What kinds of budgeting methods are there?

You can choose the budget method according to different needs and scenarios. Here are some common budgeting methods:

I. Regular budget law

Periodic budget method is a kind of budget method which takes a fixed accounting period (such as calendar year or fiscal year) as the budget period. The advantage of this method is that it is simple and easy to operate, and it is suitable for a stable enterprise economic environment. When the economic environment of the enterprise changes greatly, the reference of the budget is relatively poor.

Second, the rolling budget method

Rolling budget method is a kind of budgeting method. Every past period (half a year, quarter or January), the current budget is deleted, and the next budget is supplemented in time to keep the budget cycle fixed (generally 12 months). Rolling budget method can maintain the continuity of budget, and is suitable for the production and operation activities of enterprises in dynamic environment.

Third, the incremental budget method.

Incremental budget is one of the most commonly used budget types. It takes the budget of the previous year as the starting point, and adjusts the items in the budget of the previous year from top to bottom or from bottom to top according to the expected changes in the sales and business environment. Incremental budgeting method is suitable for the stable economic environment of enterprises.

Fourth, zero-based budgeting method

Zero-based budgeting method is a budgeting method based on zero and future economic situation, regardless of the previous year or historical data. Zero-based budgeting method can effectively control costs and expenditures, which is suitable for the situation that the economic environment of enterprises has changed greatly.

Choose the budget method that suits you best.

First, the economic situation and business environment of enterprises

Different enterprise economic conditions and business environment need to choose different budget methods. For example, for enterprises that are in the initial stage or developing rapidly, incremental budget method may be more suitable, because it can better predict the future economic situation according to historical data.

However, for enterprises that are in a mature stage or the economic environment changes greatly, the zero-based budget rule may be more suitable, because it completely ignores historical data and can better adapt to the changes in the economic environment.

Second, the purpose and requirements of budgeting

Different budget purposes and requirements also need to choose different budget methods. For example, if the purpose of budgeting is to control costs and expenditures, then the zero-based budgeting method may be more suitable because it can effectively control costs and expenditures.

If the purpose of the budget is to predict the future economic situation, then the rolling budget method may be more appropriate, because it can maintain the continuity of the budget and better predict the future economic situation.

Three. Experience and ability of budget preparers

Different budgeting staff experience and ability also need to choose different budgeting methods. For example, for experienced budget preparers, incremental budget method and rolling budget method may be more suitable, because they need higher forecasting and control ability.

For budget makers with weak ability, zero-based budget rules may be more suitable because it is simpler to operate and easier to understand.