Kill the Annual Budget: The Case for Agile Forecasting
The annual budget is obsolete the moment it is finalized. Shift from static "Negotiated Settlements" to dynamic Rolling Forecasts.
The annual budget is a relic of the industrial age. In a volatile economy, sticking to a 12-month fixed plan is not disciplined; it is negligent.
We must move from "Predicting" (guessing the future) to "Adapting" (Rolling Forecasts).
The "Negotiated Settlement"
Every year, companies engage in a painful, months-long ritual. Managers spend weeks building detailed spreadsheets, only to have them slashed by executives. The result is not a strategic plan, but a political compromise.
We call this the "Negotiated Settlement."
"The budget is the bane of corporate America. It never should have existed... It's a negotiated settlement, not a plan."
The fundamental flaw of the traditional budget is that it incentives the wrong behavior. Managers "sandbag" their targets—setting the bar low to ensure they hit their bonuses. Conversely, they inflate their expense requests to create a buffer, knowing they will be cut.
This results in a "Phony Smile" document: a plan that everyone signs off on, but no one actually believes is accurate.
The Cost of Static Planning
Beyond the politics, the biggest issue is latency. In today's digital economy, market conditions change weekly. Yet, we attempt to lock in a plan for December 2026 in October 2025.
While agile companies sprint, the average organization spends months negotiating these static numbers. By the time the budget is approved, the assumptions on inflation, currency rates, and customer demand are already obsolete.
You are essentially navigating a ship using a map drawn six months ago, ignoring the storm you can see right in front of you.
The Solution: Rolling Forecasts
The alternative is not no planning; it is continuous planning. We must move to Rolling Forecasts.
Unlike a static budget that ends at the fiscal year, a rolling forecast continuously updates the view for the next 12 to 18 months. As one month ends, another is added to the horizon. This transforms planning from a "once-a-year event" into a continuous conversation about resource allocation.
The Cultural Shift: Control vs. Allocation
Ultimately, this is a shift in philosophy. Traditional budgeting is about Cost Control—ensuring people don't spend more than they were "allowed." Rolling forecasts are about Capital Allocation—ensuring money flows quickly to the highest-return opportunities.
ABOUT THE AUTHOR
Konstantinos Kormentzas
Founder & Managing Partner
Former C-level banker turned entrepreneur who serves as a strategic ally, bridging the gap between complex data, technology, and the practical realities of business leadership.
