Are you ready for budget 2026?

Well begun is half done, as the saying goes ... and there's truth to that: In our experience, if you don't prepare well in advance for the coming year's budget process, you'll find yourself facing the same problems and inefficiencies next year that you're struggling with this year. But how do you best prepare yourself? We offer our suggestions in this article.

In far most companies, the annual budget process is not only extremely comprehensive. It is also so ingrained that it's difficult – if not impossible – to make significant changes just before starting the process. In addition, many companies often only begin preparing for next year's budget process at the last minute due to being busy with other pressing matters. Consequently, the process most often becomes more or less a copy of that of previous years.

Of course, this is not a problem if your company has a thoroughly well-functioning budget process. So before reading on, please answer the following questions on behalf of your company.

Would you describe last year's budget process as efficient and productive?
Is the budget relevant as a basis for comparison in ongoing performance evaluation?
Is the budget still a relevant benchmark for your entire company?
Does the budget help you prioritise and make better decisions?
Does the budget support the desired behaviour in your company?

If you can answer 'yes' to all the above questions, then this article is not addressed to you, and you need not read on.

Noticeable benefits from optimised processes

Well-functioning and dynamic planning processes have the potential to create significant advantages across the organisation.

Some of the most frequent benefits are a substantial reduction in time spent, increased precision in ‒ and relevance of ‒ financial forecasts and improved employee satisfaction.

However, perhaps the most important benefit is of a more strategic nature: When planning processes are more dynamic, your company can more easily adjust its course in response to changing market conditions, make faster and better decisions, and thereby gain a competitive advantage.

And the sooner your company begins preparing for next year's budget process, the better.

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How to improve the budget process in four steps

We recommend that you view your company's budget process optimisation as a change process and therefore approach it in four steps:

Step 1: Recognition of the situation and its consequences (what is wrong, and what does it mean?)
Step 2: Analysis and understanding of the background (why does it go wrong?)
Step 3: Design of the solution
Step 4: Implementation of the solution.

Let us delve further into the four change steps to make the process more tangible.

Step 1 – recognition of the situation

We recommend that you begin by conducting an evaluation of both your process and your specific use of the budget.

The more relevant stakeholders you involve, and the more specific you can be, the easier it will subsequently be to address your specific challenges.

Step 2 – analysis and background

When it comes to analysis and background, we would like to highlight especially two issues that often complicate budget planning and cause most problems:

The first is uncertainty about market conditions, etc. Most companies operate under conditions that are difficult to predict throughout the entire budget period. Therefore, a budget that is fixed for a whole year at a time and calculated in nominal values will inevitably become outdated during the budget period.

The second issue is that the budget very often serves several different purposes. In most companies, the annual budget is used, for example, to:

To establish (ambitious) goals for the year
To estimate (realistically) how earnings, cash flow, etc. are expected to develop during the year
To allocate (or: set the framework for) costs, investments and recruitment
To establish the financial targets that form part of bonus programmes.

The consequence of using the annual budget for all these purposes is inevitably that several budget objectives are addressed suboptimally.

Here too (in step 2), we recommend that you involve as many relevant stakeholders as possible to achieve a broad understanding of the need for change.

Steps 3 and 4 – design and implementation

When your company has evaluated your current budget process and has gained sufficient understanding of your challenges, time has come to design your solution and then implement it.

Though design and implementation are actually two different phases, we have combined them into one point in this article. What constitutes a good solution to your company's challenges in the budget process, and how this solution should specifically look – not to mention how it should be implemented and embedded in the company – depends on your specific situation and circumstances that have been identified in the first two steps.

At the risk of generalising, we hereby provide some examples of elements that have been included in solutions we have helped customers implement. Common to these elements is that they aim to add increased dynamism and agility to the budget and planning processes.

Simplification of the budget format and scope
Introduction of financial forecasts that are updated continuously and when significant changes in assumptions occur (e.g. in the form of rolling forecasting)
Increased clarity of goals and ambitions from above
Separation of (ambitious) goals from (realistic) forecasts
Separation of approval processes from the budget
Increased use of relative KPIs instead of fixed (nominal) figures – both as targets and for ongoing performance evaluation
Increased use of graphics to illustrate actual performance development
Limitation of monthly variance analysis in relation to the budget
Modification of bonus programmes so they are no longer based on financial targets from the budget.

Note that each of these initiatives should be carefully considered, aligned with one another and adapted to your specific situation.

Get well started with budget 2026

As mentioned earlier in this article, it would be optimal to begin your company's budget process optimisation whilst the experiences gained from the most recent budget process are still fresh, and before the calendar is filled with other priorities.

More specifically, we suggest that you approach the task by identifying who would be the relevant key stakeholders, so that together you can evaluate your company's budget process. Use the results to create consensus about the need for change in the company. Subsequently, you can assign a dedicated team to analyse your challenges in depth and use that knowledge to design an improved process inspired by the principles in this article.

Even small improvements can create significant value, so don't be afraid to start small and build on the successes.

A better approach to planning and financial management

We find inspiration in Beyond Budgeting, the purpose of which is to avoid the typical problems and inefficiencies associated with classical budgeting, and replace them with a more dynamic and holistic approach.

It is not about removing the annual budget, and certainly not about abandoning planning and performance management, but rather about a changed approach to management in the individual company. The result is a simpler and far more effective planning processes ... and better results for the company.

If you are interested in hearing more, or would like to read a case study article about how the Beyond Budgeting approach has helped our clients, please contact Senior Partner Anders Olesen.