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Planning · 1 min read

Building a budget that survives contact with reality

A budget nobody revisits after January is a document, not a tool. Three changes make it useful all year.

Most annual budgets are abandoned by March. They are built once, approved, printed, and then quietly diverge from reality until the whole exercise repeats a year later.

Three changes fix this. Build the budget from drivers rather than last year plus ten percent — headcount, unit volumes, price. When something changes, you update one assumption instead of rebuilding the sheet.

Second, run variance analysis monthly and in writing. Not to assign blame, but because a variance you can explain is information and a variance you cannot is a warning.

Third, reforecast quarterly. The original budget stays as the benchmark you are measured against; the reforecast is what you actually manage against. Keeping both is the point.

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