Before You Build Your 2027 Budget, Fix These 6 Numbers in Your 2026 Accounts

For many businesses, budgeting starts with a spreadsheet.

Last year’s numbers are pulled up, revenue is increased by a percentage, expenses are adjusted, and management begins setting targets for the year ahead.

The problem is that a budget is only as reliable as the numbers it is built on.

If your 2026 accounts contain old receivables, inconsistent margins, unrecorded liabilities or expenses that have not been properly classified, your 2027 budget may look precise without actually being useful.

Before deciding where the business is going, management should first make sure it has an accurate view of where the business stands.

Here are six numbers worth reviewing before your 2027 budget is finalized.

1. Gross Profit Margin

Revenue is usually the first number management looks at. It should not be the only one.

A company can increase sales while becoming less profitable if the cost of delivering those sales is rising faster than revenue.

Review your gross profit margin by product, service line, branch or major customer category where possible.

If revenue grew in 2026 but your margin declined, the question for 2027 should not simply be, “How do we sell more?”

It should also be, “Why are we keeping less from each dollar of sales?”

Rising supplier costs, discounting, pricing that has not been updated and inefficient service delivery can all affect the answer.

2. Accounts Receivable

A profitable business can still face serious cash-flow pressure if customers are taking too long to pay.

Before projecting next year’s cash position, look closely at your receivables.

How much is current? How much is more than 30, 60 or 90 days outstanding? Are there balances that management continues to treat as collectible even though payment has become unlikely?

A J$10 million receivable balance does not necessarily mean J$10 million is about to enter the bank account.

If collection periods are increasing, your 2027 cash-flow forecast should reflect that reality. Management may also need to review credit terms, invoicing practices and collection procedures.

3. Recurring Operating Expenses

Budgets often become distorted because unusual expenses are treated as normal, while recurring costs are underestimated.

Review your 2026 expenses and separate genuine ongoing operating costs from one-off items.

For example, a major repair may not recur next year. On the other hand, software subscriptions, insurance, professional fees, utilities, rent and maintenance costs may have increased permanently.

This exercise gives management a more realistic starting point for determining what it actually costs to operate the business.

It can also expose expenses that have quietly grown over time without delivering a corresponding benefit.

4. Payroll and People Costs

For many Jamaican businesses, payroll is one of the largest recurring expenses.

But the cost of employees goes beyond basic salaries.

Your budget should consider expected salary adjustments, statutory costs, overtime, commissions, allowances, benefits, recruitment and any additional positions planned for the year.

Management should also ask whether the current staffing structure matches the company’s expected growth.

If revenue is projected to rise significantly in 2027, can the existing team support that growth? If additional employees will be needed, those costs should be reflected before the revenue target is approved.

5. Tax and Statutory Obligations

Tax should not be treated as an expense that suddenly appears when a filing deadline approaches.

Income tax, GCT, payroll deductions and other statutory obligations can have a significant effect on cash flow.

Businesses preparing their 2027 budgets should therefore review what is already owed, what will become payable and whether current tax estimates are aligned with expected profitability.

This becomes particularly important when a business is growing quickly.

Higher profits can create higher tax obligations. If management budgets for expansion without also budgeting for the resulting statutory payments, the business may find itself profitable on paper but short of cash when payment dates arrive.

6. Cash Conversion

This may be the most important number of all.

How quickly does the profit recorded in your accounts become cash in the bank?

A business can report strong revenue and profit while simultaneously experiencing cash shortages because money is tied up in receivables, inventory or other working-capital requirements.

Look at how long customers take to pay, how much cash is held in inventory and how quickly suppliers must be paid.

If your operating cycle is becoming longer, a higher sales target may actually increase the amount of working capital the company needs.

That should be built into the 2027 plan.

A Better Budget Starts With Better Accounts

Budgeting is not simply about deciding what you want the business to achieve.

It is about understanding what the current numbers are telling you and using that information to make better decisions.

Management accounts, cash-flow forecasts and financial analysis can reveal issues that annual financial statements alone may not show quickly enough.

The earlier those issues are identified, the easier it becomes to adjust pricing, control expenditure, improve collections and plan for growth.

Before your management team finalizes its 2027 targets, make sure the underlying 2026 accounts are accurate, up to date and useful for decision-making.

Charles O’Connor Consulting Network helps businesses strengthen their accounting, management reporting, budgeting and financial forecasting so management can make decisions using reliable information.

To discuss accounting or advisory support for your business, contact us at 876-908-0486 or clientservices@cocnjamaica.com.