The federal government did not have a formal annual budget process until 1921.
The United States operated for more than a century without a formal annual budget. Individual departments submitted funding requests directly to congressional committees, with no centralized process for coordinating or prioritizing expenditures.1 The Budget and Accounting Act of 1921 changed this by requiring the president to submit a comprehensive annual budget to Congress and by creating the Bureau of the Budget (later renamed the Office of Management and Budget) to coordinate the process.
The idea of an annual corporate budget cycle developed alongside the federal model. James O. McKinsey, the founder of the management consulting firm that bears his name, published Budgetary Control in 1922, arguing that businesses should adopt formal budgeting processes modeled on governmental practice.2 The book was among the first to treat budgeting as a management discipline rather than a purely accounting function.
The annual cycle became the default rhythm of corporate planning during the mid-twentieth century. Departments submitted budget requests months in advance, negotiations produced allocations, and performance was measured against those allocations twelve months later. The process assumed that the future could be predicted with reasonable accuracy on a yearly horizon.3
By the early twenty-first century, critics argued that annual budgeting was too slow for rapidly changing markets. The Beyond Budgeting movement, formalized through the Beyond Budgeting Round Table in 1998, advocated for rolling forecasts and adaptive resource allocation as alternatives to the fixed annual cycle.4