Why Annual Planning and Budgeting is a Challenge for Midsize Companies and What They Can Do About It

It’s January - do you know where your 2025 budget is? 

If you work for one of a fortunate few companies, you’re done with your annual planning and budgeting process. Everything went smoothly from start to finish. You’re confident in your plan and your numbers. Everyone is bought in and ready to kick off a productive year that follows the plan. 

And then there’s most companies. 

As a consultant who helps midsize companies with their operations and scaling challenges, annual planning and budgeting is one of the biggest pain points that I hear about. So in the middle of budget crunch time in December, I did some market research to better understand the scope of those challenges. I interviewed seven senior leaders who are all involved in creating budgets and annual plans for their companies. They are CFOs, COOs, chiefs of staff, and similar positions. Their companies range in size from about 50 to 300 employees. I promised them anonymity so they could speak candidly. 

Here are the top 10 themes that I found. Keep reading for some suggestions for solutions. 

1. No one was completely happy with their annual planning and budgeting process. This wasn’t a surprise, but it’s good validation. If you find the process painful as well, I hope it’s some consolation to know that you’ve got company. 
2. The biggest challenge was a lack of clear direction. People charged with running the planning and budgeting process didn’t get the foundational information that they needed  - whether from the CEO, the board, or other key stakeholders - to allow them to tailor their planning and budgeting to the organization’s key objectives. Or they got it too late in the process. Or the information they got from different stakeholders was contradictory. One SVP that I talked to said that his company spent a lot of time putting together a budget only to find out that the board was expecting double the revenue growth rate that they were projecting. 
3. Several of the people I interviewed also struggled with a lack of project management for the planning and budgeting process. This took several forms, including not starting early enough to be able to finish on time, not getting full participation from all stakeholders because the importance of the process wasn’t communicated to them by senior leadership, and a lack of clarity over roles and responsibilities in running the process. 
4. Related to project management is resource constraints. People are trying to do their regular jobs and see the planning and budgeting process as an imposition. One COO told me that some of his colleagues don’t see any value in even having an annual plan because they don’t have faith it will be followed. So they put in the minimum effort. 
5. If there are any pain points in the company culture, they’re going to be especially acute during the planning and budgeting season. That’s because this is a time when a lot of people with different roles need to work together on a shared outcome. Some of the cultural issues that I heard about included the challenges of collaborating in a fully remote environment, different communication styles (people more comfortable giving information in an email vs. a spreadsheet vs. a conversation, for example), the need for collaboration between departments that aren’t comfortable working together, and the role of office politics in the scramble for limited resources. 
6. Planning technology and tools may or may not work well, but they weren’t the core problem for anyone I talked to. If there’s a process that works well, that can overcome a clunky tool. If the process doesn’t work, a tool won’t save it. 
7. It’s tough to create a good budget without a good plan. Planning and budgeting should go together like a map and an itinerary on a road trip - you can’t get where you want to go and do what you want to do if you don’t have both. And they need to be in harmony. People whose companies skipped the planning and jumped straight to the budget felt like they were flying blind, not knowing which areas of the business should get investment and which needed to tighten their belts. 
8. There needs to be a balance between thoroughness and time commitment. “You could argue that a three-month long budget preparation process is actually destroying value where a two-week budget preparation process would produce something good enough,” said one CFO that I talked to. 
9. Bad data can wreck a planning and budgeting process. If you don’t have confidence in your numbers going in, your output will reflect that. 
10. Planning too little is a danger, but so is planning too much. One chief of staff said that it’s unrealistic to expect a plan to be a crystal ball. “You set the best plan you can and then you adapt throughout the year,” she said. Stakeholders need to have that expectation and not look for perfection from the plan. 

So if you’re not happy with planning and budgeting at your company, what do you do about it? Here are three small things to get you started on a better path.

• Before you worry about the next plan and budget, make sure you get off to a good start with this one. It would be a shame to spend so much time and effort creating a budget just to have it forgotten by Martin Luther King Day (which is what happens every year at the company of one person I talked to). Have a budget rollout process so that everyone knows what’s expected of them and how it will be measured and tracked. Then follow through on that measurement and tracking on a regular cadence. 
• When you’re done rolling out the 2025 plan and budget, it might be tempting to breathe a sigh of relief and then move onto other priorities until it’s time to start working on the 2026 version. Don’t do this. Do a retrospective on the process while memories are still fresh. What went well and what didn’t? I guarantee you’ll learn something you can put to work now. 
• Think about the plan and the budget all year round. This doesn’t need to be burdensome. Weave it into your other company rituals. Annual reviews, bonuses, hiring schedules, re-forecasts - these should all inform and be informed by the annual plan and budget. Good processes will work together and reinforce each other. 

Good luck. And remember that if your planning and budgeting process isn’t as smooth as you’d like it to be, you’re not alone. 

‍Mark Kawar is principal of Up One Rung, which helps midsize companies put in place the structures and processes that they need as they scale.