BUDGETING GUIDE · UPDATED SEPTEMBER 2026
Build next year’s budget from decisions, not from last year plus 5%
In November, most owners open this year’s P&L, add 5% to every line and call it next year’s budget. It balances, it looks prudent, and it contains none of the year’s decisions: the supplier price rise that has only been in the numbers since August, the salesperson you have agreed to hire in March, the lease that renews in July. A budget is those decisions, written down as numbers and placed in the months they land, so that every month of next year has something to be measured against.
TWO BUDGETS, ONE COMPANY
Last year plus 5% says S$220,388. The decisions say S$181,500.
Take the distributor from the management accounts, cash-flow and CFO guides: about S$2 million of sales, eight staff, a bank loan, a December year-end. In November the owner sits down with ten closed months of 2026, a forecast for the last two, and the answers to two of the year’s decisions. In July: pass the supplier’s price rise on to every customer except the two largest. In September: hire a second salesperson, but after Chinese New Year. Here is the walk from 2026’s profit to 2027’s, one decision at a time.
| Step | S$ | Where the number comes from |
|---|---|---|
| 2026 profit before tax | 209,894 | Ten closed months, and a forecast for November and December. |
| Last year's one-off does not come back | +9,000 | A customer went into liquidation in June and its S$9,000 was written off. Last year plus 5% budgets the loss again, and a little more. |
| August's prices, for twelve months instead of five | −7,923 | The main supplier raised prices on 1 August; the owner passed it on with 3% to every customer except the two largest, who are on annual contracts. Margin fell from 48% to 46.5%. The 2026 average of 47.4% describes a year with two price lists, not the one coming. |
| Pay rises from 1 January | −16,374 | 4% for the seven employees; the owner's salary stays at S$8,000. S$13,780 of wages and 13th month, and S$2,594 of CPF and levy on them, net of the CPF Transition Offset. |
| A second salesperson from 1 March | −10,001 | S$4,500 a month costs S$61,151 over ten months, with CPF, SDL, a pro-rated 13th month and S$400 a month of travel and phone. Their customers start buying in June: S$110,000 of sales, S$51,150 of gross profit. On these numbers the hire pays for itself from 2028. |
| The warehouse lease renews on 1 July | −4,200 | The landlord's renewal letter says S$9,200 a month, up from S$8,500. Six months of it fall in 2027. |
| Everything else, up 3% | −2,196 | Utilities, insurance, software, vehicles, professional fees. A percentage is fine for small lines. The mistake is using one for the big lines. |
| Less interest as the loan pays down | +3,300 | S$5,000 of principal a month takes the balance from S$180,000 to S$120,000. At 5.5%, that is S$3,300 less interest than 2026. |
| 2027 budget | 181,500 | Against S$220,388 for last year plus 5%. |
Three things separate the two budgets. The percentage repeats an accident: last June’s bad debt, grown by 5%. It averages over a change: 47.4% is what the margin was across a year with two price lists, not what it will be in a year with one. And it grows sales with no cost attached: S$102,000 more, sold by nobody. The built budget sells S$131,510 more than 2026, and every dollar has a source: S$21,510 from August’s prices running seven more months, and S$110,000 from a salesperson who costs S$61,151 before selling anything.
A budget that shows profit falling has done its job.
The built budget sells more and makes S$28,394 less than 2026. In November that is information, not a verdict. The two largest customers, 40% of sales, took none of August’s increase, and their contracts renew in April. A 2% rise from April is worth S$12,379 in 2027: almost a third of the gap between the two budgets, and a conversation the owner now has five months to prepare. The percentage would never have raised it, because it never showed a gap.
HOW TO BUILD IT
Six steps, in this order.
Close October before you open the spreadsheet
In November, last year is ten closed months and two forecast ones. Every error in the ten — a bank account that does not reconcile, an accrual nobody made, stock that has not been counted — goes straight into next year's plan. The first job of budget season is the month-end close.
Take out what won't happen again, and annualise what changed
Strip the year of its one-offs: the bad debt, the recruitment fee, the legal bill. Then find everything that changed part-way through and give it a full year. August's prices ran for five months of 2026 and will run for twelve of 2027.
Build the big lines from their drivers
Revenue by major customer or product group, each agreed with whoever manages the account. Payroll person by person: salary, 13th month, CPF by age band, SDL. Rent from the lease. The small lines can take last year plus a percentage; nobody's year turns on the stationery.
Put every decision in with a date
A hire has a start date, a ramp and a cost from its first day. A price change has an effective date; a lease has a renewal date. The date decides which months carry the cost, and which year.
Phase it month by month
Sales follow last year's monthly shape, moved for anything that shifts: Chinese New Year, a customer's shutdown, a new product. Costs follow their dates. The 13th month is accrued a twelfth at a time, so December does not carry it alone.
Turn it into cash, then freeze it
Put GST back, apply the days your customers take to pay and the days you take to pay suppliers, then add loan principal, stock and last year's tax. Find the lowest month-end. Then agree the budget and stop changing it: from January, the budget is the yardstick and the forecast is what moves.
THE SINGAPORE LINES
What changes on 1 January 2027, and when each line reaches the bank.
Most of a budget is the business’s own arithmetic. These lines are set by someone else, and most of them reach the bank in a different month from the one they belong to in the P&L.
| Line | What to budget | When it reaches the bank |
|---|---|---|
| Employer CPF | 17% of wages up to the S$8,000 Ordinary Wage ceiling for employees aged 55 and under. From 1 January 2027: 16.5% for above 55 to 60 and 13% for above 60 to 65, half a point more than 2026 in each. No change above 65. | By the 14th of the following month. |
| CPF Transition Offset | Half of the 2027 increase — 0.25% of monthly wages up to the S$8,000 ceiling — for Singaporean and PR employees above 55 to 65. Automatic, and taxable in the year it is received. | January–June wages: September 2027. July–December wages: March 2028. |
| Senior Employment Credit | For Singaporean employees aged 60 and over earning under S$4,000 a month: up to 2% of wages at 60 to 64, 4% at 65 to 68 and 7% from 69, tapering to nothing between S$3,000 and S$4,000. Covers wages paid up to 31 December 2027. | Same schedule as the offset: September and March. |
| 13th month (AWS) | A twelfth every month. CPF applies up to the Additional Wage ceiling: S$102,000 less the year's Ordinary Wages subject to CPF. Not compulsory unless the contract says so. | When paid — usually December — with its CPF the following January. |
| Skills Development Levy | 0.25% of each employee's monthly pay, at least S$2 and at most S$11.25. | With CPF. |
| Pay rises | Your decision, with the National Wages Council's guidelines as the reference. They run from 1 December to 30 November and set a range for lower-wage workers — those earning up to S$2,708 a month in the 2025/2026 round. The 2026/2027 guidelines are due by the end of October 2026. | From the effective date you choose — January, for most. |
| Corporate tax | 17% of chargeable income after the partial exemption, which exempts 75% of the first S$10,000 and 50% of the next S$190,000. No rebate: none has been announced for YA 2027 or YA 2028. | A year late. 2027's tax is paid in 2028; what leaves in 2027 is 2026's, in up to 10 monthly instalments if the ECI is filed within a month of the year-end. |
| GST | Nothing. For a GST-registered business it is neither income nor cost. | One net payment a month after each quarter ends, or on the 15th of the month after that on GIRO. |
| Annual renewals | Insurance, the audit fee if the company is not exempt, the corporate secretary, software: spread evenly across the year. | In full, on the renewal date. The distributor's insurance leaves in May. |
For the distributor, the 2027 CPF change reaches one employee: the warehouse supervisor, 59 next year, on S$3,744 a month. It adds S$235 of employer CPF over the year, 13th month included. The offset returns S$112 of it: S$56 in September 2027 and S$56 in March 2028. Small money, but dated money, and a percentage budget has nowhere to put it.
PHASING
Divided by twelve, every month is wrong.
Here is the same S$181,500, month by month. Revenue follows 2026’s shape, with the price change and the new customers added in the months they start. Costs follow their dates.
| 2027 | Revenue | Gross profit | Overheads | Net profit | What moves it |
|---|---|---|---|---|---|
| January | 162,880 | 75,739 | 63,701 | 12,038 | Pay rises and the 2027 CPF rates start. |
| February | 142,520 | 66,272 | 63,678 | 2,594 | Chinese New Year falls on 6–7 February; Monday 8 February is a public holiday. |
| March | 208,690 | 97,041 | 69,771 | 27,270 | The second salesperson starts. 2026's strongest month for sales. |
| April | 183,240 | 85,206 | 69,747 | 15,459 | The two largest contracts renew. No increase assumed. |
| May | 178,150 | 82,840 | 69,725 | 13,115 | Insurance renews: paid in full, charged a twelfth a month. |
| June | 183,060 | 85,123 | 69,701 | 15,422 | The salesperson's first sales: S$10,000. |
| July | 177,970 | 82,756 | 70,379 | 12,377 | The warehouse lease renews at S$9,200 a month. |
| August | 180,000 | 83,700 | 70,356 | 13,344 | Prices now match August 2026. Growth is new customers only. |
| September | 195,000 | 90,675 | 70,333 | 20,342 | New customers step up to S$20,000 a month. |
| October | 200,000 | 93,000 | 70,310 | 22,690 | |
| November | 195,000 | 90,675 | 70,287 | 20,388 | |
| December | 165,000 | 76,725 | 70,264 | 6,461 | Year-end slowdown. The 13th month sits in every row, not just this one. |
| Year | 2,171,510 | 1,009,752 | 828,252 | 181,500 | Gross margin 46.5% all year. |
Divided by twelve, every month’s budget would be S$15,125. February’s real budget is S$2,594, so a February that goes exactly to plan would show up as a S$12,531 miss, and a March exactly on plan as a S$12,145 beat. Two months of that and nobody reads the variance column, which is the column the budget exists to produce.
Overheads step up twice: in March, when the salesperson starts, and in July, when the lease renews. In between they drift down by about S$23 a month, the interest saved as the loan pays down.
THE CASH BUDGET
S$181,500 of profit is S$101,421 of cash.
The profit budget leaves out GST, spreads the 13th month and ignores the loan. The bank does none of those things. Converted to cash, the distributor’s year looks like this.
| Line | S$ | Why |
|---|---|---|
| Budgeted profit before tax | 181,500 | From the phased budget above. |
| Depreciation | +36,000 | A cost in the P&L that nobody is paid. |
| Loan principal | −60,000 | S$5,000 a month. Only the interest is in the P&L. |
| Corporate tax on 2026's profit | −18,257 | 17% after the partial exemption, in 10 instalments from February. No rebate assumed. |
| New customers' unpaid invoices | −43,600 | November and December sales to the salesperson's accounts, with GST, still owed at 31 December. |
| Stock for the new lines | −12,000 | Bought in May, ahead of June's first orders. |
| Owed but not yet paid | +17,778 | Suppliers, October–December GST and December's CPF are all higher at 31 December than a year earlier. |
| More cash at 31 December | 101,421 | Before any dividend. |
The months matter more than the total. Starting the year with S$60,000, the lowest month-end is January, at S$58,424: December’s CPF, including the CPF on the 13th month, leaves in the same month as the fourth-quarter GST. April is next, at S$62,912, when the first-quarter GST goes out against receipts from February, the Chinese New Year month.
The question only the cash view answers.
The owner wants a dividend in June. With a S$30,000 floor, the one the cash-flow guide set, the cash budget gives a straight answer. S$65,000 keeps every month-end above the floor: July, the tightest month after it, closes at S$31,973. S$100,000 takes July to minus S$3,027, an overdraft in a year the P&L says made S$181,500. The profit budget cannot see the difference between the two.
BUDGET AGAINST ACTUAL
Every variance is timing or permanent. Find out which.
Say March 2027 closes at S$196,690 of sales and S$89,494 of gross profit. The management pack puts it beside the budget.
| March | Budget | Actual | Variance | What it is |
|---|---|---|---|---|
| Revenue | 208,690 | 196,690 | −12,000 | One order shipped on 1 April instead of 31 March. |
| Gross profit | 97,041 | 89,494 | −7,547 | Two causes, which need different answers: |
| Of which volume | −5,580 | The late order at 46.5%. Timing: April should come in over budget by the same amount. | ||
| Of which margin | −1,967 | 45.5% instead of 46.5%. The two largest customers, still on 2026 prices, took a bigger share of the month. Permanent until April's renewal. |
Timing variances reverse: you note them and wait for the month they land in. Permanent ones do not: they go into the forecast. Neither goes into the budget. Keep the approved budget exactly as it was and put a second column beside it, the latest forecast for the full year, refreshed each quarter. The pack then answers two different questions: how the year is doing against the plan, and where it will land.
WHAT GOES WRONG
Four ways a budget stops being used.
It was built on a year that was not closed
If October's bank reconciliation is three weeks behind and the stock has not been counted since the year-end, the budget starts from a profit that is not true. Everything built on it is precise and wrong.
Nobody who has to deliver it agreed to it
A sales number the owner sets alone is a wish. Whoever manages the accounts should put a name against every material line — which customers, which products, at what prices — or the budget will be missed with an explanation already written.
It gets rewritten every quarter
Re-budget in June and the plan matches the year so far, which means it measures nothing. Keep the approved budget fixed and put a forecast beside it. If the year changes so much that the budget is meaningless, say so once, formally, and reset it once.
It stops at profit
A profit budget cannot tell you whether the dividend, the loan repayments and the new hire fit in the same year. Only the cash view can, and in most small companies it is the half that never gets built.
Common questions.
When should a Singapore company prepare its annual budget?
Two to three months before the financial year-end: October to November for a December year-end. By then most of the year is closed and can be relied on, and there is still time to act on what the budget shows — a price renewal to prepare, a hire to time — before the year starts. A company with another year-end works back from its own date. Whatever the timing, close the latest month first: a budget built on unreconciled months carries their errors forward.
What is the difference between a budget and a forecast?
A budget is the plan: agreed once, before the year starts, and not changed during it, so every month has a fixed yardstick. A forecast is the latest expectation and changes whenever the facts do. Most SMEs are best served by three things: an annual budget by month, a reforecast of the full year each quarter, and a 13-week cash-flow forecast by week for the near term. The budget says how the year is going against the plan; the forecasts say where it will land.
Is a budget a legal requirement in Singapore?
No. The Companies Act requires proper accounting records, and IRAS requires an estimate of chargeable income after the year-end, but nothing requires a budget. Lenders are different: banks assessing a facility, including loans under EnterpriseSG's Enterprise Financing Scheme, want forecasts alongside management accounts, and a budget with a cash view is the natural basis for them.
What changes for employers in Singapore on 1 January 2027?
CPF rates for employees above 55 to 65. Employer rates rise half a point, to 16.5% for above 55 to 60 and 13% for above 60 to 65; employee rates rise to 19% and 13%. Rates for employees 55 and under, and above 65, do not change, and the Ordinary Wage ceiling stays at S$8,000. The CPF Transition Offset pays employers half the employer increase for Singaporean and PR employees in those bands, automatically: in September 2027 for January–June wages and March 2028 for July–December. The Senior Employment Credit continues for wages paid up to 31 December 2027.
Should the budget include the corporate income tax rebate?
No. Rebates are set one Budget at a time: YA 2026's was announced in February 2026 at 40% and later raised to 50%, with a cash grant and a S$40,000 cap. None has been announced for YA 2027, which taxes 2026's profit, or YA 2028, which taxes 2027's. Budget tax at 17% after the partial exemption. If a rebate is announced, it arrives as a surprise rather than a hole.
Does GST go in the budget?
Not in the profit budget. For a GST-registered business, GST collected is owed to IRAS and GST paid on purchases is claimed back, so neither is income or cost. It belongs in the cash view: customers pay you 109% of each sale, you pay suppliers 109% of each purchase, and the difference leaves one month after each quarter ends — or on the 15th of the month after that if you pay by GIRO.
How detailed does a small company's budget need to be?
Detailed where the money is. Revenue by major customer or product group, payroll person by person, rent from the lease: those lines decide the year. Everything else can be one line at last year's run rate plus a percentage. A budget with two hundred lines is rarely more accurate than one with twenty. It is just harder to explain when it is wrong.
How often should I compare actual results with the budget?
Every month, as soon as the month is closed: actual, budget and variance side by side in the management accounts, with a sentence on each material variance saying whether it is timing or permanent. Reforecast the full year once a quarter. Leave the budget itself alone — the moment it is rewritten to match the year so far, it stops measuring anything.
Official sources
CPF rates and wage ceilings as published by the CPF Board, including its contribution tables from January 2027; the CPF Transition Offset, the Senior Employment Credit, corporate tax rates, exemptions and rebates, ECI instalments and GST due dates as published by IRAS; the Skills Development Levy as published by the Skills & Workforce Development Agency; the Annual Wage Supplement, the National Wages Council and the 2027 public holidays as published by MOM. All checked on 26 September 2026. The distributor and every figure in its budget are illustrative.
- CPF Board: CPF contribution changes from 1 January 2027
- CPF Board: Ordinary and Additional Wage ceilings
- IRAS: Senior Employment Credit, Enabling Employment Credit and CPF Transition Offset
- IRAS: Corporate income tax rate, rebates and tax exemption schemes
- IRAS: Estimated Chargeable Income (ECI) filing and instalments
- IRAS: GST filing and payment due dates, including GIRO deduction dates
- Skills & Workforce Development Agency: Skills Development Levy FAQs
- MOM: Variable wage components (AWS, bonus, variable pay)
- MOM: Government accepts the NWC Guidelines for 2025-2026
- MOM: The National Wages Council convenes for 2026/2027
- MOM: Public holidays for 2027
This guide provides general information, not accounting, tax, employment or financing advice. The distributor, its budget and its cash position are illustrative. CPF rates, the CPF Transition Offset, the Senior Employment Credit, the Skills Development Levy and tax rules are as published on the date shown and change from time to time.
WRITTEN BY
Jacqueline May
Principal Accountant · Chartered Accountant (Singapore), in practice since 2008
Jacqueline is a Chartered Accountant (Singapore) and the Principal Accountant at Synergy Accounting, in practice since 2008. She works on corporate tax, GST and ACRA compliance for small and medium businesses — the filings, deadlines and judgement calls most owners would rather hand over. These guides are written from what she sees in practice.