9 strategies to protect your profit margins right now

Inflation hit 3.1% in the March 2026 quarter, pushing back above the Reserve Bank’s 1 to 3% target range. Electricity prices are up 12.5% for the third consecutive quarter, and transport costs have accelerated as fuel prices climb. If your margins feel tighter than they did six months ago, the numbers back that up.

That said, small businesses aren’t standing still. Xero’s Small Business Insights data shows sales rose 3.9% year on year in the March 2026 quarter, the fifth consecutive quarter of improvement. Retail was up 5.1%, hospitality recorded its best quarterly result in nearly three years, and construction recorded its second consecutive quarter of positive sales growth.

The challenge is that many business owners are absorbing rising costs rather than adjusting their pricing, and the difference is coming straight out of their profits.

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 in two minutes.

Zero in on the work that actually pays

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 services 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.

Expand your team’s capability with AI

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.

Revisit your pricing before margins slip further

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.

Close the gap on late payments

Late payments cost small businesses more than $800 million a year, and 62% of businesses report they’re losing money because invoices aren’t paid on time. If your overdue invoices are adding up to $10,000 or more at any given time, that’s cash you’ve already earned sitting in limbo, creating gaps that force you to cover costs out of pocket.

A few changes that add up quickly: 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 to keep cash moving.

Renegotiate your supplier terms

Suppliers would rather renegotiate than lose a good customer, and most 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.

Find the savings hiding in your recurring 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 few businesses have re-quoted them in the past 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 your favourite AI chatbot 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.

Start forecasting your cash flow (it’s simpler than you think)

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. Even a simple spreadsheet mapping your expected income and expenses over the next 8 to 12 weeks can do that.

This is more important than ever right now. With fuel and electricity costs shifting quickly and the Reserve Bank expecting OCR increases this year according to its May Monetary Policy Statement, your cost base could look different month to month. Our free cash flow forecast template takes the guesswork out of setting one up, and it’s worth 20 minutes of your time.

Make sure you’re claiming every deduction you’re entitled to

With the tax year ended 31 March now behind you, it’s worth checking with your accountant that you’ve captured every deduction available. The 20% Investment Boost, for example, lets eligible businesses claim an additional 20% deduction on most new assets purchased from 22 May 2025. There’s also a $1,000 immediate write-off on low-value assets that’s easy to overlook.

A broader review of what you’ve spent on insurance, software, vehicle costs and professional services can also uncover deductions you haven’t claimed. Even small amounts add up, and the cash benefit flows straight to your bottom line.

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 as one more option in how you manage your cash flow rather than a sign that something has gone wrong.