A novel numerical procedure to design the optimal axial balance in external gear machines (EGMs) has been formulated and developed in the present study. Lateral lubricating interfaces exist between the lateral bushes and the rotating gears in pressure compensated designs of EGMs and play a significant role in minimizing power losses arising from fluid shear stress and leakages from the gap. Moreover, lateral bushes in pressure compensated designs of EGMs perform significant functions of sealing the tooth space volumes while they transfer fluid from the inlet to the outlet port. ^ The losses from the lateral gap from these two opposing sources can be minimized by designing an optimal balance area on the side of the lateral bushes which do not face the gears, while simultaneously ensuring that proper pressure is established at the high pressure port of the EGM. This condition is termed as the \u27axial balance\u27 of the machine, which is significant in improving its reliability and reducing wear in the EGM under consideration. ^ To determine the optimal axial balance which minimizes the power losses associated with the lubricating gap in all operating conditions, all the static and hydrodynamic forces acting on the lateral bushes have to be considered. This delicate aspect of external gear units design is usually addressed through empirical procedures which rely heavily on experience, expertise and expensive experimental trial and error. ^ In this research, the proposed method is fully automatic and leverages the previous work of modeling the lateral lubricating interface between gears and lateral bushes in the author\u27s research group at Purdue. The developed procedure has a significant potential to virtually design the axial balance in a variety of EGM designs, results for which are presented in the current study. Furthermore, the possibilities of using the developed procedure to design new efficient solutions is demonstrated in this research by applying this method to design a micro surface shaping effect, by introducing a linear sloping wedge on either side of the gear teeth. Optimal axial balance configurations are determined for these effects which further improves the efficiency of the reference EGM chosen for the purpose of this study