FPA CAREER

The 5
Budgeting
Methods You
Should Know
About

Follow @ Ehab Sobhy for more FP&A.

 FPA CAREER

Method 1: Zero-
Based Budget
What it is: This method starts fresh each year, requiring
every department to justify every dollar spent.
Benefits: Great for cost control and focusing on priorities.
Drawbacks: Time-consuming and requires constant
adjustments. ⏱️
Good for: Businesses looking to streamline costs or
undergoing significant changes.
 FPA CAREER

Method 2:
Incremental
Budget
What it is: This method uses the previous year's budget
as a base and adjusts it for inflation or specific needs.
Benefits: Simple and quick to implement. ✅
Drawbacks: Can perpetuate inefficiencies and overlook
changing market conditions. ❌
Good for: Established businesses with steady growth
and minimal changes.
 FPA CAREER

Method 3: Activity-
Based Budget
(ABB)
What it is: This method links costs directly to activities,
giving a clearer picture of how your money is driving
revenue.
Benefits: Improved resource allocation and better
decision-making.
Drawbacks: Can be complex to set up and requires
ongoing monitoring. ⏱️
Good for: Businesses with a variety of products or
services and a focus on efficiency.
 FPA CAREER

Method 4: Value
Proposition Budget
What it is: This method allocates funds specifically to
create and sustain value propositions for your
customers.
Benefits: Ensures resources are directed towards high-
impact initiatives.
Drawbacks: Requires careful evaluation of each
expense and can lead to competition between
departments. ⚖️
Good for: Businesses focused on customer value and
maximizing return on investment.
 FPA CAREER

Method 5:
Flexible Budget
What it is: This method adjusts budget forecasts based
on changes in activity levels.
Benefits: Allows for quick adaptation to changing market
conditions.
Drawbacks: Can make it difficult to track progress
towards long-term goals.
Good for: Businesses in dynamic environments with
fluctuating sales or production levels.
 FPA CAREER

Remember, the
best budgeting
method is the one
that works for YOU!
By understanding the advantages and disadvantages of
each approach, you can make an informed decision and
put your business on the path to financial success.
 FPA CAREER

Ehab Sobhy

Follow me for more FP&A tips

and career hacks