Stress-test your business for the current economic climate

Steve Roxby
November 12, 2026

With so much economic uncertainty around, how confident are you that your business could handle a financial shake-up?

Stress-testing your business involves using cash flow forecasting and other financial projections to assess how changes in revenue, costs and interest rates could affect your finances. By testing different scenarios, you can identify potential problems and make plans before they become a reality.

It might sound like a lot of number-crunching. But it’s better to find out where the cracks are now than when you’re under pressure.

Uncertainty we’re facing right now

There’s no shortage of uncertainty for us Aussie small business owners right now. Between global conflicts, rising costs and changing economic conditions, it can be hard to know what’s coming next, let alone plan for it.

Here’s a quick overview of some of the current pressures:

Global conflict – Tensions around the Strait of Hormuz are creating uncertainty around fuel prices, shipping costs and global supply chains.
Government budget announcements – Announcements without clear details or implementation timeframes can make it hard to plan ahead.
Proposed tax changes – Potential reforms that may not be legislated for some time can leave you uncertain about future tax obligations.
Interest rates – Recent rate increases and the possibility of further rises are creating concerns about borrowing costs, loan repayments and investment decisions.
Property prices – Falling house prices and concerns about further declines could affect consumer confidence, property-backed borrowing and your access to finance.
US policy uncertainty – President Trump’s ever-changing stance on trade, tariffs and economic policy is keeping us guessing and fuelling fear and uncertainty.
Rising operating costs – Higher fuel, energy, wages and other expenses are putting pressure on our profit margins.
Weaker customer demand – Cost-of-living pressures and cautious spending can affect sales, revenue and growth plans.
Falling business confidence – Uncertainty about what’s ahead is making some of us more cautious about hiring, investing and expanding.

Not every business will feel these pressures in the same way. The important thing to understand is which ones could affect yours – and what this might mean for your cash flow, profitability and future plans.

What stress testing your business means

Stress-testing your business means looking at how your finances would hold up if circumstances changed – especially if things didn’t go to plan.

For example: what would happen if your operating costs increased by 15%, sales dropped by 10% or interest rates went up again? Could your business absorb the impact – or would you need to make some changes?

By running different scenarios through your financial forecasts, you can see how these changes might affect your cash flow, profitability and ability to meet your financial commitments.

The idea isn’t to predict the future or prepare for the absolute worst. It’s to identify potential financial pressure points before they become problems, so you can make confident decisions and take action while you still have options.

How to stress test your business finances

So, where do you start? You can’t stop a storm from coming, but you can make sure your business is ready to weather it.

That starts with a clear picture of your finances, some realistic business scenario planning, and a plan for what you’ll do with the results.

Start with your current cash flow position

Before looking ahead, get a handle on where your business stands financially right now. Good cash management starts with understanding what’s available and what’s already committed.

Review the money coming in and going out, including cash inflows from customer payments, operating expenses, loan repayments and upcoming tax obligations.

Look at your current cash position and whether you have enough available to cover your commitments.

And don’t just look at your bank balance. Money owed to you by customers isn’t necessarily money you’ll have available when bills fall due.

The question is: How much of that cash is already committed, and how much flexibility do you really have if circumstances change?

Use cash flow forecasting to look ahead

Once you understand your current position, it’s time to look at what’s coming.

Start by preparing or reviewing your annual financial forecast, then break it down into shorter periods to see when potential cash flow pressures might come up.

Cash flow forecasting helps you estimate how much money will move in and out of your business over a future period, so you can identify potential cash shortages before they happen.

A key part of financial forecasting is checking whether assumptions are realistic. When forecasting cash flows, are your revenue projections realistic? What if a major project is delayed or planned growth requires more working capital than expected?

But cash flow is only part of the picture. A comprehensive financial forecast should also look at:

Profit and loss – Your expected revenue, expenses and profitability
Balance sheet – Your projected assets, liabilities and overall financial position

Together, these forecasts help you understand where your business could be heading – and whether your current plans are financially sustainable.

Run the numbers on different scenarios

Now comes the actual financial stress-testing.

Take your financial forecasts and adjust the numbers to see what happens under different circumstances.

For example:

What if your revenue dropped by 10%?
What if fuel, materials or other operating costs increased by 15%, or you face unexpected costs?
What if interest rates rose by another percentage point?
What if your customers started taking longer to pay?

These are hypothetical scenarios, but they can reveal some very real financial vulnerabilities. Look at how each change would affect your cash flow, profitability and ability to meet your commitments.

You can also test several changes happening at once to see how combined pressures could affect your business.

The aim is to understand how much pressure your business could handle and where you might need to act.

Review your pricing and profit margins

Rising costs can quickly eat into your margins, particularly if you haven’t reviewed your pricing for a while. This is especially true if you’re locked into fixed-price contracts or have limited room to pass rising costs on to customers.

Look at what it costs to deliver your products or services and whether your current prices are still giving you a decent return.

Could you absorb another increase in fuel, wages or materials? Would you need to adjust your prices? And how might that affect customer demand?

It’s also a good idea to look at which products, services or customers are most profitable. You may find opportunities to improve margins without upping prices across the board.

Know your borrowing capacity

If your cash flow comes under pressure, would you be able to access additional finance?

Now’s a good time to review your existing borrowings, repayment commitments and available financing options.

Consider how higher interest rates could affect your repayments, whether you have sufficient security for additional borrowing and how much debt your business could realistically service if revenue or profitability declined.

Understanding your borrowing capacity before you need extra funds gives you more time to explore your options, rather than making decisions under pressure. It could even be worth arranging a finance facility now, as getting one across the line when you’re already under financial pressure may be difficult.

Borrowing isn’t always the right answer, of course. Any additional debt you take on needs to be affordable and supported by a realistic repayment plan.

Keep monitoring and adjusting

Financial stress-testing isn’t something you do once and file away.

Economic conditions change – and so do your business circumstances. That’s why it’s important to regularly compare forecasts with actual results, keep an eye on market trends and update your assumptions when things change.

Having systems in place to monitor your cash flow, profitability and financial position is an important part of effective cash flow management. It can help you spot emerging issues and respond sooner.

And if the numbers aren’t looking quite how you’d hoped? That’s valuable information too. The earlier you know, the more options you may have.

Don’t wait for uncertainty to become a problem

You can’t control interest rates, global events, or what the economy does next. But you can understand how these factors might affect your business and take steps to prepare.