There is something slightly counterintuitive about asking a management team to start preparing next year’s budget at the beginning of Q4. After all, there are still three months left in the current fiscal year. Some deals in the pipeline have yet to close. Cash is still flowing in and out of the business, and no one really knows what the market will look like a few months from now, especially in the age of AI, when the business environment is changing faster than ever.

And yet, late September or early October is exactly the right time to start planning next year’s budget. The reason is simple: a good budget is not an attempt to predict the future. It helps management think systematically about it. Instead of asking, “How much will we sell next year?” it is more useful to consider different scenarios. What if we grow by 20%? What if sales and revenue decline instead?

Those scenarios lead to questions that can shape practical plans: If revenue grows, will we need to hire more employees? If sales are expected to go down, should we increase the marketing budget or cut it back? Is our planned capital expenditure (CAPEX) still justified? And how much cash should we keep on hand so that growth does not put pressure on cash flow?

At that point, the budget stops being an accounting exercise and becomes a strategic tool.

A meaningful budget should include several scenarios, including a growth scenario and a conservative one. But it is just as important to establish how the company will respond to each: when to approve additional hiring, when to increase investment, and which signs would prompt management to pause and reassess the plan.

The goal is not to lock in the numbers now. It is to give management enough time to examine the assumptions behind them, challenge those assumptions, and understand how one decision affects another.

The budget sets the direction and can be adjusted as the year unfolds to reflect changing conditions. A company that waits until December to start thinking about 2027 may still get its spreadsheet done on time. But it is making it harder to plan effectively and set itself up for a successful fiscal year.

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