What advanced budgeting models do you use?

1 Rolling Budgets

A rolling budget is a type of flexible budget that updates periodically, usually every month or quarter. Instead of having a fixed budget for a year, a rolling budget extends the budget horizon by adding a new period at the end of each cycle. This way, you can adjust your budget to reflect the latest information, trends, and changes in your business environment. A rolling budget can help you to avoid being locked into outdated assumptions, improve your accuracy and responsiveness, and align your budget with your strategic objectives.

2 Zero-Based Budgeting

Zero-based budgeting (ZBB) is a method of budgeting that requires you to justify every expense from scratch, rather than basing it on previous or historical data. ZBB assumes that no costs are fixed or necessary, and that every activity and resource must be evaluated for its value and impact. ZBB can help you to eliminate waste, optimize your allocation of resources, and focus on your priorities and goals. However, ZBB can also be time-consuming, complex, and difficult to implement, especially for large and diverse organizations.

3 Activity-Based Budgeting

Activity-based budgeting (ABB) is a method of budgeting that links your costs to your activities and outputs, rather than to your inputs and resources. ABB identifies the drivers of your costs, such as the volume, frequency, and complexity of your activities, and allocates your budget accordingly. ABB can help you to understand how your activities affect your performance, improve your efficiency and quality, and align your budget with your customer needs and expectations. However, ABB can also be challenging to measure, track, and manage, especially for intangible or indirect activities.

4 Scenario Planning

Scenario planning is a technique of budgeting and forecasting that involves creating multiple scenarios or alternative futures for your business, based on different assumptions, variables, and uncertainties. Scenario planning helps you to anticipate and prepare for various outcomes, such as best-case, worst-case, and most-likely scenarios, and to test the robustness and flexibility of your budget and strategy. Scenario planning can help you to enhance your creativity and innovation, reduce your risks and vulnerabilities, and improve your agility and resilience. However, scenario planning can also be subjective, complex, and dependent on the quality and reliability of your data and assumptions.

5 Beyond Budgeting

Beyond budgeting is a philosophy and approach that challenges the traditional role and practice of budgeting in organizations. Beyond budgeting advocates for replacing rigid and centralized budgets with adaptive and decentralized systems that empower teams and individuals to make decisions based on real-time information, feedback, and learning. Beyond budgeting can help you to foster a culture of trust, collaboration, and accountability, improve your speed and responsiveness, and achieve better results and performance. However, beyond budgeting can also require a significant change in your mindset, structure, and culture, and may not suit every organization or situation.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?