Most companies treat budgeting like a year-end checkbox. They wait until November or December, then rush to fill in numbers. By the time the budget is complete, it already reflects a past that no longer exists and leaves leadership reactive rather than proactive.
Rushing the budget process creates risk. Instead of providing clarity, hurried budgets deliver constraints. They lock teams into flawed assumptions, stifle strategic conversations, and handicap leadership in the face of change.
Psychology helps explain why. Daniel Kahneman and Amos Tversky first described the planning fallacy in “Judgment under Uncertainty.” Later empirical work by Roger Buehler, Dale Griffin, and Michael Ross found that even when people recall past delays, they still predict that future tasks will proceed smoothly. Daniel Kahneman expanded these insights for executives in Thinking, Fast and Slow. Compressing budgeting into a few frantic weeks magnifies these biases and undermines accuracy and foresight.
What the research says about timing
Timing and structure both matter. A 2021 Journal of Consumer Research study documents “budget depreciation,” showing that budgets set too far in advance lose their constraining power as the pain of payment fades, which can increase overspending unless the budget is refreshed.
For businesses, the takeaway is clear. Start budgeting early enough to allow strategic alignment, and build in regular refresh cycles so the budget remains relevant and motivating throughout the year. Harvard Business Review outlines agile budgeting disciplines that preserve flexibility while maintaining financial rigor. Boston Consulting Group similarly recommends shorter cycles, relative targets, and scenario-based planning in uncertain environments.
Stories from the field
A mid-sized SaaS company we worked with began its budget planning in September. Leadership aligned around strategy first, then built base-case and upside scenarios. By January, they were adjusting resources in real time, shifting capital where opportunities emerged and tightening controls where inefficiencies surfaced. The result was a year defined by agility rather than retrenchment.
Contrast this with a manufacturing client that delayed until December. Their budget locked in faulty assumptions. By the first quarter they were over budget, underinvesting, and scrambling to recalibrate. Instead of using the budget as a guide, leadership was fighting fires.
Another example comes from a professional services firm. They historically waited until November to create their budget, often defaulting to last year’s numbers plus a modest increase. When encouraged to begin the process in September, they instead identified growth opportunities in new markets, reallocated resources toward high-margin services, and trimmed underperforming lines of business. By the time the new year began, the leadership team had both clarity and conviction about where to invest. The earlier start transformed their budget from a backward-looking ledger into a forward-looking playbook.
September as the starting line
Beginning in September transforms budgeting from an accounting exercise into a leadership discipline. It creates the time and structure to align ambition with strategy, test assumptions before they calcify, and prepare for multiple futures.
The most effective budgeting processes include:
- Strategic anchoring. Start with ambition, not arithmetic. Define what the business needs to achieve before assigning numbers.
- Scenario modeling. Build multiple versions of the future, including best case, base case, and downside, while assumptions are still flexible.
- Accountability rhythms. Establish checkpoints throughout the year so the budget drives alignment and action.
- Budgets as living frameworks. Treat the budget as dynamic. Revisit and refine it regularly as conditions shift.
Even advanced methods like zero-based budgeting (ZBB) work best when launched early and refreshed consistently. McKinsey shows how ZBB can help organizations reallocate resources toward growth.
Practical takeaways for leaders
If you want your budget to drive results rather than simply record them, consider these practices:
- Begin budgeting in September. Give yourself the gift of time for alignment, discussion, and iteration rather than compression and compromise.
- Lead with strategy before spreadsheets. Start with vision, goals, and desired outcomes. Then let the numbers follow, rather than letting the numbers dictate.
- Model multiple scenarios. Resist the temptation to assume one future. By preparing for upside, base, and downside cases, you give yourself agility when reality deviates from the plan.
- Establish quarterly reviews. A budget is not a document to be filed away. Use it as a framework for continuous review, refreshing assumptions every few months to keep it relevant and motivating.
- Embed accountability. Assign clear ownership for budget drivers, and create rhythms of accountability so financial leadership is shared across the organization.
Waiting until late fall to budget means you begin the year already behind. The best leaders do not wait. They start early, using September to turn budgeting into a blueprint for clarity, agility, and growth.
Nelson Tepfer
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