The Federal Fiscal Year for Software Companies: Budgets, CRs and Q4

2026-10-08#saas #federal-market

By Philip Luca — Founder of GovExpress; prior domain experience at Bloomberg Government and GovWin IQ.

A commercial software company plans its quarter around the customer’s calendar year and its own sales targets. A federal customer runs on a different clock. The money an agency can spend, when it can spend it and what it can spend it on are all set by the federal budget cycle, and that cycle runs one to two years ahead of the purchase.

Companies that sell into government without understanding that clock tend to make the same mistake: they find an interested user in March, push for a signature in May, and are told there is no money until next year. This guide explains how the federal fiscal year works, what continuing resolutions do to a deal, why so much buying lands at the end of September, and how to line your pipeline up with all three.

The fiscal year runs October to September

The federal fiscal year starts on October 1 and ends on September 30. It is named for the calendar year in which it ends, so fiscal year 2027 began on October 1, 2026.

Each fiscal year’s money starts long before October. In broad strokes:

Stage	Roughly when, for the fiscal year starting in October
Agency budget formulation	About 18 to 24 months before the year starts
President’s budget request to Congress	The preceding February, by statute (often later in practice)
Congressional appropriations	Spring and summer before the year starts
Execution: contracts awarded and funds obligated	October 1 through September 30

The practical consequence is that a new requirement an agency starts building this year is usually funded in a budget that won’t be spent until the year after next. If your product needs a dedicated line item, the people you need to talk to are the ones writing budgets now, not the ones spending this year’s money.

Most deals don’t need their own line item. They fit inside an existing program’s budget, an office’s operations money, or an IT modernization effort that is already funded. Finding which of those your product fits into is a large part of federal account work.

Money has a shelf life

Federal funds aren’t interchangeable dollars. Each appropriation is available for a set purpose and a set period, and an agency can only obligate it within that period.

Annual funds, such as most operations and maintenance money and many civilian salaries and expenses accounts, are generally available for one fiscal year.
Multi-year funds last longer. In the Department of War, research, development, test and evaluation funds are commonly available for two years and most procurement funds for three.
The bona fide needs rule means annual funds can only pay for a need that arises in the year the money is available. An agency can’t use this year’s money to buy next year’s subscription in advance.

Which pot of money your product draws on affects how a deal can be structured. A software subscription bought with operations money usually has to fit inside one fiscal year’s funding. Agencies can buy severable services that cross fiscal years for a period of up to 12 months using the money of the year the contract starts, but how agency counsel classifies a given subscription varies. Ask your buyer early how they plan to fund it.

Continuing resolutions and the slow first quarter

Congress passes twelve annual appropriations bills. It rarely finishes all of them by October 1. When it doesn’t, it usually passes a continuing resolution (CR) that keeps agencies funded at roughly the prior year’s rate for a set period.

A CR typically comes with restrictions that matter to sellers:

No new starts. Agencies generally can’t begin programs or activities that weren’t funded in the previous year.
No rate increases. Spending on existing activities is held near the prior year’s level.
Short horizons. A CR may last weeks or months, and agencies often obligate only part of their expected funding until a full-year bill passes.

For a software company, a CR slows new business more than it slows renewals. Continuing an existing subscription at the same level usually fits inside a CR. A first purchase that needs new funding, or an expansion that increases spending, often waits.

If appropriations lapse with no CR in place, the government partially shuts down. The Antideficiency Act bars agencies from obligating money that hasn’t been appropriated, so new awards that need lapsed funds stop. Work under contracts that were already funded may continue, depending on the contract and the agency’s guidance.

Why September is the busiest month

Spending isn’t spread evenly across the year. Annual funds that aren’t obligated by September 30 generally expire for new obligations, so agencies work to commit them before the year ends. Obligations rise through the fourth quarter and peak in September.

For sellers, year-end spending is real but often misunderstood:

It rewards readiness, not timing. Year-end money goes to purchases that can be awarded quickly: products already on a contract vehicle, quotes already reviewed, security questions already answered. A company that first meets a buyer in August is rarely ready in time.
It favours existing vehicles. A buyer with three weeks to spend money will use a vehicle they already know, such as a GSA Schedule, a GWAC or an agency BPA, instead of starting a new competition. See federal contract vehicles for software companies.
It still needs a requirement. Year-end money doesn’t mean anything goes. The purchase must still meet a need the agency has that year.

Small purchases can move fastest of all. Below the micro-purchase threshold, an authorized cardholder can sometimes buy a subscription in days.

Timing your pipeline to the federal year

A workable rhythm for a software company selling to federal agencies:

October to December: renew and listen. Expect slow new business under a CR. Focus on renewals and on learning which programs your users sit in and how they’re funded.
January to March: get into next year’s plan. Agencies are executing this year’s money and planning for the next. This is when a program office can still plan your product into a coming budget.
April to June: get buyable. Make sure you can be bought through a vehicle the buyer already uses, that your SAM.gov registration is active, and that your security and accessibility answers are ready. See Section 508 and VPATs for software companies.
July to September: close. Have quotes, terms and paperwork in the buyer’s hands before year-end pressure starts. A deal that is ready in July can be funded in September. A deal that starts in September usually can’t.

Security status decides more year-end deals than price does. A buyer can move a product with a current FedRAMP authorization quickly. A product with only a self-attested security questionnaire may need a review the calendar doesn’t leave room for. Be precise about which one you have; federal reviewers treat them differently.

The calendar is a readiness question

The federal fiscal year doesn’t change what an agency needs. It changes when the agency can act on that need. The companies that do well are the ones that are already buyable when the money is available, and that are in conversation with program offices a year before it is.

To see where your company stands on the categories federal buyers check, from registration and vehicles to security posture, score your company’s federal readiness.

The CMMC brief

What the Phase 2 suspension changed and what it did not — the obligations that still bind, the assessment path a contract puts you on, the scoping decision that drives the cost, and the sequence that fits inside a pipeline. Sourced from the primary record.