Annual budget planning: how to build next year's budget so it matches your books
How is the annual budget usually built?
Towards the end of the year, you send a template to every department head, collect the requests, add them up and go back to each team to cut until the total fits what the company can afford. The result is a spreadsheet with a tab per cost centre, a column per month and a summary sheet on top, and after a few rounds of revisions it is approved before the year starts. One finance lead told us their budget is planned once a year, at year-end, on cost centres that mostly follow the departments.
Even in larger companies with dedicated planning teams, it takes time: in the 2026 FP&A Benchmarking Survey of the Association for Financial Professionals (AFP), the average annual budget took 8.7 weeks to produce. The bigger problems show up during the following year, when you compare the budget with the actuals every month and that comparison takes far more work than it should. How much work it takes is largely decided now, when next year's budget is set up.
Why should your budget follow the same structure as your books?
A spreadsheet budget usually follows the organisation: a tab per team, with lines for the types of spending, such as marketing events, software or travel. Your bookings record the same spending on the accounts of your SKR03 or SKR04 chart, and those accounts rarely match the lines in the budget. One company told us that a category like marketing in their business plan is split across several separate accounts in their bookkeeping, so every comparison during the year starts with mapping one structure onto the other. That mapping is what makes plan versus actual so much work every month.
If you build the budget on the same cost centres and accounts that your bookings will use, the mapping never has to be done. It takes more work at budget time, because department heads think in hires, campaigns and projects rather than accounts, and you have to translate their requests, but that work is done once instead of every month.
Personnel costs need the same care, because they are usually the largest line and depend on start dates and salary changes that are kept in your payroll and HR tool. A salary tab copied into your budget file is out of date as soon as one start date moves. The same applies to contracts that renew during the year at a new price, which only appear in the budget if someone remembers to add them.
Who should see the budget?
In a budget round, department heads often see only their own numbers, partly because the budget file contains salaries and cannot simply be shared, and hiding a column in a spreadsheet does not keep the salary figures private. If a department head is asked to cut their request without knowing that every other team is cutting too, they will argue about the cut instead of the priorities.
The first thing that helps is sharing the total the company can afford before the requests come in, so the first round starts closer to the final budget. The second is letting each department head see their own budget during the year, so they can check what is left without asking finance.
Do you need budgeting and forecasting software?
When the spreadsheet gets too big, the usual next step is to look at budgeting and forecasting software. It makes the budget round easier to run, but the plan still sits in a separate tool from the books, so the budget and the actuals have to be brought together every month. It is also expensive for a growing company: one finance team of around 70 people told us the planning tools they looked at cost between 1,000 and 3,000 euros a month, too much for a company their size. That cost also comes on top of what you already pay for your existing tools.
How does Agent F keep the budget connected to your books?
A budget that is approved and then left alone falls behind the business with every change. A new hire starts two months late, an event is cancelled or a supplier raises its price. These changes are tracked in emails and side spreadsheets rather than next to the budget, so the gap between plan and actual spend is only discovered when someone compares the two.
In Agent F, the annual budget is built in the same system as your bookings, on the same accounts and cost centres. A category like marketing, from the example above, is planned directly on the accounts its invoices will be booked to, so plan versus actual needs no mapping once the year starts. The structure is your own, because Agent F is configured to how your company is organised, through our AI-Native ERP Factory.
During the year, every transaction is reconciled and booked as it comes in, with your team approving each suggested booking, so manual matching becomes an approval flow and the actuals are current at any point. With the changes described above, a supplier's price increase shows up as a variance on its account and cost centre in the month the invoice is booked. A new hire who starts two months late shows up as lower personnel costs in those two months, instead of in a quarterly review. Access rights decide who sees what, so each department head can follow their own budget while salaries stay visible only to the people who should see them.
Learn how Agent F works, and book a demo at agent-f.ai/demo to see it run on your numbers.