Understanding the Federal Budget Cycle

Do you truly understand the Federal Budget Cycle? This includes understanding:

What impact do changes in government spending and funding have on most economic activity?
How are those effects communicated?
What is the relationship between the fiscal or budgetary cycles of the government and the business cycles?

If you are doing business with the Federal Government, the answers to these questions can be vital to your sales process. A proper understanding of how the government is funded and how it spends, especially over a period of one year (but not necessarily starting at the beginning of the calendar year), is essential to financial planning for private businesses and the general public at large.

However, the government budget cycle cannot be easily understood because of its complex nature and its role in the business cycle, economy, and political as well as social spheres. Below, we provide an overview of the federal budget cycle, also known as the government budget cycle, and extend its core tenets to the business cycle, particularly the private business cycle. In other words, demonstrate how government spending and funding interact with business spending and funding.

What is the federal budget circle?

Aside from project execution and basic rules, government spending and funding (budget cycles) are important aspects of democratic accountability. In other words, it is a crucial component of decision-making for both the government and the general public. The government budget is ultimately designed to provide resources and accountability for a specific fiscal year.

2 Forms of Federal Budgets

1. Discretionary Budget

This is a significant portion of the federal government’s overall budget. The budget is typically based on the president’s request and is approved by Congress. As the name implies, it is subject to change. This budget is created at the discretion of legislators and is updated annually and, in some cases, biannually. This budget includes funding for education, health, and the military, among other things. This is the portion of the budget most affected by the unpredictability of the federal market.

2. Mandatory Budget

These are legislatively mandated government budgets that cannot be changed. That is, the budget is required and constant, but it is not designed for a relatively short time period. This budget accounts for pensions, benefits, salaries, and other expenses. In short, the budget is usually dictated by the government.

Federal Budget Cycle & Business Cycle

In general, the term “business cycle” refers to the routine expansion, rising and falling in the price of real economic activity. On the one hand, the financial and business cycles both reflect cyclical fluctuations in the economy at large. However, the federal budget cycle controls the business cycle in terms of predictive power. That is, federal budgets have an impact on products, interest rates, exchange rates, the stock market, and the real estate market.

The government’s budget cycle is a dynamic trend that influences the pace of economic activity. Recent financial crises have shown that low business output and poor economic conditions are generally caused by abrupt changes in the federal government’s budget cycle. This is why understanding current events and happenings at the federal level can allow you to better understand how to position your sales pitch and approach federal customers.

How Do You Integrate Your Business Objectives Into the Federal Government’s Budget Cycle?

There is no doubt that government spending and changes in government funding are inextricably linked to business objectives. In other words, changes in the exchange rate and government budgets will inevitably have an impact on business, firms, and industry growth. However, in order to benefit from the federal government budget cycle, there is a need to align your business goals with the various stages of the federal government budget process. We outline two ways to align your goals below:

1. Engagement throughout the government budget process.

The government’s budget process is usually finalized in October. Procurement activity is up in the first quarter as long as the budget is approved. It’s a busy time for federal contractors, and most businesses do see an increase in output. The beginning of a new fiscal year or when the new budget is passed, is the best time for prospecting and product demos.

As the FY advances, time for approving new sales becomes limited and requires federal sales reps to switch to wrapping up existing open deals and going after low-hanging opportunities that the government’s use it or lose it funding can cover. Here is a guide on how to best leverage your sales process at each stage of the federal budget cycle.

2. Plan ahead of time for government spending and other major political events.

The popular perception is that career politicians frequently try to use expansionary economic policy before elections to increase their chances of re-election. Most politicians make several attempts to manipulate the economy in order to increase their chances of re-election. This idea is commonly referred to as the “political business cycle.” This refers to the possibility of a significant economic cycle caused by the political cycle.

Good economic conditions prior to elections appear to help a politician get re-elected. As a result, the government may use economic policy to stimulate economic growth and business output ahead of elections. As a result, integrating your business goals and objectives with government spending and funding necessitates planning for political events.