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READ OF THE WEEK

Budgets are Dead, Long Live Budgets

This is the first episode of our mini-series on Budgeting - why budgets aren’t dead, how AI and geopolitics challenge traditional planning, and why the real change is cultural. In the next issue, we’ll get practical: how to actually freeze a rolling forecast into a budget, what prerequisites you need, and the CFO toolbox that makes it work.

1. If Everyone Agrees Budgets Are Broken -  Why Do Boards Still Demand Them?

For years, CFOs have declared the annual budget dead. Too rigid. Too slow. Too disconnected from reality. And yet - every December, we still deliver one.

Why? Because investors, banks, and boards want a number. A benchmark to hold management accountable. A yardstick to measure against.

The paradox: budgets are both useless and indispensable.

2. Why Budgets Break Faster Than Ever

The world today doesn’t respect your 12-month plan:

• Geopolitics: Energy shocks, tariffs, supply chain disruptions, sanctions, and FX volatility can wipe out entire assumptions overnight. A CFO who budgeted for “stable energy prices” in 2021 didn’t survive 2022 without emergency re-forecasting.

• AI: Budgets hate uncertainty, and AI is a moving target. Costs hit first (consultants, licenses, cloud). Efficiencies show up later, and rarely in the quarter you planned for. That makes AI a budget killer. At the same time, AI-driven product initiatives force CFOs to budget for experimentation - high upfront costs with unclear revenue timing, making traditional ROI assumptions far less reliable.

• Macro swings: Interest rates, inflation, consumer confidence - assumptions crafted in Q4 are often outdated by Q1.

Key takeaway: A static budget is a fragile tool in a volatile environment.

3.  The Cultural Shift

Here’s the uncomfortable truth: the main problem isn’t technical. It’s cultural.

• Old mindset: Budget as constraint - “not in budget, can’t do it.” The budget was the Bible. If it wasn’t in, it didn’t happen.

• New mindset: Budget as conversation - What’s the ROI? What’s the scenario? What has changed? 

This ROI-driven approach has long been standard in the U.S., while Europe still defaults to "not in budget, we don't do it.

This requires a leap of faith. Budgets used to create a sense of control - even if it was an illusion. Moving to rolling forecasts means leaders must learn to live with ambiguity.

For CFOs, this is leadership, not accounting. You need to help your CEO and board understand that being “off budget” is not mismanagement - it’s reality moving faster than the spreadsheet.

4. The New Model: Budget as Frozen Forecast

The solution isn’t to kill the budget. It’s to redefine it.

• Rolling forecast = management reality. Updated monthly or quarterly, it reflects the world as it is today.

• Budget = frozen snapshot. A single cut of the rolling forecast, frozen for external stakeholders. It creates the comparability boards and investors still need.

• Variances = signal, not failure. A variance is not a mistake; it’s an early-warning system. When numbers move, that’s exactly what should happen in a volatile environment.

The budget process is more than just freezing numbers. It's your annual strategic anchor: Where do we want to be in 2-3 years? This vision gets pulled out months later when AI and geopolitics force short-term pivots. The long-term direction stays your North Star - even as the path shifts constantly.

In this volatile reality, buffers aren't optional. Build them in - not for comfort, but for survival.

This model ends the "which number?" debate: forecast for steering, budget for accountability and vision for where you want to be in 2-3 years.

Note: Some companies with highly predictable business models might get away with re-forecasting only once a year. But be careful - stability can create false comfort. The avalanche always hits when you least expect it.

5. Common Pitfalls

Many CFOs still run budgets and forecasts as two separate processes - one for the board, one for management. The result? Confusion, wasted time, and constant arguments about “which number is right.”

The fix is a single rolling forecast, with the budget as a frozen snapshot. That way, there’s no debate over which number counts - it’s the same model, viewed in two ways.

But what about spending discipline if the budget is fully flexible? This is where governance comes in:

• The board-approved budget sets the ceiling.

• The rolling forecast shows how you stay within it as assumptions shift.

• Variances are not excuses to overspend - they’re signals to reallocate.

The optimism trap: Every new hire should survive this question today: Do we still need this person in 6-12 months, or can we bridge differently? Tech stack, automation, AI - everything changes job profiles faster than ever. 

And fundamentally: Overdelivering beats underdelivering. The CFO should be more conservative than the CEO here - that's not pessimism, it's professional skepticism.

6. What This Means for CFOs

This new model has clear implications:

• You’re managing two audiences. Boards want predictability. Management needs flexibility. Both can be true.

• You’re rewriting the narrative. Variance is not “failure to execute.” It’s “the world changed, and we adapted.”

• You’re balancing vision and caution. The CEO dreams big, you calculate realistically. The tension is productive - when discussen openly.

• You’re leading the culture. Finance is no longer the budget police. It’s the orchestrator of scenarios, conversations, and trade-offs.

Pro Tip: Never present a budget slide without its forecast context. It’s like reporting the weather without a forecast - interesting, but useless for decision-making.

🔎 CFO Watchlist: New EU Rules for SaaS Contracts

On September 12, the EU Data Act comes into force - and hidden in the fine print is a clause every SaaS CFO should note: customers can switch providers at any time. Unless contracts spell out compensation very explicitly, the old contract is void the moment a client leaves.

Critics warn this undermines the very foundation of SaaS: predictable revenues. Multi-year contracts have been the bedrock for hiring, financing, and scaling. If predictability erodes, European SaaS companies may look less attractive compared to U.S. peers.

But others argue that contracts were never the real lock-in. The real stickiness comes from integrations into workflows, APIs, employee training, and the migration costs no CFO takes lightly. In practice, switching vendors “on a whim” is rare - law or not. (Full discussion on LinkedIn (10) Post | LinkedIn)

👉 The takeaway: The EU isn’t killing SaaS, but it is raising the bar. Contracts may lose power as a safety net, while product quality, seamless integrations, and customer success become even more critical to retention.

🌐 Finance Collective DACH

Your go-to CFO Network

(by Simone)

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CFO Playbook reflects our personal opinions, not professional advice.