In the years following the economic downturn of 2008, more and more companies turned to rolling budgets that provided more flexibility in an unstable market. However, which is right for your company – a fixed budget or a rolling budget? The answer, unfortunately, isn’t black and white. You must weigh the pros and cons of each* to determine which is right for your company’s industry, culture and market position.
Advantages of a Rolling Budget
- Compiling the level of detail required for a fixed budget can be an unbearable process, particularly if by the time you print the budget, the information is outdated.
- Switching to quarterly or even monthly financial forecasting can be beneficial for companies who are in constant change.
- A rolling financial forecasting and budgeting process also allows you to re-assess areas of the business more frequently than once a year, ensuring business units meet their targets more than once a year.
- You don’t have to give up annual targets – even with a rolling budget, leaders can still be held to an annual metric or goal.
Advantages of a Fixed Budget
- Fixed annual budgets provide detail that can help shape incentive-compensation plans and capital-markets communications.
- If your company is more comfortable with a fixed annual budget plan, you can continue the process, while also adopting some rolling financial forecasting measures. Meanwhile, the budget keeps you focused on the big picture.
*Adapted from “Let It Roll,”
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