October Newsletter 2026 | McCoy Accounting Advisors CFO Insights

October marks the beginning of the fourth quarter, and for leadership teams, it should also mark the beginning of serious financial planning for 2027.

There is a natural tendency to view budgeting as a year end exercise. Leadership teams finish the current year, evaluate final results, determine priorities, and then begin putting numbers around the next twelve months. That sequence creates a compressed planning cycle at exactly the time when organizations are also managing year end deadlines, client commitments, holiday schedules, tax planning, performance reviews, and operational demands.

Beginning the 2027 budget in October allows valuable time creating space for decision making.

A strong annual budget requires more than taking the current year’s numbers and applying an expected percentage increase. It requires leadership to understand what has happened during 2026, determine what those results reveal about the organization, identify what resources will be required next year, and establish realistic assumptions about growth, staffing, capital investment, profitability, and cash.

The fourth quarter gives your leadership team the opportunity to work through those decisions before January arrives.

Start With the Business You Have Today

Before projecting 2027, establish an accurate picture of 2026.

By October, you have approximately nine months of actual financial performance available. That provides enough information to identify meaningful patterns while still leaving time to incorporate what you learn into both fourth quarter decisions and next year’s financial plan.

Begin with year to date results through September and compare them with the original 2026 budget, prior year results, and any forecasts developed during the year.

Look beyond whether revenue is ahead or behind plan.

Evaluate what created the results.

Which revenue streams performed as expected?

Which services, projects, departments, or locations produced the strongest margins?

Where did labor costs exceed expectations?

Which overhead expenses increased faster than anticipated?

Were pricing assumptions accurate?

Did expected hiring occur on schedule?

Did planned investments produce the expected financial or operational benefit?

Were there expenses that appeared temporary at the beginning of the year but have now become part of the organization’s ongoing cost structure?

This analysis gives leadership a better starting point for 2027.

An established business has the advantage of its own operating history. Recent performance can provide an important foundation for future projections when leadership also identifies the operational drivers behind changes in revenue and expenses.

One of the most valuable questions during October budget preparation is:

“What did we learn about our business this year that should change how we allocate money next year?”

That question can uncover more useful information than simply asking how much the company expects to grow.

Build the Budget Around Operating Drivers

A 2027 budget becomes much more useful when the numbers are connected to the activities expected to produce them.

Consider a company projecting 12 percent revenue growth.

Where will that growth originate?

Perhaps an existing sales team is expected to increase production. Maybe a new market will be entered. A construction company may have a stronger backlog entering the year. A professional services firm may be adding capacity. A trades business may be increasing service agreements or expanding into a new territory.

Each growth assumption creates additional assumptions.

If revenue growth requires more employees, the staffing plan belongs in the budget.

If additional volume requires equipment, the capital expenditure plan belongs in the budget.

If growth requires a larger inventory commitment, additional working capital may be necessary.

If the company plans to enter a new market, marketing, sales, travel, technology, insurance, licensing, and management expenses may increase before the expected revenue arrives.

This is where budgeting becomes an operational planning exercise.

Current financial planning guidance similarly emphasizes connecting revenue projections to factors such as pricing, customer demand, capacity, and market assumptions rather than relying on unsupported growth percentages.

The more clearly leadership can identify the drivers behind the numbers, the easier it becomes to evaluate whether the budget is achievable.

Make Growth Earn Its Place in the Budget

Growth projections deserve scrutiny.

When a company has grown consistently, leadership may reasonably expect another strong year. However, growth usually requires some combination of additional customers, higher prices, increased volume, expanded capacity, new services, improved productivity, acquisitions, or greater market share.

Those assumptions should be measurable.

If you are budgeting 15 percent revenue growth for 2027, identify how much will come from existing customers, new customers, price increases, new service lines, additional capacity, or other defined sources.

Then determine whether the organization has the resources to deliver that revenue.

Capacity is frequently the missing variable in growth planning.

A company may have enough market opportunity to generate another $2 million in sales, yet its current team may only have the capacity to deliver an additional $750,000 effectively. Closing that gap may require recruiting, training, equipment, systems, working capital, additional management capacity, or some combination of those resources.

Your revenue budget should reflect the speed at which those resources can realistically become productive.

A new salesperson may require months to develop a pipeline. A new project manager may need onboarding time. New equipment may have a lead time. A new location may require several months before reaching expected production levels.

Budget the timing of growth along with the amount of growth.

Calculate the Full Cost of Staffing

Payroll is one of the largest expenses for many organizations, which makes workforce planning an essential part of the annual budget.

Begin by reviewing your current organizational structure.

What positions are currently filled?

Which vacancies need to be filled?

Where is the company operating beyond reasonable capacity?

Where are employees consistently working overtime?

Which departments will require additional support if revenue grows?

Are there management positions that need to be created as the organization becomes larger?

Once those needs are identified, calculate the full financial impact.

The cost of a new employee extends beyond base compensation. Depending on the position and company, the budget may need to include payroll taxes, benefits, bonuses, workers compensation, recruiting costs, training, technology, software licenses, vehicles, equipment, travel, office space, and other resources.

Timing matters here as well.

If a new employee is expected to start July 1, the 2027 budget should generally reflect approximately six months of compensation and related expenses. If recruiting needs to begin in April to achieve that July start date, recruiting costs should appear earlier.

Workforce planning becomes especially powerful when it is linked directly to the financial plan, incorporating future headcount along with compensation, benefits, taxes, and related personnel expenses.

This approach allows leadership to see when hiring needs to occur and how quickly revenue must develop to support the expanded cost structure.

Put Capital Expenditures on the Calendar

Capital expenditures can create significant cash requirements, particularly for construction companies, trades businesses, manufacturers, transportation companies, and organizations dependent on technology or specialized equipment.

October is an ideal time to ask department leaders what assets they expect to need during 2027.

Vehicles may need replacement.

Equipment may be approaching the end of its useful life.

Technology infrastructure may require upgrades.

A facility may need improvements.

The company may need additional equipment to support expected growth.

Once those needs are identified, leadership can evaluate timing, cost, financing options, expected useful life, operational impact, and cash requirements.

For every significant capital expenditure, ask:

When will we need it?

How much will it cost?

Will we purchase, lease, or finance it?

What cash will be required upfront?

What ongoing payments or operating expenses will result?

What additional capacity, efficiency, or revenue should the investment create?

A $250,000 equipment purchase has a very different impact depending on whether it is paid in cash, financed over several years, or leased. The income statement, balance sheet, and cash flow implications also differ.

The annual budget should capture those effects appropriately.

Formal financial projections commonly include a dedicated capital expenditure budget alongside projected income statements, balance sheets, and cash flow statements.

Look for Costs That Have Quietly Become Permanent

One of the more useful October budgeting exercises is reviewing expenses that gradually entered the business during the year.

Companies accumulate costs.

A software subscription is added for one department. A temporary consultant becomes a recurring resource. An additional vehicle is leased. Insurance premiums increase. A service contract renews at a higher rate. Travel increases. A vendor changes pricing.

Individually, these changes may receive little attention.

Collectively, they can materially alter the company’s cost structure.

Review 2026 expenses line by line and identify the current monthly run rate. Annualize recurring expenses based on what the company is spending today rather than relying solely on the total spent year to date.

For example, an expense that increased from $5,000 per month to $8,000 per month in July should receive careful attention. Using the nine month average could understate the 2027 requirement because the business enters January operating at the higher monthly level.

This type of run rate analysis can reveal where next year’s budget needs to reset its baseline.

Build Cash Into the Planning Process

A profitable budget can still create cash pressure.

Growth can require money before it produces money.

New employees receive paychecks before all of the revenue they support is collected. Equipment deposits may be required months before an asset becomes productive. Larger projects may increase payroll, materials, subcontractor costs, and accounts receivable simultaneously.

As the 2027 operating budget takes shape, translate it into expected cash movement.

Consider the timing of customer collections, vendor payments, debt service, payroll cycles, tax payments, capital expenditures, owner distributions, financing activity, and seasonal changes.

Recommended planning guidance encourages connecting sales, spending, and cash projections and identifying financing needs before the business is under pressure to secure capital.

This is particularly important for companies planning meaningful growth in 2027.

Leadership should know in advance which months are expected to consume cash and which months are expected to replenish it.

Give Department Leaders Ownership of Their Numbers

For organizations with established leadership teams, budgeting should include input from the people responsible for executing the plan.

Department heads often have information that accounting does not.

Operations may know that a major piece of equipment needs replacement.

Human resources may know that compensation adjustments will be necessary to retain key employees.

Sales may know that a major customer contract is expiring.

Technology may be planning a system implementation.

Project leaders may see capacity constraints developing months before they appear in the financial statements.

Ask leaders to submit their expected 2027 needs with supporting assumptions.

Then challenge those assumptions constructively.

What business result will this expenditure support?

When will the money be required?

What happens if the expenditure is delayed?

What additional resources are required?

What measurable outcome should leadership expect?

This process creates stronger financial discipline because managers begin connecting operational requests to the company’s broader financial capacity.

Use October to Create Options

One of the greatest advantages of beginning the budget during the first month of the fourth quarter is the ability to model alternatives.

Build an initial expected case for 2027.

Then pressure test it.

What happens if revenue finishes 2026 below the current forecast?

What happens if a major customer leaves?

What happens if hiring takes three months longer than expected?

What happens if equipment costs increase?

What happens if growth exceeds expectations and additional working capital is required?

Scenario planning helps leadership identify decision points before those decisions become urgent.

It may reveal that a planned hire should occur only after a specific revenue threshold is reached. A capital purchase may need financing rather than cash. A new initiative may require a minimum gross margin before receiving additional investment.

These are decisions leadership can establish now.

October Begins a Better 2027

Starting your 2027 budget in October gives your organization approximately three months to analyze, challenge, refine, and communicate the plan.

October can focus on year to date analysis, operating assumptions, departmental needs, staffing, and capital expenditures.

November can focus on building projections, testing scenarios, evaluating cash requirements, and reconciling departmental requests with company priorities.

December can focus on final decisions, leadership approval, communication, and establishing the reporting structure that will measure 2027 actual performance against the plan.

Then January begins with direction.

Your leadership team knows the revenue expectations. Department leaders understand their spending parameters. Hiring decisions have financial context. Capital investments have been evaluated. Cash requirements have been anticipated. Growth expectations have operational assumptions behind them.

A well developed budget gives management a financial framework for making decisions throughout the year.

At McCoy Accounting Advisors, we help leadership teams turn financial information into forward looking decisions through budgeting, forecasting, cash flow planning, KPI analysis, and Fractional CFO guidance.

As the fourth quarter begins, this is the time to start asking what your organization will require to successfully execute its 2027 plans.

The earlier those answers become numbers, the more time your leadership team has to make informed decisions before the new year begins.