Can your 2027 budget withstand a change in scenario?

At this time of year, departments consolidate their projections and the executive team prepares to approve targets, investments and hiring for 2027. Before approval, it is worth asking a question that is often left out: what happens to results and cash if the budget assumptions do not hold?

Every budget starts with revenue and expense projections. It becomes more reliable when the company knows which assumptions support those figures and how far the plan holds up when one of them changes.

Explicit assumptions before the numbers

Sales growth, price adjustments, input costs, exchange rates, interest rates and payroll increases are often embedded in spreadsheets, with no record of who defined them or on what basis. Documenting each assumption, along with its source and owner, makes discussion easier at approval and simplifies tracking throughout the year.

Scenarios and sensitivity

Once the assumptions are mapped, the company can build alternative scenarios to the base case and measure how much each variable changes the result. Sensitivity analysis shows, for example, which drop in volume or which exchange rate movement would put the planned margin at risk. It also separates the assumptions that deserve monthly monitoring from those with little impact.

Cash, investments and financing

A plan can close with a profit and still put pressure on cash. Collection periods, inventory, the investment schedule and the cost of debt need to be part of the same calculation. Postponing or phasing an investment can change funding needs over the year, and that decision becomes clearer when the cash budget is prepared alongside the income budget.

Review triggers

A budget prepared for change defines, at approval, the signals that will lead to its review, such as:

• a significant revenue deviation;

• exchange rate movement outside the expected range;

• a change in the cost of financing.

With these triggers agreed upon, the executive team reaches those moments with alternatives already discussed.

How VBR supports this planning

VBR supports companies in structuring budgets, financial modeling and scenario building. The work can follow the traditional model, based on historical data, or zero-based budgeting, in which each forecast is built from scratch every period. In both cases, assumptions, results and cash are connected in the same model.

If your 2027 budget is being built or approved, contact VBR's team through the link in our bio or via our institutional website.