When is the right time for small and mid-size companies to start budgeting for the next year? This is today’s topic of our FP&A journal.
It’s September and many folks out there are starting to plan their finances for the next year. Other folks are waiting to start in Q4. So when is the right time to start?
Let’s assume for now that fiscal year coincides with the calendar year. For small and mid-size businesses, it is very rare to see budgeting for the next year start before July. Similarly, it is usually not the case that companies begin budgeting after the New Year. The typical timing for most businesses of this size is the end of Q3 (September) and the beginning of Q4 (October).
We believe that the ultimate timing will depend on your company’s complexity in sales and expenses, as well as your forecasting cadence. The higher the complexity, the earlier budgeting should begin. Similarly, the lower the forecasting cadence, the earlier budgeting should begin. On average we recommend that small and mid-size companies start budgeting no later than October as it gives most companies enough time to assess their revenue and expense trends, and start preparing for the next year’s adventure. However, this shouldn’t be interpreted as though companies that missed this time frame should skip this year’s budgeting and wait until next year. Formal budgeting is a practice that brings enormous benefits to any organization, it is never too late to start.
We wish our fellow finance professionals all the best in their modeling and predicting undertakings in this year’s budgeting season!
(This article was also published on LinkedIn)
