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Hello
Can you please tell me what’s the difference between these three? They seem very similar.
Thanks
An incremental budget is a way of preparing a budget. Take last year’s and apply an increment for inflation and perhaps other changes. Contrast with zero based budget where budgets are created from scratch.
A fixed budget is what it says: the budget stays the same for the whole period and is not changed in response to events.
A rolling budget will typically always look at the 12 months ahead and is updated every month by removing the month just gone including the month that is now 12 months away. So the budget periods would be:
1.1.2018 to 31.12.2018
1.2.2018 to 31.1.2019
Etc
Thanks, I realise there was a misread since you explained fixed instead of flexed. But your explanation is still appreciated.
ok, so increment is based on past information.
Rolling is for a period e.g. 12 months and updated every month.
How is a flexed budget different from a rolling budget? I’m thinking that both would take into consideration the current situation and adjust accordingly and that’s where I need clarification please.
Sorry for the misread.
Flexed budgets are flexed (scaled) to the level of activity, usually production. For example, if production is 10% greater than budget you woud flex the material budget by increasing it by 10%..
See the performamce Managememt paper notes (old F5) if you need more on the types of budget.
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