How to Think About Your Budget As a Strategic Tool, Not a Straitjacket.
Say it with me: budgets should support strategies.
The leaves are turning amber and gold across much of the US, and the air is getting crisp, at last, here in the Midwest. And yes, these changes signal pumpkin spice season and cozy sweaters for us finance pros too. But they also signal the start of one of our busiest, most interesting, most demanding times of year: Budgeting Season.
There is a particular energy that accompanies it, often one part anticipation, one part anxiety, and twinges of dread. But it doesn't have to be that way. At Level, we approach budgeting as one of the most helpful, strategic processes businesses can build and sustain. Read on to learn how leaders can shift the mindset around budgeting, and use it as a chance to set intentional goals for the year to follow. We’ll cover:
What the headlines asking us to “abolish the annual budget” are really suggesting
How to reframe the budget from a constraint to a catalyst
The essential questions teams need to ask their finance pros – and vice versa – to ensure that budgets support strategies.
The Backlash Against Budgets is About Processes, Not Spreadsheets
We’ve all seen the articles in Forbes, Harvard Business Review, and other major business publications declaring it's time to "let go of traditional budgeting" or "abolish the annual budget." This is not a new idea - HBR still runs a 2003 article titled, Who Needs Budgets?, that rejects what they call traditional budgeting’s “reliance on obsolete data … protracted, self-interested wrangling over what the data indicate about the future … and foregone conclusions … that render pointless the interpretation and circulation of current market information.”
Ouch. But, 2003 was eons ago, so let’s perhaps give it some space.
But the idea that budgeting is a backwards-looking, peevish exercise designed to constrict, not enable, growth is still with us. The 2020 Forbes article, titled Kill Budgeting or Kill Your Business still seems to think that “if we budget what we put in, that is to say, eliminate or cut back the amount, then we limit our overall growth and production.” Which is true - if that’s what budgeting means to you.
But even still, that was in 2020, when uncertainty and a craving for freedom were the core components of our collective consciousness - so maybe we give this one space too.
More recently, we’ve seen Forbes reinvigorate the Beyond Budgeting movement, which has been with us since at least 1998, and which promises to free organizations from “dictatorship, micromanagement, number worshiping, bureaucracy, calendar periods, secrecy, sticks and carrots, and all the other management myths about what is best for achieving great performance in teams and organizations.”
The management myth I would like to bust? That budgeting is the tool of dictatorial leaders (with the finance team serving as their henchmen), and not a process that aligns the entire business around growth-oriented, strategic investment.
And really, if you read them closely, these articles aren’t suggesting we operate in some kind of financial free-for-all, where teams can spend without planning or accountability. What they're actually advocating for is putting the importance of budgets into proper perspective.
The real problem isn't the fact that a spreadsheet of projected expenditures exists – the issue lies in the processes that create and govern its use. And that is something that we can solve, while maximizing all the benefits that budgeting brings to the table.
From A Set of Constraints to a Catalyst for Growth
Picture this scenario: It's March, and Sarah, a marketing director at a mid-sized B2B tech company, has identified an incredible opportunity. A competitor has just stumbled badly, and there's a three-month window to capture their disgruntled customers. She needs to move fast—increase ad spend, bring on a contract writer, maybe sponsor a few strategic industry events.
She takes the proposal to leadership, and the response is immediate: "It's not in the budget."
Never mind that the opportunity could yield a 300% return. Never mind that the competitor's weakness is temporary and the window is closing. The Budget—capital B, monolithic and unmovable—has spoken. And just like that, a potentially transformative strategic move dies on the vine because we're treating last year's financial projection like it was carved in stone tablets.
This is what happens when we let a static, inflexible budget guide our every strategic decision. We turn a planning tool into a prison. And that’s precisely what the budget abolitionists are upset about.
I am too. Budgets should support strategies - that means that they should resource strategic initiatives effectively and evolve throughout the year to take advantage of opportunities as they arise. A good budget makes room for both.
Here's how I think about it instead: A budget should be a plan that outlines how we will pay for strategies that we believe will help us level up. It's not a ceiling. It's a framework. It's not a limitation. It's a conversation starter.
This shift in perspective changes everything.
When I work with teams on budgeting, I don't frame it as "Here's what you can or can't spend." Instead, I ask: "Here are the resources we have available. How do we deploy them most effectively to achieve our strategic objectives?" It's a subtle difference in language, but it creates an entirely different dynamic.
Think about another scenario: David runs operations for a manufacturing company. During the budgeting process, instead of being handed a number and told to make it work, his CFO sits down with him and asks, "What would you need to reduce lead times by 20%? What would it take to improve quality metrics by 15%? Let's talk about what success looks like, and then we'll figure out how to resource it."
That's a conversation about possibilities, not limitations. That's alignment, not constraint.
Budgets as Alignment Tools
A well-constructed budget that drives alignment tells a story. It says: "This is what we believe matters most. This is where we're placing our bets. This is how confident we are in different strategic initiatives." When everyone can see that story clearly, when they understand not just the numbers but the reasoning behind them, something powerful happens.
Teams stop fighting over resources and start collaborating on priorities. Department heads stop hoarding budget allocations and start looking for efficiencies they can redeploy. Leadership stops saying "no" reflexively and starts asking "how might we make this work?"
Every CFO will start this storytelling a little differently, but every one of them will cover the following chapters:
Historicals - your income statement (aka P&L), balance sheet, and cash flow statement. These are the most important documents for understanding the story of your business.
Strategic Performance - what existing strategies are working or need continued investment to bear fruit? What needs to be changed or sunsetted? What new strategies - products, customers, verticals, approaches, or pricing structures - do we want to implement? What are the resources required?
Operating Metrics - are highly dependent on your industry and business model, but everyone should know revenue growth rates, gross profit margin, operating margin, net profit margin, and cash conversion cycle as a starting point.
These three plot points tell the story of your business to date. Once you have that story on the page, you have what you need to build a budget model that grows your business - and supports all of the innovative thinking your teams bring to the table.
That last point is crucial. Any finance professional can say "no"—that's the easy part. The real skill is in figuring out how to say "yes" responsibly. Maybe it's reallocating resources from a lower-priority initiative. Maybe it's adjusting timelines. Maybe it's identifying a test-and-learn approach that requires less upfront investment. But there's almost always a path forward if we're willing to treat the budget as a living document rather than holy writ.
As we head into budgeting season, I'm thinking about two sides of this conversation: what do owners and founders need to know to make the budgeting process easier and more valuable? And what does our pro community have to say about creating truly agile budgets?
Stay tuned for budgeting case studies across a variety of industries, including non-profits. You’ll leave with actionable insights that you can use to build a better budgeting process tomorrow, and the confidence to tackle it with clarity and calm.
You believe in budgets. But budgeting? Easier said than done. That’s ok - Level is here to help. Contact a Dedicated CFO to learn about how Level can build your budget before the new year.
