When the Wind Changes: How to Build a Resilient Budget for 2027

For many companies, autumn means one thing: budgeting season. The annual ritual of convincing the board that the future can be forecasted with the precision of two decimal points.

Sales presents an optimistic vision of the future – often precisely the one the board would like to see reflected in the budget. Procurement somehow manages to identify another few percentage points in savings, even in areas where, just a year earlier, it insisted there was nothing left to squeeze out. Production promises greater efficiency, usually accompanied by a disclaimer: CAPEX must be approved, machinery must arrive on time, employees must be available, and there must be no breakdowns. HR assumes stable headcount, higher employee engagement but just in case – instead of budgeting for “Fruit Thursdays” – it tries to fit in extra funds for an online course entitled “How to Professionally Lay Off Employees” – in case that the company once again will have an opportunity to put all those values so enthusiastically promoted in its monthly internal newsletters to the test. Finance looks on in disbelief, sensing the hypocrisy embedded in more than a few of these assumptions, but reluctantly consolidates everything into a single model, as corporate ritual demands.

The result is a spreadsheet that the more trusting among us call an “integrated financial model”. Then begins the familiar sequence of meetings, revisions of the previous meetings and negotiations. Eventually, a budget for the following year emerges, typically accompanied by two simple scenarios of +/- 10% (without accounting previously set safety margins that individual departments have already discreetly embedded in their own assumptions).

This is how most organisations have prepared their budgets for decades.

But does this approach still reflect the reality many businesses will face in 2027?

Today’s geopolitical and economic environment means that changes in energy prices, raw material costs, interest rates, exchange rates, regulations, tariffs, supply chains and consumer behaviour can fundamentally reshape business conditions within a matter of weeks.

So what shall be particularly taken into consideration when planning a budget for 2027?

A BASE CASE SCENARIO WITH +/- 10% VARIATIONS IS NOT ENOUGH

The 2027 budget should incorporate considerably more possibilities than a conventional set of scenarios, some of which should assume a much wider range of potential outcomes.

The key risk today is not that a single variable might move in the wrong direction. It is that several variables could deteriorate simultaneously within a very short timeframe. A sharp decline in demand, soaring energy prices, more expensive raw materials, supply chain disruptions or customers taking a creative approach to payment terms may each be relatively manageable in isolation. When they occur together, however, they can fundamentally change a company’s financial performance and liquidity position.

The solution is to identify the critical drivers for your company, define their potential deviations and stress-test the most dangerous combinations – even those that appear unlikely at the planning stage.

Several such scenarios should be quantified and presented in detail. Their impact on sales, margins, EBIT, cash flow and working capital should be calculated, together with the thresholds that trigger specific management actions.

Every scenario should be accompanied by answers to three fundamental questions: what actions will be initiated, who will make the decisions and how quickly, and how should individual departments be prepared in advance, before the scenario becomes reality – without creating unnecessary panic across the organisation.

Scenarios without quantified consequences and clearly assigned actions are only analytical exercises. They may look impressive in a presentation, but offer limited value when market conditions genuinely begin to change rapidly.

YOUR BUDGET DEPENDS ON YOUR SUPPLIER’S BALANCE SHEET MORE THAN YOU THINK

In 2027, companies should pay closer attention to their critical suppliers – not only in terms of price, quality and delivery performance, but also their financial health.

The risk is far from theoretical. Late payments are already widespread, and an increase in payment delays may be one of the earliest warning signs of deteriorating financial conditions of your partner.

In June, Atradius estimated that almost one-third of invoices were overdue, while 83% of companies experienced payment delays. Manufacturing businesses are particularly exposed, as delayed payments can rapidly increase pressure on working capital and the financing of day-to-day operations.

Consider even the best supplier, with excellent quality and delivery performance, but a relatively concentrated customer portfolio in which one customer accounts for the majority of its revenue. In practice, your business depends not only on the financial health of that supplier, but also on the financial condition of its largest customer. Losing such a customer could undermine the supplier’s liquidity within weeks, reducing its ability to finance inventory, investments or raw material purchases – and ultimately affecting your own operations.

There are plenty of examples in the market where years of neglecting dual sourcing have ultimately left companies with little choice but to finance a supplier’s operations or pay virtually any price to maintain production continuity.

For strategic suppliers, therefore, it is worth examining not only their financial statements, but also customer concentration, debt levels and access to financing.

The behaviour of trade credit insurers also deserves attention. During prosperous periods, credit limits appear to be stable and predictable. Yet a few negative signals from the market may be all it takes for an insurer to decide that the time has come to share the risk – preferably by handing it straight back to your business.

Does your plan for 2027 include such scenarios?

INDECISION COMES AT A PRICE

In 2027, the competitive advantage will belong not to the company that predicts the market most accurately, but to the one that reacts fastest when its forecast proves wrong.

Two companies may encounter exactly the same problem on exactly the same day.

Within a week, one adjusts purchasing volumes, revises its production plan, postpones CAPEX and renegotiates contracts.

The other launches a series of meetings, reports, additional analyses and successive layers of approval. By the time a decision is finally made several months later, the problem may become much more expensive.

Unfortunately, years of prosperity have harvested an entire generation of managers who have become highly skilled at navigating in corporate procedures, hiding behind HR slogans and operating in an environment where satisfactory financial results concealed their weaknesses.

They often prove far less capable when circumstances demand that someone take responsibility quickly and make a difficult, unpopular decision.

Rather than being prepared to say clearly, “This is what we’re going to do,” they organise another meeting, followed by a meeting about the meeting, while attempting to distribute responsibility among so many people that ultimately nobody feels accountable for the decision.

In stable times, this management model can survive for years. During a crisis, the cost of delayed decisions can undermine even the most carefully prepared budget.

In a more challenging environment, you cannot rely on people who only know the corporate tricks, tell you what you want to hear and look good during presentations – even the finest tailored suit cannot substitute for the ability to make reasonable decisions based on business acumen without hesitation, take responsibility for them and implement them effectively.

So, in 2027, be extremely careful about who is at the steer of your boat and its departments. Sometimes a lack of decisiveness might be more costly than some small mistakes resulting from a prompt adaptation.

KNOWING WHICH WAY THE WIND BLOWS IS NOT ENOUGH

The 2027 budget should not be an attempt to demonstrate that we can predict the future with absolute accuracy.

It should be a test of whether the organisation is flexible and prepared for several different scenarios.

Until recently, poor decisions, slow reactions, excessive inventories or weak contracts could often be concealed by satisfactory sales and overall results in the following quarter.

Such a market was an exceptionally forgiving judge of management quality.

2027 may prove considerably less forgiving.

That is why knowing which way the wind blows is not enough. You also need to know when to change course, who has the authority to make that decision and whether the organisation is capable of acting quick enough.

Because when the wind changes direction, the winner is not the one who described it best. It is the one who adjusted the sails first.