Many leadership teams wait for final year-end numbers before beginning to plan for the next year. Starting the planning process earlier can give businesses more time to make informed decisions about cash flow, hiring, pricing, margins, inventory, and growth investments before the first quarter begins.
Budgeting and forecasting can give leadership greater visibility into where the business intends to go and how changing conditions could affect those plans. Understanding the role of each is an important first step in preparing for 2027.
Budgeting and Forecasting Are Not the Same Thing
What Is a Budget?
A budget provides a financial roadmap for the year, establishing revenue and expense targets and guiding resource allocation. It gives leadership a framework for determining where resources may be needed and how spending aligns with business priorities.
What Is a Forecast?
A forecast projects future financial performance using current information, including actual results and updated business assumptions. As conditions and business priorities change, the forecast can be updated to give leadership a more current view of where the business may be headed.
A rolling forecast takes this approach further by maintaining a consistent forward-looking planning horizon as actual results become available.
Why Most Companies Need Both
Budgets and forecasts serve different purposes. A budget establishes financial goals and resource expectations, while a forecast helps leaders evaluate how actual performance and changing assumptions may affect expected results.
Used together, they can give leaders a clearer framework for comparing plans with current expectations and adjusting business decisions as circumstances change.
When Should Businesses Start Planning for the Next Year?
For businesses preparing for 2027, beginning the budgeting and forecasting process before year end can provide additional time to review assumptions, consider different scenarios, and make decisions before the new year begins.
Responsibility for the process will vary by organization. A CFO or controller may coordinate financial planning with input from the CEO, leadership team, and department leaders. Businesses without a dedicated CFO may also use a fractional CFO to help coordinate the planning process.
Starting earlier can give leadership more room to evaluate the assumptions behind the numbers and consider the potential effects of decisions involving hiring, pricing, cash flow, and investment.
Should You Wait Until the Books Are Closed?
Final year-end results provide valuable information, but leadership does not necessarily need to postpone all planning until those numbers are available. Waiting for the year-end close before beginning the process may leave less time to evaluate and act on priorities for the first quarter.
Current financial trends, year-to-date results, and expected year-end performance can provide a starting point for developing a 2027 budget and forecast. Businesses can use this information to establish initial assumptions and identify areas that warrant closer attention. The objective is to develop a useful planning baseline that can evolve as more information becomes available.
Once final year-end results are available, leadership can revisit the assumptions underlying the forecast and update projections where appropriate. This approach allows planning to begin before year-end while incorporating more complete financial information when it becomes available.
How to Tell If Your Planning Needs Attention
Several questions can help leadership assess its readiness for 2027:
- Have revenue targets been established?
- Are hiring needs and staffing assumptions defined?
- Has the business reviewed its pricing assumptions?
- Is there visibility into expected cash flow?
- Can leadership assess the financial impact of planned growth?
- Has the business considered how lower-than-expected revenue could affect its plans?
- Is there a clear view of the expected cash position entering the first quarter?
If several of these questions remain unanswered, it may be useful to make year-end financial planning a priority. Better visibility into these areas can help leadership evaluate decisions with greater context and identify questions that should be addressed before the new year.
How Budgeting and Forecasting Support Business Decisions
A useful budget and forecast can inform decisions across several areas of the business:
- Hiring Decisions – Evaluate staffing plans alongside expected demand and available resources.
- Pricing Decisions – Consider how changing costs and margin expectations may affect pricing.
- Margin Management – Monitor changes in revenue, costs, and profitability assumptions.
- Cash Flow Planning – Anticipate seasonal pressures and expected cash needs entering the first quarter.
- Growth Planning – Assess potential investments in the context of expected financial performance.
These tools become especially useful when leadership revisits them as actual results and business conditions change.
Prepare for 2027 With Greater Financial Visibility
Beginning the budgeting and forecasting process before year-end can give leadership more time to evaluate assumptions, identify potential financial pressure points, and make informed decisions before the calendar turns. The purpose of the process is to provide leadership with greater visibility into the business and a financial plan that can be reviewed and adjusted as circumstances change.
Preparing for 2027? Connect with your CRI CFO Hub advisor for help developing a realistic budget, preparing cash flow forecasts, and creating the financial visibility needed to make confident decisions throughout the year.
Mark is an accounting and finance professional with over a decade of experience in public accounting and consulting. As both an accountant and entrepreneur, he is passionate about helping clients strategically organize and grow their businesses to reach their goals.
Visit Mark's Expert Hub to learn more about his experience and read more of his editorial content