Why You Should Budget in Summer, not Winter

By Matt McDonald
9 Min Read

I’ve been an accountant, among other things, for well over thirty years now, and one common habit that I would really like to see the end of is budgeting and planning from July to June – from winter to winter.

Think about it.  In Australia, most businesses have financial years that start on 1 July and finish on 30 June.  In the USA and Continental Europe, most businesses observe financial years that start on 1 January to 31 December.  And yes, I know that there are other models, eg in Japan and New Zealand – but the fact remains that in much of the developed world, financial (and therefore budgeting) years typically start and finish in winter.

How depressing.  Who wants to be drafting budgets and setting targets in late autumn and early winter?  When its typically wet and cold, in places like Melbourne (where I live).  Do you find that inspiring or aspirational, on reflection?  I don’t.

And putting that aside, what happens halfway through “the financial year”?  Most of us stop for an extended break over the holiday season.  So if things are going well, we might lose that positive momentum.  And if the business is going badly, we lose valuable time to take effective remedial action.

So I’m going to suggest that its about time we started planning like we actually live – following the natural, January to December rhythms of the Australian calendar year, rather than the artificial timetable imposed by dismal taxation deadlines.


Why the Calendar Year is Best for Budgeting – and Performance Planning

  1. Think about it – we go to Christmas parties and reflect on the year that has passed.  Not just the last six months or so.  Wouldn’t it be better to celebrate the final score, not just worry if we can “maintain our lead going into the second half of the game”?
  1. Most of us are pretty worn down at the end of the calendar year – even without COVID19 restrictions.  Everyone I talk to is feeling pretty “cooked” right now.  But when we come back from summer breaks, we are usually feeling pretty good.  Optimistic even.
  1. Because if you want to grow your business, it actually helps to be optimistic – and very few of us are at our optimistic best when its wet and cold.  Not even accountants, in my experience.
  1. Finally, remember that your people are also likely to plan their lives around calendar, not financial years.  So briefing them on their individual targets and any necessary role focus changes in summer is more likely to keep them engaged with their leaders and aligned to your overall plan.  It sure beats trying to get them excited about budgets in the middle of winter!


What about “the tax year”?

Its a little known fact that it is possible for many Australian companies to formally change their tax years to align with the calendar year – ie to end on 31 December – here’s how.

Now your business might not be able to prove “an ongoing event, industry practice, business driver or other ongoing circumstance that makes 30 June impractical”.  But don’t worry – you can always leave your tax year aligned to the 30 June standard, and run your budgets and performance planning on a calendar year basis.

This is possible because most small business accounting systems, like Xero, are actually technically agnostic about what constitutes a “financial year”, unlike the comparatively rigid systems that I originally trained to use.  Profit & Loss and Sales reports can typically be run using any combination of start and finish dates, for example.

So you see there is usually no problem at all leaving the tax year reconciliations and reporting to your accountant, while you and the rest of your team play to your strengths – and plan for and work to a more intuitive calendar year, running progress reports as required based on flexible reporting parameters.


Sounds good – but we already have a budget out to 30 June….

But is it actually still useful?

A lot of budgets prepared in Australia in winter 2021, before NSW and Victoria went into extended lockdowns, are pretty obsolete now.  Why not shred them, throw them in your compost, and start with a fresh (and warm) head in the new year, with current assumptions and ambitions?  And use that to get your team on board, with meaningful targets?

Better yet… start with a refreshed Strategic Plan that is “right for the times”, and then budget and set performance targets for your team that align with that plan.  Because a budget that isn’t based on a current Strategic Plan is probably not much good to start with.


OK – but I’m going on leave, I have no time or energy to do a budget (or a Strategic Plan)

Let me tell you a dirty budgeting secret… the world will not end if a budget is only finalised after the new planning year starts.

In fact, every ASX listed and multinational company that I worked in, as the Australian CFO, typically only signed off on budgets a few weeks after the start of the planning year.  And we never once suffered an earthquake or plague of frogs.  True story, and most accountants I know have shared similar stories.  Even the Federal Government now gives itself flexibility for its annual budget.


Before you close for the holidays, there are TWO last things you need to do

You’ve already advised your customers and suppliers that you are taking a break – good job.  But when you gather your team for your end of year party or final office drinks, make sure that you don’t forget to:

  1. Tell your team how much you value them, and that the business couldn’t have achieved its goals without them.  That will be 100% true.
  1. Let them know that when they come back to work, refreshed and ready for a new adventure, you will have a great story to tell them about the business’s goals for the coming calendar year and the parts that they will each play in achieving them.

Because even if you don’t decide to change your budgeting cycle, you will definitely have goals for the new year and you need to send your team away for the holidays feeling good about coming back to work in January.


And while YOU are away, ask yourself this one question…

Wouldn’t you like to come back restored from leave in January, with a clear ambition for what you want 2022 to look like, refresh your Strategic Plan and then roll out a budget and performance plan that actually means something to you and your team?

And this time next year, celebrate the successful year that’s been, not being exhausted at the half time siren, like many of us are right now?

Or would you prefer to pick up that tired budget from last winter, and remind everyone how they felt back then, before lockdowns and border closures wrecked that plan?

Sounds like a simple choice to me!

Matt McDonald

Matt McDonald

Matt has worked as a CFO, Acting CEO, Company Secretary and Head of Sales and HR for 30+ years.

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