadable checklist.

Renegotiate your supplier terms

Suppliers would rather renegotiate than lose a good customer, and most business owners never test that. A single conversation could save you thousands over the next 12 months. Ask about better rates on volume, longer payment windows, or alternative products that do the same job at a lower cost.

If your current supplier can’t move, it’s probably time to get quotes from their competitors, particularly on materials, packaging, or wholesale goods you order regularly.

Audit your recurring business costs

There’s almost certainly money sitting in your recurring business costs that you can get back this week. Insurance, software, phone plans, subscriptions: these tend to renew on autopilot, and most business owners haven’t re-quoted them in over a year.

Start by pulling up your bank statements from the last three months and highlighting every recurring charge. If your insurance premium went up 15% at renewal and you didn’t get a competing quote, that could be $1,200 or more you didn’t need to spend. The same goes for software. Are you paying for tools your team has stopped using? Are you on a plan that’s bigger than what you need?

Once you’ve identified what’s worth challenging, try using AI to speed up the process. Paste your current plan details into ChatGPT and ask it to compare against current market rates, then draft a renegotiation email you can send to your provider. What used to take an afternoon of phone calls can now take a fraction of the time.

Forecast your cash flow (even roughly)

Knowing three weeks in advance that next month is going to be tight gives you time to chase outstanding invoices, renegotiate a payment date, or hold off on a purchase. That’s what even a basic cash flow forecast does. A simple spreadsheet mapping your expected income and expenses over the next 8 to 12 weeks is enough.

This is more important than ever right now. From 1 July 2026, Payday Super requires employers to pay superannuation at the same time as wages, rather than quarterly. If you’re not forecasting, it could catch you off guard.

Our free cash flow forecast template takes the guesswork out of setting one up, and it’s worth 20 minutes of your time.

Make the most of EOFY deductions

With 30 June approaching, it’s worth talking to your accountant about ways to bring forward expenses and reduce your tax bill, which can support your cash position heading into the new financial year.

The $20,000 instant asset write-off was made permanent in the May 2026 budget, so you can plan with certainty. But to claim the deduction in this financial year, assets still need to be operational by 30 June. Prepaying expenses like insurance, rent, or subscriptions before year-end may also bring deductions into the current financial year, depending on your circumstances.

Beyond deductions, our EOFY checklist walks through the housekeeping that’s easy to miss, from reconciling payroll and updating your asset register to paying super early enough for it to land before 30 June.

Use business funding to protect your margins

Used well, external funding can protect your margins by helping you act on opportunities or smooth out timing gaps. For example, a 10% discount on a $20,000 bulk order saves you $2,000. If short-term funding to pay upfront costs a few hundred dollars, you could come out well ahead.

Or if you know a large invoice is coming in 30 days but you’ve got bills to cover now, bridging that gap can keep your operations running without forcing you to discount your own prices or delay other payments. The point is to think about funding strategically, as a tool in your cash flow toolkit rather than a sign that something has gone wrong.