Budget season is here! Are you ready to turn the chaos into a well-organized, efficient planning period?
Just picture it…
The strategic objectives feel achievable and the leadership directives stay the same. Then department heads give you everything you need on time. You find consistent and clean data without issues. There are no late nights, no revisions, no shifts in the market outlook. Everyone is aligned companywide, and no one drinks too much coffee.
Sounds good, right?
Unfortunately, we all know the reality is very different. The problem with annual planning is that, ironically, it rarely goes as planned.
The good news is that there’s a lot that you can do right now — before the season starts — to level up your budgeting processes. There’s still time to dust off those quickly-forgotten learnings from previous planning cycles and live up to the promises you made to yourself to be better prepared this year.
You’ve still got time to nail it.
In this article, we’ll cover five best practices to help you make this year’s budget season the most effective yet.
1. Start budget season with strategic clarity
To be successful, strategy and budget must work hand-in-hand, so your preparation starts with a fact-finding mission. First, identify a maximum of five strategic objectives by asking:
What is the overall business strategy?
What are the main business goals?
What is the company really trying to achieve?
Spend time with the senior leadership to understand what’s top of mind and what the long-term goals are for the business. This is crucial for building everything from your leading and lagging indicators, to your KPIs, operational plan, budget, and financials.
Now that you’ve identified these strategic objectives, take time to find out what’s likely to affect performance – and use this information to inform better assumptions. For example:
How is the competition behaving?
What are the bottlenecks in the business?
What are the industry trends that you need to account for?
What about macroeconomics?
Consider the external factors shaping your industry. Things like manufacturing shortages, AI disruption, or new legislation. Don’t forget to account for internal factors such as current employee skill gaps, the geographical markets you’re targeting, product issues or advantages, productivity, and available resources.
If you’re well connected in the business, this is much easier. You’re already on the pulse and can kick off budget season with strategic understanding. That’s why it’s so important to build those strong relationships with stakeholders and leadership. Start now, if you haven’t already!
2. Create magic from the clash between bottom-up and top-down budgeting
Bottom-up vs top-down budgeting. You’ll see a lot of opinions out there on one side or the other of this argument but, in reality, you have to have both. The magic happens in the conversations where these methods clash. This is where finance teams thrive – where you can become the heroes that are really driving better decision-making in the business.
Top-down budgeting is all about establishing clear objectives, with resource allocation based on what the business needs to do in order to be successful. You’ll review sales capacity, CAC, pipeline coverage, and a range of levers that drive the actions to hit the strategic goals.
Top-down budgeting starts from the board, cascading down to the CEO, leadership team, and so on. It’s a very powerful method because it increases the chance of hitting more ambitious targets, but it’s also non-collaborative and sometimes unrealistic to the department heads on the other side.
Bottom-up budgeting provides a more accurate forecast. It’s a good representation of departmental commitments, which usually improves collaboration and buy-in from stakeholders. But it also tends to be less ambitious and creates a situation where you’re less likely to meet those strategic goals.
The role of the finance team is to mediate in both, to see where the numbers don’t align, and create a plan of action. Work with the CFO and stay on top of the strategic goals, but also focus on being a business partner. This is one part of the budgeting process where the concept of business partnering really shines – where you have an opportunity to align those top-down objectives with the real capacity of the business.
Start by thinking ahead. How are you going to get your bottom-up and top-down model built? What do you need to include? What data will you need? How will you approach it?
By creating space for conversations that align leadership’s strategic objectives with practical insights from the business teams on the ground, you’ll prepare a budget that’s realistic and achievable.
3. Improve data collection, visibility, and accuracy
Now, let’s talk about the data that underpins your budget. We’ve all been stuck trying to sort through dirty data, chasing stakeholders, trying to fill the gaps, and getting lost in the endless back and forth of Slack messages, emails, spreadsheets…you know the drill!
If you want to avoid all that inefficiency this year, you need to make it easier for stakeholders to provide you with clean data. Introducing templates to simplify data management is an easy win. Instead of a range of different spreadsheets with different columns and values, get ahead of data collection problems by providing every department with standardized templates.
Base your templates on standardized fields and formats, so you can easily map data to these fields to be entered into one central repository. If you’re using an FP&A platform, this can be automated via API or existing integrations. That way, your standardized template becomes an automated template, so all the data you need to collect flows to your fingertips automatically and you can manipulate it very easily.
And take the time to explain your templates to stakeholders! Go to each stakeholder responsible for filling them in and make sure they understand how to do so accurately. You can also have pre-submission meetings with department heads to review their budgets ahead of time, address any concerns, and answer questions.
A crucial step in the path to improvement is helping everyone understand why clean data matters – not just to you, but to the entire organization. Make it clear that clean, accurate, granular data helps stakeholders across the business to make better decisions, prioritize geographies or new products, and so on. That way, it becomes a collaborative approach to data hygiene with a clear value add at the end of the process.
Here’s a quick summary of those tips for improving data collection, accuracy, and visibility:
Introduce standardized templates for data collection
Take the time to explain your templates to stakeholders
Automate your standardized templates where possible
Schedule pre-submission meetings with stakeholders
Help everyone understand why granular data matters
4. Drive stakeholder collaboration and alignment
One of the key skills for strategic finance teams is project management. Budget season is a hero project and needs strong leadership to drive it forward. It should be managed in the same way as a product launch or an M&A deal with a clear kickoff, checkpoints, and accountability.
Part of this might be about putting in the work to enhance your own credibility and professionalism within the organization. This will enable you to introduce rigor and enforce discipline, so that people respect your deadlines and provide you with information that meets the mark in both quality and form.
It’s vital to build relationships with budget holders during the year, before the annual planning and budgeting cycle begins. You want to strengthen these relationships and help stakeholders understand why investing their time and effort is critical. Their input impacts more than their own resource allocation and budget. It’s part of a bigger picture that reaches far beyond their silo.
You’ll likely need to moderate a few difficult conversations during budget season; those around revenue, for example, can often become quite tense. Fortunately, you’re well-equipped to that because you understand the levers that drive performance. Hitting revenue targets means agreeing on a specific sales close rate, it means agreeing on improving retention by 5%, it means driving 3x pipeline coverage. These levers are intertwined, so all stakeholders must agree.
It goes without saying that your process should be documented digitally so you can clearly see who has agreed to what and by which date. The year is long – you’ll want to refer back the commitments that both the leadership team and budget owners have made to keep everybody accountable.
Don’t confuse this for micromanagement. This is the basis of driving performance in an organization, which is ultimately the main goal of a finance team.
5. Shift your mindset to performance management
Budget season might be an annual event but you’re much better off thinking about it as a constant operation. One of the biggest pain points with the budgeting process is how frustratingly quickly it needs to be readjusted. Suddenly it’s February and you’re already generating new versions of the budget.
One solution is to adopt a rolling forecast strategy. Monthly (or even quarterly) rolling forecasting is a great way to improve the flexibility of your budgeting process, give department heads more freedom, improve the overall accuracy of your projections, and keep a better grip on the business. Of course, this isn’t right for every business – and it’s not always possible because of the time investment.
As you work your way through budget season, keep asking yourself: what can I do now to my life easier if I want to be an agent of performance in the business for the rest of the year? So you stop thinking about budgeting as an isolated event but rather one part of an ongoing cycle.
To be successful, you need to keep monitoring departmental performance throughout the year. This is much easier if you’re using an FP&A solution that allows you to build a self-service dashboard for department heads with real-time data. You’ll have a single source of truth where everyone can check key metrics every month when you reforecast and judge performance.
A dashboard like this enables alignment on those key metrics. You won’t get to April and realise that the way Sales was defining CAC back in September is completely different to Marketing’s definition. You cut through that noise so you can have meaningful performance conversations about what really matters, like how to remove bottlenecks so the business can grow faster, how to achieve profitability, IPO, or whatever your strategic goal is.
And finally, just because budget season is over, it doesn’t mean the project management should stop. We recommend having a regular budgeting sync with each department head to discuss performance and come up with ideas from a finance perspective to improve the likelihood of success.
Let’s sum up those long-term budgeting process improvements:
Shift your budgeting mindset from isolated event to ongoing operation
Adopt a monthly or quarterly rolling forecast strategy (if it makes sense)
Keep thinking beyond budget season, even when you’re in the thick of it
Build a dashboard where everyone can align on key performance metrics
Keep up with your performance and project management all year round
You can transform your budgeting process
We understand that finance teams are short on time and budgeting is a hugely time expensive endeavour. You don’t always have enough hours in the day to project manage efficiently, to implement a new system, to chase stakeholders, or build complex dashboards.
But you can transform your budgeting process.
At Abacum, our mantra is that finance teams are the heroes of their organizations because you are the agents of change. You have a 360° view of performance, you understand the data that drives revenue, and you should be a central partner to every decision maker.
If you put the right processes and tools in place now, you can and will multiply your impact.
Book a demo to see what budgeting for 2025 could look like with Abacum.
