Budget Part4

ACCA F5 - Performance Management 

Incremental budgeting - check the article below ………………… " Comparing Budgeting Techniques"

Zero based budgeting - check the article below ………………… " Comparing Budgeting Techniques"

Rolling/Continuous/Perpetual budget - Rolling budgets eliminate the artificial focus on one year time horizon and also eliminate the blind spot at the end of the budgeting period. The objective is visibility across business cycle. It is suitable for business where internal and external circumstances are constantly changing because they require budgeting for short periods. It creates problem in performance appraisal because of changing budget figures.

Advantage: Budget is participative, extended into future, up to date, reduce uncertainty, focus on short time period and account for changes.

Disadvantages: Costly, time consuming, creates problem in performance appraisal and budget may reflect only slight variance from past periods.

Activity-based budget (ABB) - Determination of overheads using activity-based costing as a basis for preparing budgets is ABB. ………Check article below "A worked example"

Feed forward control - Feed forward control is mechanism developed in advance for closing budgetary gap by comparing the projected budget figures against projected actual results.

Advantage: Problems are identified before they occur and helps revise budget to reflect changes.

Disadvantage: Incurs high costs, valued time and sophisticated system.

Use of spreadsheet in budgeting (Excel 2007):

Advantages: Flexible enough to accommodate large datasets up-to 16384 columns and 1048576 rows. Index, match, (v/h) lookup and other referencing formulas and interlocking rows and columns in formula makes budgeting process easier. Simple mathematical functions and formulas with formatting abilities is added advantage. Easy distribution of soft copy in different formats to multiple users quickly and easily.

Disadvantages: Ill-suited for integrated cross-company communication and collaboration. Multiple-iteration is a nightmare to control. Security of key data is difficult. Consolidation of result is cumbersome.

ACCA Article: Comparing Budgeting Techniques