Capability template for finance and accounting

Annual operating budget

For an owner or finance lead preparing next year: revenue and costs by month and by team, built from this year's figures and each budget owner's drivers, every assumption written down, capital purchases listed apart, the whole checked against cash, and the questions leadership has to settle.

The outcome

Next year's budget arrives as one coherent draft instead of a stack of spreadsheets from every team. Each line shows this year's figure, next year's, the change, and how the owner got there: the orders and prices behind sales, the share of sales behind materials, the monthly charge behind rent. Where the arithmetic an owner gives does not produce the figure they sent, the draft says so and keeps their figure until they answer.

The budget is laid out month by month and team by team, with people costs taken straight from your headcount plan. Equipment, vehicles and other capital purchases sit on their own list, outside running costs, so the result is not distorted and the cash is still counted.

Then the test that matters: can the company afford it? A month-by-month cash check shows the lowest point of the year and every month that falls below the minimum leadership has set, and runs again with revenue lower than budgeted. Every gap to a target, every month short of cash and every capital purchase arrives as a question for leadership, with the facts beside it. Leadership sets the targets and approves the budget; the draft changes no one's figures to make them fit.

Who starts the work, and when

The finance lead starts it a few months before the budget year begins, once the budget owners have sent their figures and the headcount plan is ready; in a smaller company, the owner does. It runs again after each round of revisions, as owners answer their questions and resubmit, until leadership approves the budget. The finance lead reviews every draft before it reaches leadership.

What they supply

Settings. The budget year, who the budget is for and when they meet, the size of change worth questioning, the capitalisation limit, how long customers take to pay, opening cash, and whether a missing line may be carried at this year's figure.
Leadership's targets. Revenue, result and the minimum cash balance.
This year's figures, by team and line, as a simple table with stated column headers.
Each budget owner's submission: next year's figure for every line, the driver behind it, how it falls across the months and the reason for any big change.
The headcount plan, people costs by team and month. Headcount plan prepares it.
The capital purchases list, and any loan repayments, tax payments or other cash movements that are not running costs.

It works from files you supply. No connection to your accounting system or bank is needed, and none is asked for.

What comes out

One draft budget in a fixed order:

The picture. Revenue, costs and the result against this year and against target, capital purchases, and cash at its lowest point, in the budget and in the lower-revenue case.
The tie-out. Proof that this year's figures and the headcount plan add up before anything is built, and that every view of the budget agrees.
The budget by team, line by line, with each driver recomputed and each flag in place.
The budget by month, and costs by team by month.
The largest changes from this year, with the reason each owner gave.
Capital purchases, month by month, outside costs.
The cash check, month by month, with the months below the minimum marked.
Every assumption, with who made it.
Questions for budget owners, and open questions for leadership.
Checks for the finance lead: missing submissions, drivers that do not match, changes with no reason, flagged capital items.

An invented example

Illustrative example with invented data. The company, the people and every figure below are invented. Company K is an invented sign maker with about 40 people in three teams. Its finance lead prepares the draft 2027 budget for the managing director's budget meeting. People are referred to by role.

The inputs come first, in full, so the template can be run on them. The draft budget follows.

The inputs

1. Settings, from the finance lead

Company: Company K. Budget year: January to December 2027. Currency: US dollars.
For: managing director, budget meeting on Thursday 3 December 2026.
Prepared by: finance lead, on Tuesday 10 November 2026.
This year's figures: actual January to October 2026, my estimate for November and December.
Change threshold: $5,000 and 10%.
Capitalisation limit: $2,500, compared with each row of the capital purchases list.
Collection lag: 1 month. Receivables owed at 31 December 2026: $250,000.
Opening cash on 1 January 2027: $320,000.
Downside: revenue 10% lower.
Missing submission lines: carry at this year's figure.

2. Targets, from the managing director

Revenue: $3,700,000. Result: $300,000. Minimum cash at any month end: $150,000.

3. This year's figures, as of 6 November 2026

Team | Line | Type | Owner | This year
Sales | Sign sales | Revenue | Sales director | 2,880,000
Sales | Installation fees | Revenue | Sales director | 360,000
 | Total revenue | Total | | 3,240,000
Sales | People costs | Cost | Sales director | 420,000
Sales | Marketing | Cost | Sales director | 96,000
Sales | Travel | Cost | Sales director | 30,000
Production | People costs | Cost | Production manager | 960,000
Production | Materials | Cost | Production manager | 1,008,000
Production | Equipment upkeep | Cost | Production manager | 48,000
Administration | People costs | Cost | Office manager | 300,000
Administration | Rent | Cost | Office manager | 144,000
Administration | Software | Cost | Office manager | 36,000
Administration | Insurance | Cost | Office manager | 24,000
 | Total costs | Total | | 3,066,000

4. Budget submissions

Sales from the sales director on 3 November 2026; Production from the production manager on 4 November 2026; Administration from the office manager on 5 November 2026.

Team | Line | Next year | Driver | Phasing | Assumption
Sales | Sign sales | 3,168,000 | 1,320 orders x 2,400 | custom | Second sales rep starts in March; orders up from 1,200 to 1,320; average order held at 2,400.
Sales | Installation fees | 432,000 | 480 installs x 950 | even | Installs grow with orders.
Sales | Marketing | 120,000 | this year 96,000 + trade show 24,000 | custom | Spring trade show in April; everything else as this year.
Sales | Travel | 30,000 | same as this year | even |
Production | Materials | 1,108,800 | 35% of Sign sales | as: Sign sales | Materials stay at 35% of sign sales, as this year.
Production | Equipment upkeep | 66,000 | service contract 4,000 a month + overhaul 18,000 | custom | Press overhaul due in July; service contract unchanged.
Production | Waste removal | 12,000 | 1,000 a month | even | The landlord's shared waste service ends in December; a contractor has quoted 1,000 a month.
Administration | Rent | 149,400 | 12,000 a month Jan to Mar, 12,600 a month Apr to Dec | custom | Lease review in April adds 5%.
Administration | Software | 43,200 | 3,600 a month | even |

Custom phasing:
Sign sales: Jan 192,000; Feb 216,000; Mar 264,000; Apr 288,000; May 300,000; Jun 288,000; Jul 252,000; Aug 228,000; Sep 276,000; Oct 300,000; Nov 300,000; Dec 264,000.
Marketing: Jan 8,000; Feb 8,000; Mar 8,000; Apr 32,000; May to Dec 8,000 each month.
Equipment upkeep: Jan to Jun 4,000 each month; Jul 22,000; Aug to Dec 4,000 each month.
Rent: Jan to Mar 12,000 each month; Apr to Dec 12,600 each month.

5. Headcount plan of 2 November 2026

Team | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Total
Sales | 37,000 | 37,000 | 43,000 | 43,000 | 43,000 | 43,000 | 43,000 | 43,000 | 43,000 | 43,000 | 43,000 | 43,000 | 504,000
Production | 82,000 | 82,000 | 82,000 | 82,000 | 82,000 | 82,000 | 88,000 | 88,000 | 88,000 | 88,000 | 88,000 | 88,000 | 1,020,000
Administration | 26,000 | 26,000 | 26,000 | 26,000 | 26,000 | 26,000 | 26,000 | 26,000 | 26,000 | 26,000 | 26,000 | 26,000 | 312,000

6. Capital purchases list of 5 November 2026

Team | Item | Amount | Month | Owner | Reason
Administration | Laptops (2) | 2,400 | Jan | Office manager | For the two new starters.
Sales | Van for installs | 42,000 | Mar | Sales director | Second installation crew.
Production | Flatbed printer | 85,000 | May | Production manager | Replaces the printer bought in 2016.

7. Other cash items of 6 November 2026

Item | Amount | Months
Loan repayment | -5,000 | every month
Tax payment on 2026 profits | -40,000 | Sep

The draft budget

ANNUAL OPERATING BUDGET: 2027, DRAFT

For: managing director, budget meeting on Thursday 3 December 2026, to settle the open questions and approve. Prepared by the finance lead on Tuesday 10 November 2026.
Sources: this year's figures, as of 6 November 2026, actual January to October 2026 and the finance lead's estimate for November and December; submissions from Sales, sales director, 3 November 2026; Production, production manager, 4 November 2026; Administration, office manager, 5 November 2026; headcount plan of 2 November 2026; capital purchases list of 5 November 2026; other cash items of 6 November 2026.
Settings used: change threshold $5,000 and 10%; capitalisation limit $2,500; collection lag 1 month; opening receivables $250,000; opening cash $320,000; minimum cash $150,000; downside 10% lower revenue; missing lines carried at this year's figure. Defaults used: none.

THE PICTURE
Revenue: budget $3,600,000; this year $3,240,000; change +$360,000 (11.1%). Target $3,700,000: $100,000 below.
Costs: budget $3,389,400; this year $3,066,000; change +$323,400 (10.5%). People costs $1,836,000, from the headcount plan.
Result: budget $210,600; this year $174,000; change +$36,600 (21.0%). Target $300,000: $89,400 below.
Capital purchases: $129,400, 3 items, outside costs and inside the cash check.
Cash: opening $320,000; closing $251,200; lowest $144,900 at the end of May. Below the $150,000 minimum: May. If revenue is 10% lower: lowest -$94,800 at the end of October; below the minimum: April to December; below zero: September to December.
Lines: 13. Flagged: 3. Questions for budget owners: 3. Open questions for leadership: 3.

TIE-OUT
This year: revenue lines add to Total revenue, $3,240,000; cost lines add to Total costs, $3,066,000. Headcount plan: each team's months add to its Total; total $1,836,000. Budget: by team, by month and in the cash check, revenue $3,600,000 and costs $3,389,400.

BUDGET BY TEAM
Sales (sales director). Submitted by the sales director on 3 November 2026.
Sign sales (Revenue). This year $2,880,000; next year $3,168,000; change +$288,000 (10.0%). Driver: 1,320 orders x $2,400 = $3,168,000. Phasing: custom, Jan $192,000, Feb $216,000, Mar $264,000, Apr $288,000, May $300,000, Jun $288,000, Jul $252,000, Aug $228,000, Sep $276,000, Oct $300,000, Nov $300,000, Dec $264,000.
Installation fees (Revenue). This year $360,000; next year $432,000; change +$72,000 (20.0%). Driver: 480 installs x $950 = $456,000, not the $432,000 submitted; the budget uses $432,000. Phasing: even, $36,000 a month. FLAG, driver does not give the amount: $456,000 against $432,000 submitted. See question 1.
People costs (Cost). This year $420,000; next year $504,000; change +$84,000 (20.0%). Driver: headcount plan of 2 November 2026. Phasing: as the headcount plan, $37,000 in January and February, $43,000 a month from March.
Marketing (Cost). This year $96,000; next year $120,000; change +$24,000 (25.0%). Driver: $96,000 + $24,000 trade show = $120,000. Phasing: custom, $8,000 a month, $32,000 in April.
Travel (Cost). This year $30,000; next year $30,000; no change. Driver: same as this year = $30,000. Phasing: even, $2,500 a month.
Team total: revenue $3,600,000; costs $654,000.

Production (production manager). Submitted by the production manager on 4 November 2026.
People costs (Cost). This year $960,000; next year $1,020,000; change +$60,000 (6.3%). Driver: headcount plan of 2 November 2026. Phasing: as the headcount plan, $82,000 a month January to June, $88,000 a month July to December.
Materials (Cost). This year $1,008,000; next year $1,108,800; change +$100,800 (10.0%). Driver: 35% of Sign sales = $1,108,800. Phasing: as Sign sales, Jan $67,200, Feb $75,600, Mar $92,400, Apr $100,800, May $105,000, Jun $100,800, Jul $88,200, Aug $79,800, Sep $96,600, Oct $105,000, Nov $105,000, Dec $92,400.
Equipment upkeep (Cost). This year $48,000; next year $66,000; change +$18,000 (37.5%). Driver: $4,000 a month + $18,000 overhaul = $66,000. Phasing: custom, $4,000 a month, $22,000 in July.
Waste removal (Cost). This year $0; next year $12,000; new line. Driver: $1,000 a month = $12,000. Phasing: even, $1,000 a month.
Team total: revenue $0; costs $2,206,800.

Administration (office manager). Submitted by the office manager on 5 November 2026.
People costs (Cost). This year $300,000; next year $312,000; change +$12,000 (4.0%). Driver: headcount plan of 2 November 2026. Phasing: as the headcount plan, $26,000 a month.
Rent (Cost). This year $144,000; next year $149,400; change +$5,400 (3.8%). Driver: 3 x $12,000 + 9 x $12,600 = $149,400. Phasing: custom, $12,000 a month January to March, $12,600 a month April to December.
Software (Cost). This year $36,000; next year $43,200; change +$7,200 (20.0%). Driver: $3,600 a month = $43,200. Phasing: even, $3,600 a month. FLAG, change past the threshold with no reason given: up $7,200 (20.0%). See question 2.
Insurance (Cost). This year $24,000; next year $24,000; no change. Driver: carried at this year's figure, not submitted. Phasing: even, $2,000 a month. FLAG, not submitted. See question 3.
Team total: revenue $0; costs $528,600.

BUDGET BY MONTH
Month | Revenue | People costs | Other costs | Result
Jan | $228,000 | $145,000 | $100,300 | -$17,300
Feb | $252,000 | $145,000 | $108,700 | -$1,700
Mar | $300,000 | $151,000 | $125,500 | $23,500
Apr | $324,000 | $151,000 | $158,500 | $14,500
May | $336,000 | $151,000 | $138,700 | $46,300
Jun | $324,000 | $151,000 | $134,500 | $38,500
Jul | $288,000 | $157,000 | $139,900 | -$8,900
Aug | $264,000 | $157,000 | $113,500 | -$6,500
Sep | $312,000 | $157,000 | $130,300 | $24,700
Oct | $336,000 | $157,000 | $138,700 | $40,300
Nov | $336,000 | $157,000 | $138,700 | $40,300
Dec | $300,000 | $157,000 | $126,100 | $16,900
Year | $3,600,000 | $1,836,000 | $1,553,400 | $210,600

COSTS BY TEAM BY MONTH
Month | Sales | Production | Administration | Total
Jan | $47,500 | $154,200 | $43,600 | $245,300
Feb | $47,500 | $162,600 | $43,600 | $253,700
Mar | $53,500 | $179,400 | $43,600 | $276,500
Apr | $77,500 | $187,800 | $44,200 | $309,500
May | $53,500 | $192,000 | $44,200 | $289,700
Jun | $53,500 | $187,800 | $44,200 | $285,500
Jul | $53,500 | $199,200 | $44,200 | $296,900
Aug | $53,500 | $172,800 | $44,200 | $270,500
Sep | $53,500 | $189,600 | $44,200 | $287,300
Oct | $53,500 | $198,000 | $44,200 | $295,700
Nov | $53,500 | $198,000 | $44,200 | $295,700
Dec | $53,500 | $185,400 | $44,200 | $283,100
Year | $654,000 | $2,206,800 | $528,600 | $3,389,400

LARGEST CHANGES FROM THIS YEAR
Sales, Sign sales: +$288,000 (10.0%). Reason given: second sales rep starts in March; orders up from 1,200 to 1,320; average order held at $2,400 (sales director).
Production, Materials: +$100,800 (10.0%). Reason given: materials stay at 35% of sign sales, as this year (production manager).
Sales, People costs: +$84,000 (20.0%). Reason given: headcount plan of 2 November 2026.
Sales, Installation fees: +$72,000 (20.0%). Reason given: installs grow with orders (sales director).
Sales, Marketing: +$24,000 (25.0%). Reason given: spring trade show in April; everything else as this year (sales director).
Production, Equipment upkeep: +$18,000 (37.5%). Reason given: press overhaul due in July; service contract unchanged (production manager).
Production, Waste removal: +$12,000 (new line). Reason given: the landlord's shared waste service ends in December; a contractor has quoted $1,000 a month (production manager).
Administration, Software: +$7,200 (20.0%). Reason given: none stated.

CAPITAL PURCHASES (outside costs)
Jan: Laptops (2), Administration, $2,400, owner office manager. Reason: for the two new starters. FLAG: under the capitalisation limit.
Mar: Van for installs, Sales, $42,000, owner sales director. Reason: second installation crew.
May: Flatbed printer, Production, $85,000, owner production manager. Reason: replaces the printer bought in 2016.
Total $129,400.

CASH CHECK
Month | Cash in | Costs paid | Capital | Other cash | Closing cash | Below minimum
Jan | $250,000 | $245,300 | $2,400 | -$5,000 | $317,300 | no
Feb | $228,000 | $253,700 | $0 | -$5,000 | $286,600 | no
Mar | $252,000 | $276,500 | $42,000 | -$5,000 | $215,100 | no
Apr | $300,000 | $309,500 | $0 | -$5,000 | $200,600 | no
May | $324,000 | $289,700 | $85,000 | -$5,000 | $144,900 | yes
Jun | $336,000 | $285,500 | $0 | -$5,000 | $190,400 | no
Jul | $324,000 | $296,900 | $0 | -$5,000 | $212,500 | no
Aug | $288,000 | $270,500 | $0 | -$5,000 | $225,000 | no
Sep | $264,000 | $287,300 | $0 | -$45,000 | $156,700 | no
Oct | $312,000 | $295,700 | $0 | -$5,000 | $168,000 | no
Nov | $336,000 | $295,700 | $0 | -$5,000 | $203,300 | no
Dec | $336,000 | $283,100 | $0 | -$5,000 | $251,200 | no
Year | $3,550,000 | $3,389,400 | $129,400 | -$100,000 | $251,200 |
Lowest: $144,900, end of May. If revenue is 10% lower, everything else unchanged: lowest -$94,800, end of October; below the minimum: April to December; below zero: September to December.

ASSUMPTIONS
Lines:
Sales, Sign sales: second sales rep starts in March; orders up from 1,200 to 1,320; average order held at $2,400 (sales director, 3 November 2026).
Sales, Installation fees: installs grow with orders (sales director, 3 November 2026).
Sales, People costs: headcount plan of 2 November 2026.
Sales, Marketing: spring trade show in April; everything else as this year (sales director, 3 November 2026).
Sales, Travel: none stated.
Production, People costs: headcount plan of 2 November 2026.
Production, Materials: materials stay at 35% of sign sales, as this year (production manager, 4 November 2026).
Production, Equipment upkeep: press overhaul due in July; service contract unchanged (production manager, 4 November 2026).
Production, Waste removal: the landlord's shared waste service ends in December; a contractor has quoted $1,000 a month (production manager, 4 November 2026).
Administration, People costs: headcount plan of 2 November 2026.
Administration, Rent: lease review in April adds 5% (office manager, 5 November 2026).
Administration, Software: none stated.
Administration, Insurance: none stated; carried at this year's figure.
Budget-wide:
This year's figures are actual for January to October 2026 and the finance lead's estimate for November and December (settings, finance lead).
Customers pay one month after revenue is budgeted: the $250,000 owed at 31 December 2026 is collected in January 2027, and December 2027's revenue of $300,000 is still owed at the end of the budget year (settings, finance lead).
Costs are paid in the month they are budgeted (the budget's rule).
The result is before depreciation, interest and tax; the loan repayments and the tax payment appear only in the cash check (other cash items, finance lead).
Opening cash on 1 January 2027 is $320,000 (settings, finance lead).
The downside lowers every month's revenue by 10% and leaves costs, capital purchases, other cash items and the opening receivables unchanged (settings, finance lead; the budget's rule).
Insurance is carried at this year's $24,000 because missing lines may be carried (settings, finance lead).
Defaults used: none.

QUESTIONS FOR BUDGET OWNERS
1. For the sales director: Sales, Installation fees: the driver, 480 installs x $950, gives $456,000; the submission says $432,000. The budget uses $432,000. Which is right?
2. For the office manager: Administration, Software: $43,200 next year against $36,000 this year, up $7,200 (20.0%), at $3,600 a month. No reason is given. What is behind the increase?
3. For the office manager: Administration, Insurance: no submission was received. This year's $24,000 is carried, phased evenly at $2,000 a month. What should next year's figure be, and on what basis?

OPEN QUESTIONS FOR LEADERSHIP
1. Revenue is budgeted at $3,600,000, $100,000 below the $3,700,000 target, and the result at $210,600, $89,400 below the $300,000 target. No submitted figure has been changed to meet either. How does leadership want each gap handled?
2. Closing cash falls to $144,900 at the end of May, $5,100 below the $150,000 minimum, in the month the $85,000 flatbed printer is paid for. If revenue is 10% lower, cash is below the minimum from April to December and below zero from September to December, lowest -$94,800 at the end of October. Does leadership accept the May position, and what should happen if revenue runs below budget?
3. Three capital purchases totalling $129,400 are listed: laptops (2), $2,400, January; van for installs, $42,000, March; flatbed printer, $85,000, May. Which are approved, and in which months?

CHECKS FOR THE FINANCE LEAD
Submissions missing: Administration, Insurance. Carried at this year's figure: Administration, Insurance, $24,000.
Drivers that do not give the submitted amount: Sales, Installation fees, driver gives $456,000, submitted $432,000.
Changes past the threshold with no reason given: Administration, Software, +$7,200 (20.0%). Nothing stated: none.
People costs found in submissions, left out: none.
Capital items flagged: Laptops (2), $2,400, under the capitalisation limit.

Draft for the finance lead's review and managing director's approval. No submitted figure has been changed, no target has been set or moved, and nothing has been approved, sent or entered in any system.

Where it fits

Finance and accounting, which runs the budget and owns the figures it is built from.
Leadership, where the targets are set, the gaps are settled and the budget is approved.
Professional services, where fees depend on people and a hire in March changes the whole year.
Manufacturing, where materials follow sales and one machine purchase can take cash below the line.
Ecommerce and retail, where sales are seasonal and the months matter as much as the total.
Nonprofits, where the board approves a budget every year and expects every figure to have its reason.
Established businesses, where the budget is rebuilt every year from last year's spreadsheet and the reasons live in a few heads.
Growth & scaling, when new people, new equipment and slower-paying customers make cash the question before profit is.

What has to change for your company

Your form. The teams, lines and column headers your budget form and accounting system use.
Your limits. The size of change worth questioning, the capitalisation limit, and how far below budget the lower-revenue case should go.
Your cash rules. How long customers take to pay, and which loan, tax and owner payments belong in the cash check.
Your owners. Who owns each line, and whether a missing line may be carried at this year's figure or must be submitted.
Your result. Whether you report before depreciation, as written, or after it.
Your approvals. Who sets the targets, who approves the budget and who approves each capital purchase.
Your platform. It runs in ChatGPT, Claude, Copilot or Gemini. Decide which files the assistant may read and where the approved budget is kept.

What has been checked

Fully Powered AI wrote this capability template. It was editorially reviewed on 10 November 2026. It was tried on its invented example in Claude on 10 November 2026; the record of that run is published with it, lists the ambiguities it met, and lists the small edits made afterward that have not been run again. It has not yet been tested in a client environment. It has not yet been tested as a packaged version in ChatGPT, Claude, Copilot or Gemini.

Testing in your environment means running it on last year's budget round, which your finance lead remembers well, with hard cases written in advance: figures that do not add up, a driver that does not produce the owner's figure, a missing submission, a big change with no reason, a purchase that takes cash below the minimum. The finance lead checks every figure against the submissions before anyone relies on the draft. Pilot acceptance-test preparation sets those cases up, and what we test before we call an AI workflow ready describes the record we keep.

The full capability template

Everything above is the outline. The complete capability template is the working version: the roles, the inputs, the procedure, the exceptions and stop conditions, the output format, the reviewer checklist, the acceptance tests, the instructions for an AI assistant and what to customize for your company. It comes with a download and the link to its folder in Fully Powered’s public repository.

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