A a budget every month each time rolling forward

A rolling budget can be defined as:

 

“A budget constantly updated by
adding a further period, e.g. a month or quarter and removing the earliest
period”.

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A
monthly rolling process would involve preparing a budget every month each time
rolling forward for one year. The first month would be planned in great detail
with the remaining months being of lesser detail reflecting uncertainty about
the long term future of the organisation. This allows for more precise planning
in the first month particularly in respect of working capital and short term
resource usage. On the control side the budget will provide a more reliable
standard against which to judge performance.

 

The potential advantages of using
rolling budgets are that:

They reduce uncertainty in budgeting which is important in highly
volatile industries where sales levels and prices may fluctuate;
Managers need to reassess the budget frequently;
More realistic budgets will aid motivation;
Planning and control will always be based on up to date information
which covers a significant period into the future.

The disadvantages of rolling
budgeting are that:

It is time and resource intensive;
Managers may find the constant revision of budgets disruptive and
unsettling;
Continuous updating may not be justified where the changes are not
continuous.

As
far as the public sector is concerned most of these disadvantages would apply
as public bodies normally have to stay within fixed limits which could make
this process somewhat pointless.A rolling budget can be defined as:

 

“A budget constantly updated by
adding a further period, e.g. a month or quarter and removing the earliest
period”.

A
monthly rolling process would involve preparing a budget every month each time
rolling forward for one year. The first month would be planned in great detail
with the remaining months being of lesser detail reflecting uncertainty about
the long term future of the organisation. This allows for more precise planning
in the first month particularly in respect of working capital and short term
resource usage. On the control side the budget will provide a more reliable
standard against which to judge performance.

 

The potential advantages of using
rolling budgets are that:

They reduce uncertainty in budgeting which is important in highly
volatile industries where sales levels and prices may fluctuate;
Managers need to reassess the budget frequently;
More realistic budgets will aid motivation;
Planning and control will always be based on up to date information
which covers a significant period into the future.

The disadvantages of rolling
budgeting are that:

It is time and resource intensive;
Managers may find the constant revision of budgets disruptive and
unsettling;
Continuous updating may not be justified where the changes are not
continuous.

As
far as the public sector is concerned most of these disadvantages would apply
as public bodies normally have to stay within fixed limits which could make
this process somewhat pointless.