It’s that time of year.
Someone on your team is about to pull up last year’s budget, make a few adjustments, and send it around for “input.” A few people will tweak their numbers. Nobody will really think too hard about it. And by January, the budget will be sitting in a folder somewhere, largely ignored.
Sound familiar?
Budgeting is one of those things that every business knows they should do and most businesses don’t do well. And for professional services firms specifically, the problems tend to cluster around the same three things: too much detail in the wrong places, the wrong people owning the numbers, and a fundamental misunderstanding of what a budget is actually for.
Let’s talk through each one.
Problem One: Too Much Detail in the Wrong Places
Here’s a common scenario. A firm builds their budget using their chart of accounts as the guide. Every account gets a line. Every subaccount gets its own row. By the time it’s done, the travel section alone has eight lines: airfare, lodging, ground transportation, meals, parking, conference fees, and a couple of others that nobody remembers adding.
The result: a budget that’s exhausting to build, cluttered to read, and impossible to manage against.
Here’s the thing about travel budget: it doesn’t matter how much is lodging versus airfare versus Uber. What matters is the total. Can we spend $30,000 on travel this year or $50,000? That’s the decision. The breakdown below it is noise.
A good budget uses categories that match how decisions actually get made — not the full granularity of your chart of accounts. Think about what level of detail is actually useful for the person managing the budget. If nobody is making decisions at the subaccount level, don’t budget at the subaccount level.
This is exactly the problem I’m working through with a client right now. Their chart of accounts has grown over the years without much oversight — lots of subaccounts, lots of categories that made sense once and just stuck around. Before we can build a useful budget, we’re cleaning up the underlying structure. Because a cluttered chart of accounts produces a cluttered budget, and a cluttered budget doesn’t help anyone.
Problem Two: The Wrong People Owning the Numbers
Even a well-structured budget fails if nobody actually owns it. Two things tend to go wrong here.
The first is no accountability at all. The budget gets built, distributed, and then… nothing. Nobody checks in on it. Nobody asks whether the numbers were hit. Nobody connects the monthly financials back to what was planned. The budget exists as a document, not as a management tool.
The second is accountability without understanding. The budget gets handed to someone who doesn’t really know what they’re supposed to do with it — so they do the easiest thing: copy last year’s numbers, maybe add a small percentage, and send it back. No critical thinking about whether the numbers make sense. No consideration of what’s changing in the business. No connection between the budget and the actual plan for the year. Both of these are fixable. But they require intentionality.
The right person to own a budget line is the person who actually controls that spending — and who understands enough about the business to make a thoughtful projection. That person needs to be asked real questions: What are you planning to do differently this year? What assumptions are you making? What would change if revenue came in 20% below target?
And critically — they need to be asked about it again in March, and June, and September. A budget review isn’t a formality. It’s a management conversation.
Problem Three: Forgetting What a Budget Is Actually For
This is the big one.
A budget is not a history lesson. It’s not last year’s numbers plus a little growth. It’s not a exercise in filling in spreadsheet cells. A budget is a profitability plan.
The logic runs like this: at revenue target X, your firm can afford to spend Y. The budget is the expression of that math — broken down by department, by category, by month. It’s a statement of intent about how you’re going to run your business at a given level of revenue. Which means you have to start with revenue.
This is where a lot of budgets go wrong. Expenses get budgeted first — people think about what they need, what they want, what they spent last year — and revenue gets added at the end as almost an afterthought. Or worse, revenue just gets set to “same as last year plus 10%” without any real thinking about whether that’s achievable or what it would take to get there.
“Same as last year” on expenses is lazy. “Same as last year” on revenue is dangerous.
Your revenue target should drive everything else. How much can you spend on salaries at that revenue level and still hit your margin target? How much on overhead? How much on growth investments? The budget is the answer to those questions — not a collection of departmental wish lists stapled together.
What a Good Budget Process Actually Looks Like
You don’t need a complicated system. You need a few things to be true:
Start with revenue. Set a realistic target — one that’s grounded in your pipeline, your capacity, and your market — and work backwards from there. What margins do you need to hit? What does that leave for expenses?
Budget at the right level of detail. Use categories that match how decisions get made, not the full granularity of your chart of accounts. Consolidate where the detail doesn’t drive decisions. Travel is travel. Marketing is marketing. You can always drill down in the actuals if something looks off.
Put the right people in charge. The person who controls the spending should own the budget line. Give them real questions to answer — not just a spreadsheet to fill in.
Build in accountability. Monthly or quarterly budget-to-actual reviews aren’t optional. This is where the budget becomes a management tool instead of a document. If you’re not reviewing it, you’re not using it.
Revisit your assumptions. Especially on revenue. If your top line is tracking significantly above or below plan by Q2, your expense budget needs to flex with it. A budget built for $2M in revenue doesn’t work the same way if you’re heading for $1.5M or $2.5M.
One More Thing
If your chart of accounts is a mess — too many subaccounts, categories that don’t reflect how the business actually runs, accounts that nobody’s looked at in years — fix that before you build the budget.
A budget is only as useful as the financial structure underneath it. If the categories don’t make sense, the budget won’t either. And if the actuals don’t map cleanly to the budget, your variance analysis is going to be a nightmare.
It’s worth the investment to clean it up. The budget you build on top of a clean chart of accounts will be easier to build, easier to manage, and actually useful to the people responsible for following it.
That’s the goal: a budget that works for your business, not one that just checks a box.
Chris Geno is a CPA and fractional controller at High Rock Accounting, working with professional services firms on financial strategy, reporting, and operations. Budget season coming up? It’s worth a conversation before you open last year’s file.
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