By: Sylvester Ofori
Most budgets fail for a simple reason: they try to predict the future while ignoring the truth of the past.
In December, businesses and nonprofits often sit in meetings where someone confidently announces, “Let’s grow revenue by 40% next year.” Everyone nods. The spreadsheet smiles. The projector behaves like a motivational speaker. Then January arrives with school fees, rent, supplier demands, and customers who “will pay next week.” Suddenly, the same people who loved the 40% growth plan are asking for a “quick cashflow update.” That is when the budget starts sweating.
A useful budget is not a wish list. It is a decision tool—a one-page plan that helps you answer three questions throughout 2026:
- What is our realistic plan based on last year’s actuals?
- Will we have cash week by week, not just profit on paper?
- What three KPIs must never surprise us?
This guide explains what management needs to know to draft a credible 2026 budget, whether you run general services, manufacturing, construction, banking/fintech, or an NGO.
1. Start with truth: budgets are built on last year’s reality
The strongest budgets begin with actual performance, not ambition. Your 2025 numbers are your best forecasting map—provided you interpret them properly.
Step 1: Close 2025 to a “budget-ready baseline”
Before using 2025 actuals, do a quick normalization pass. You are separating repeatable performance from one-off noise.
For SMEs, normalise for:
- one-time costs (legal disputes, major repairs, relocation, big bad debts written off)
- one-time income (asset sales, unusual contracts, refund windfalls)
- owner-related items that will not repeat (personal expenses disguised as “office supplies” with suspicious enthusiasm)
For NGOs, normalise for:
- one-off grants received once and not renewed
- donor-funded project spending that ends in 2025
- emergency programs/events that will not repeat
If you skip this step, you will build a 2026 plan on distorted numbers—like using last year’s rainstorm to forecast next year’s climate. Worse, you will treat a miracle as a strategy.
2. Budget drivers, not departments: the management difference
Many budgets fail because they are built around account names (“Transport,” “Repairs,” “Office Expenses”) instead of the real drivers of cost.
A budget becomes credible when management links spending to the operational factors that cause it.
Step 2: Reclassify spending into cost drivers
Examples of drivers that actually explain your costs:
- headcount, compensation bands, and hiring plans
- rent and utilities per branch/location
- fuel and transport per route, delivery cycle, or service calls
- cost per unit produced or procured (including waste and yield)
- clients served / beneficiaries supported
- training count, outreach count, event count
- transaction volume, merchants, active users (fintech)
This driver approach works across industries because it reflects reality: costs happen because activities happen. Nobody wakes up and says, “Today I will increase admin expenses.” They wake up and say, “We’re expanding operations.” Then the expenses follow them home.
3. Build the budget in three layers (so it survives reality)
A credible budget is not one flat table. It is structured, transparent, and defensible.
Step 3: Draft 2026 using three layers
- Base layer (repeatable): Start with normalized 2025 actuals and carry forward what will still exist.
- Change layer (planned adjustments): Add known changes: new hires, salary adjustments, rent increases, new branches, new projects, IT upgrades, marketing push, loan repayments.
- Risk layer (contingency): Add a contingency line—often 3% to 7% of operating costs—and document why.
A budget without contingency is like attending a Ghanaian wedding with “exact money” and forgetting that every auntie has a fundraising project for your soul.
4. Profit budgets are not enough: build a cash plan that keeps you alive
Many organisations “make profit” and still struggle to pay salaries. This is not a contradiction. It is accounting versus survival.
A profit budget answers: Will we be profitable?
A cash plan answers: Will we be alive every Friday?
Cashflow pressure is intensified by timing:
- customers buy today and pay later
- suppliers deliver today and demand money earlier than your customers remember you exist
- salaries come on fixed dates (whether cash is available or not)
- taxes, SSNIT, rent, utilities land on predictable cycles
- donors promise funds but disburse after reports, approvals, and sometimes “internal processes”
In short: timing is everything. The calendar is your CFO’s silent competitor.
5. The two-horizon cash method: simple, practical, and brutal
To prevent annual-budget blindness (looking successful in December but going broke in March), use two horizons:
- Weekly cash plan for 13 weeks (control window): This is where management actually controls outcomes.
- Monthly cash plan for the rest of 2026 (planning window): This supports strategic decisions (capex, hiring, expansion).
This method forces early warnings. It is hard to pretend you are okay when Week 6 says “negative cash,” and Week 7 says “even more negative cash.” The spreadsheet stops smiling at that point.
6. What management must demand in the budgeting process
Budgets become management tools only when leadership insists on discipline in four areas:
a) Written assumptions (not assumptions in people’s heads)
Your budget must begin with a one-page assumptions sheet:
- pricing and volume assumptions
- FX assumptions (where relevant)
- inflation and supplier price assumptions
- hiring plan and salary structure
- expected donor funding and conditions (NGOs)
- facility limits and repayment assumptions
When assumptions are not written, budgets become debates, not plans. Everyone remembers the meeting differently—especially after Christmas.
b) Accountability and ownership
Assign owners: revenue owner, payroll owner, procurement/COGS owner, capex owner, statutory compliance owner.
Budgets fail when everyone agrees, but no one owns.
c) Variance rules (how you will run the budget)
Agree in advance on weekly cash review (short, sharp), monthly performance review (with explanations), variance thresholds requiring action (e.g., ±10% or material amounts), and decision triggers when cash dips below your minimum buffer.
A budget without variance discipline is like a smoke alarm with no batteries—very decorative, not very useful.
d) Controls against “budget theatre”
Budget theatre is when the budget exists for presentation, not management. Avoid it by enforcing linkage to actuals, realistic payment cycles, written assumptions, cash-first thinking, and scenario testing.
7. Scenario and sensitivity: make the budget stress-proof
A budget is credible only if it survives stress. Management should require at least three scenarios:
- Base case: things go as expected
- Downside case: collections delay or costs rise
- Upside case: growth is stronger than expected
Then run simple sensitivities:
- What if revenue drops by 10%?
- What if collections delay by 30 days?
- What if input costs rise by 15%?
- What if payroll increases unexpectedly?
- What if donor funds delay by two months?
This is not pessimism. This is leadership maturity. Hope is not a control.
8. Budget governance: how to run 2026 without January panic
Budgets fail when they are filed away. Good budgets are operated.
Management should implement:
- weekly cash meetings (15–30 minutes)
- monthly performance reviews with variance explanations
- rolling forecast updates quarterly
- decision logs for major changes (hiring, capex, pricing, facilities)
A budget that is not reviewed becomes obsolete by February, and by March it becomes a comedy show.
Closing: the budget is not the document; it is the discipline
A budget that works is built on last year’s truth, driven by operational reality, protected by contingency, and governed by consistent review.
In 2026, the goal is not to produce an impressive spreadsheet. The goal is to build a system that keeps the organisation solvent, credible, and controlled through good months and difficult ones.
And one final reminder from experience: If your plan depends on miracles, at least budget for the miracles’ transport and per diem.
Conclusion: your 2026 budget should be boring—and that’s the point
A good budget is not exciting. It is usable. It turns last year’s reality into this year’s discipline. It prioritizes cash over ego. It tracks three KPIs that prevent surprises.
Author: Sylvester Ofori is a Chartered Accountant and Manager in Financial Assurance and Advisory, with experience spanning audit, forensic accounting, financial reporting, and advisory services across multiple sectors. He currently serves as a Subject Matter Expert on an accounting software solution, providing technical guidance on the development and application of standards-compliant financial systems.
His professional interests lie at the intersection of accounting, technology, and governance, with a strong focus on the practical implementation of international financial reporting standards. Through his writing, Sylvester shares insights aimed at strengthening financial integrity, enhancing decision-making, and supporting sustainable organizational growth.