Whether you’re a startup working with a fractional CFO or a well-established tech company with a fully built finance function, this is a particularly important time of year. As we get into 2025, some steps you take now can set you up for financial success.
That said, any tech company has a lot of moving parts. And that makes it relatively easy for things to fall through the cracks. In an effort to combat that, we want to lay out an annual budgeting and forecasting checklist that all CFOs can use to prepare for the coming year.
Part 1: Budgeting
To start, let’s focus on setting your 2025 budget. Each of these checklist items helps you build a strategic, data-informed financial plan for the coming year.
Item 1: Look back
Start by reviewing your 2024 budget. Compare that against budgets from previous years, too.
This critical first step tells you a lot about where you need to make adjustments for the coming year. If you can see that you’re consistently over budget when it comes to travel expenses, for example, that’s a sign that you either need to increase that category for 2025 or implement new guidelines around those expenses.
Item 2: Categorize
Reviewing previous years’ budgets should illuminate where your current spending categorization is working and where it might need to be finessed.
Most tech companies implement three overarching budget categories: capital, operating, and project costs.
At a tech company, capital expenditures extend beyond land and building costs to things like software licenses and hardware upgrades.
Because operating costs encompass payroll and benefits, this is probably your biggest bucket — and the one you most carefully need to manage.
Project costs are attached to a one-time goal, like implementing and integrating a new software solution. Looking back on past project costs can help you better anticipate these expenses, which can be more difficult to plan for. Past project outlay should help you prepare for both the timing and total cost of projects in the coming year.
Item 3: Set goals
Make sure that your 2025 budget includes:
- The cost of all of your business locations (i.e., your leases or mortgages)
- Salaries
- Hourly wages
- Payments to contractors
- Payments to vendors
- Employee benefit packages
- Marketing and advertising costs
- Utilities for all business locations
- Cloud/computing/software costs, including subscriptions and server space
- Consumables (e.g., coffee for the office, paper and ink for printers)
- Taxes
- Insurance
- Company vehicles
- Equipment purchase or rentals, including IT equipment
- Travel expenses
By budgeting for all of these categories in 2025, you should set your tech company up to spend strategically next year.
Past budgets should inform your plan for 2025, but you shouldn’t merely copy-paste your 2024 plan over. Before you set financial targets for the coming year, pull in company-wide key performance indicators (KPIs) and talk with key players in other departments.
Using what you learn, look for ways to optimize. Can you automate certain processes to lower overhead by a specific percentage? Can you streamline vendor relationships to slim down your accounts payable outlay?
An effective budget doesn’t just lump expenses into categories and set ceilings for them. It strategically guides the company’s spending to achieve both short —and long-term goals.
Part 2: Forecasting
In the same way, creating a 2025 budget sets expectations for what your company will spend, a 2025 forecast gives you an idea of what kind of revenue you can likely expect. This requires more finesse than setting a budget, but it’s a critical to-do. Whether you need to manage runway or satisfy shareholders, a strong forecast enables success not just in the finance department, but across the organization.
For that, check off these three to-dos.
Item 1: Gather up historical data
Fortunately, forecasting doesn’t have to — and shouldn’t — be guesswork. Using historical data helps you predict revenue for 2025 as accurately as possible.
Look at your past cash flow forecasts, and measure them against actual revenue. Here it can be helpful to create a spreadsheet with three columns attached to each category: the anticipated revenue, the actual revenue, and the difference between the two.
Identifying where the third column contains large sums helps you pinpoint areas where your forecasting has historically fallen short. Focusing on fine-tuning those forecasts builds a more accurate projection for 2025.
If your tech company relies on a handful of larger clients, you may benefit from drilling deeper there, too. Talking to the salespeople and account managers assigned to those clients should give you clarity around demand forecasts from those large players.
Item 2: Identify trends
Once you have historical data compiled, spend some time with it. Take a high-level view to look for overarching trends. Then, comb through, hunting for patterns that aren’t readily apparent.
Don’t stop with your own data, either. Do some research to pull in external factors that could impact how your company performs in the coming year. Look at your competition, taking specific note of any new or rapidly growing players. Evaluate the market at large and look at what experts are saying in terms of growth, stagnancy, or fall-off.
The last few years have been specifically trying for tech companies, and those challenges have garnered a lot of public attention. As a result, you should be able to find articles and thought leadership pieces on how your specific segment of the tech world has been affected.
Item 3: Create your assumptions
By laying major trends over your own historical data — and the trends therein — you should be able to develop 2025 projections in which you can feel confident.
Develop assumptions for the coming year, factoring in things like seasonality. Work closely with other teams, particularly sales and marketing, to predict what the coming year will bring in terms of accounts payable.
The forecasted assumptions put your organization on track for a successful 2025. Armed with these informed predictions, you should have a much easier time effectively managing your cash flow.
All of this may sound like a lot of work, and it certainly is. To get support in moving through this checklist, enlist our team. We specialize in accounting for tech companies and we’re experienced in creating effective budgets and informative projections. For guidance as you plan for 2025, contact us.
