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The first month of rolling budget is prepared in detail and the later month in less detail as there is greater uncertainty about the future. Is the preparation of rolling budget be effective where there is uncertainty, but why and what is the best method to deal with these uncertainties.
Rolling budget is where you use the latest actual to reflect the coming forecast which deemed more reliable than the fixed, flexible and incremental. However, I think beyond budgeting will having the same characteristics as rolling budget but more suitable for rapid change environment which drive to continuous improvement, for decentralization organisation.
fairlygladys: Thank you, but please do not answer in this forum – it is Ask the Tutor, and you are not the tutor 🙂 (and ‘beyond budgeting’ is not in the syllabus until paper P5 and has nothing to do with rolling budgets – it advocates not preparing budgets at all!!!)
Fadil: Whichever way a business prepares budgets, there is going to be more certainty about the earlier months than the later months – the further into the future, the harder it is to forecast. With ‘normal’ budgeting, because the budget it normally prepared just once a year, the uncertainties make it almost useless as we move further during the year. With rolling budgets, because they are re-prepared regularly they are always going to be better forecasts because each time we prepare them we update given what has already happened.
(All of this is explained in the free lectures on budgeting 🙂 )
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