The manufacturing industry had a challenging year in 2025, despite some favorable tax developments under the One Big Beautiful Bill Act. Tariff uncertainty and escalating costs were among the factors creating difficulties, and how they'll play out in 2026 remains to be seen.

To keep your manufacturing company's cash flow healthy and your business on course despite such complications, you must do the legwork to create an accurate, reasonable budget — and continue to employ smart budgeting practices year-round. Here are five tips for budgeting success.

1. Review your company's goals

Your budget should reflect the goals you've set for the budget period and beyond, especially if you'll be setting the foundation for long-term goals or taking further steps toward them. Your goals — whether launching a new product, expanding market share or improving efficiency through automation — should influence resource allocation in your budget.

Financial goals are important, too. They must be realistic and attainable. If they're not, they can lead to a budget that's more aspirational than useful.

2. Forecast your revenue, expenses and cash flows

Your sales forecast plays a pivotal role in budgeting, so it must be realistic. It not only provides the estimated revenue that will be available to cover the expenses on the other side of the ledger, but also determines estimated production volume (that is, how much will be required to fulfill the expected sales). In turn, you can calculate the amount of raw materials, labor hours, and fixed and overhead costs required. That information will inform pricing decisions.

Don't overlook your cash flows, because you'll also need to forecast them. Your budget may project sufficient revenues to cover your costs and leave you with a solid profit margin, but your business can take a hit if you run into an unforeseen cash crunch. You might, for example, need to obtain financing to bridge the gap. Rolling 13-week cash flow forecasts allow you to take into account variables that are subject to rapid fluctuation and prepare for any cash shortfalls.

3. Avoid over-reliance on historical data

Historical data is an essential ingredient when formulating your budget. It can give you valuable information on trends, seasonal variances and areas where you fell short on previous budgets. But you shouldn't base your upcoming budget entirely on the past (for example, simply increasing all of the prior year's figures by a set percentage). History isn't always the best predictor of the future in manufacturing.

You must also collect information on other factors that may affect your revenues and expenses, and adjust your budget accordingly. Examples include industry and market trends, macroeconomic conditions, equipment age and capacity, workforce availability, and relevant legislative and regulatory developments.

4. Solicit stakeholder input

The need for the additional information referenced above is one reason the days of "top-down" budgeting — where executives or senior management devise a high-level budget that department managers must then implement — have largely passed. Savvy manufacturing leaders realize that a more comprehensive, holistic approach is more effective.

Executives, department managers and project managers all should be involved in the budgeting process. It's too easy for accounting and finance staff to miss critical information that the individuals immersed in day-to-day operations often possess. Involving these people can significantly improve budget accuracy.

5. Make your budget a living document

Budgets shouldn't be treated as static documents, especially when so much data is now available thanks to artificial intelligence, data analytics and similar technological advances. If you run into supply chain disruptions, shifts in demand or other unexpected circumstances, you don't have to be tied to a budget that was drafted in a very different environment.

These days, you can easily monitor your budget, comparing it against actual revenues and costs in real time — not just at year-end. When you identify the possibility of notable variances, you can adjust the budget's figures, implement measures to get back on track (such as cost-cutting) or both.

Get to work

Drafting and implementing a credible budget can improve strategic planning and operations, while also making it easier for your manufacturing company to secure financing. If you have questions about your company's budget, we can help provide the answers.