TRADITIONAL & ALTERNATIVE APPROACHES TO

THE BUDGETING PROCESS

TRADITIONAL ALTERNATIVE

GOAL SETTING Top-down: Participatory:

Senior management sets budget Those responsible for achieving
goals, such as revenue and profit the budget goals are included in
targets, and imposes these goals setting those goals.
on the rest of the organization.

TIME PERIOD Fixed budget: Rolling budget:

The budget period is a specific The budget is continuously
time period—usually coinciding updated so the time frame remains
with the organization’s fiscal year. stable while the actual period
covered by the budget changes.

FORECAST VALUES Static budget: Flexible budget:

The budget presents one Budgeted revenues and costs are
forecast for a given time period adjusted during the budget period
and is not changed during the according to the actual volume of
life of the budget. production output.

VS.

FORECASTING PROCESS Incremental budgeting: Zero-based budgeting:

Managers use the previous The budgeting process begins
period's budget and actual results, “from the ground up” and ignores
as well as expectations for the all previous budgets, as though
future, to determine the budget the budget were being prepared
for the next period. for the first time.

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