Rolling budget

Definition

A rolling budget is a continuous 12-month budget that is updated regularly to add a new budget period as the most recent period is completed. It allows organizations to continuously plan for future periods without waiting for a fiscal year-end.

5 Must Know Facts For Your Next Test

1. Rolling budgets are periodically updated, typically on a monthly or quarterly basis.
2. They provide a more accurate and up-to-date financial forecast compared to static budgets.
3. Managers use rolling budgets to react quickly to changes in the business environment.
4. Rolling budgets require more frequent review and adjustment of financial plans.
5. They help in aligning operational activities with strategic goals by maintaining focus on future periods.

Review Questions

• What is a key advantage of using a rolling budget over a traditional annual budget?
• How often are rolling budgets typically updated?
• Why might managers prefer rolling budgets in dynamic business environments?

Related terms

Static Budget:

A fixed budget that does not change once it has been set, regardless of changes in activity levels.

Variance Analysis:

The process of analyzing the differences between actual and planned behavior in budgeting.

Forecasting:

The practice of predicting future financial outcomes based on historical data and market analysis.