(Drury) The Budgeting Process - The buget period

4 important questions on (Drury) The Budgeting Process - The buget period

What types of perioding budgets are there? (3)

1. 12 monthly
2. 13 four-weekly
3. Continuous or rolling budgeting

What is the downfall of 12 monthly perioding?

It ties a company to a 12-moth commitment, which can be risky because the budget is based on uncertain forecasts.

What is continuous or rolling budgeting?

An approach to budgeting in which the annual budget is broken down into months for the first three months and into quarters for the rest of the year, with a new quarter being added as each quarter ends.
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What are the advantages of rolling budgeting? (3)

1. It ensures that a 12 month budget is always available by adding a quarter in the future as the quarter just ended is dropped.
2. It ensures that planning a continuous process, and managers are encouraged to constantly look ahead and review future plans.
3. Actual performance will be compared with a more realistic target, because budgets are being constantly reviewed and updated.

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