Businesses have several options on how they would like to carry out their budgets. One standard choice is between a rolling budget and a static one. Here are the differences in each path and how they can affect your business.
Choosing a Static Budget
A static budget type is the one that most people are familiar with. You might sit down with their small business accounting team to create a budget that extends from January to December of one calendar year. People like this type of budget because it is easy to wrap your head around. People are very used to thinking of time in terms of years. And it gives you an easy progress marker; you track the months along with how you're doing on your budget to see if the right progress is being made. Some people won't need outside help to set up a static budget.
The drawback of a static budget is just that-- it's static. It doesn't take into account the changes that occur throughout the year. It's essentially a good guess at the beginning of the year, but it may be far off from your goals by the end of the year.
Choosing a Rolling Budget
Rolling budgets are becoming more popular as a way to adapt the business goals throughout the entire year. A rolling budget always takes into account the upcoming 12 months. When one month is finished, you review the budget and add on your projections for an additional month at the end of your rolling budget.
It's great for businesses that need to be adaptive, such as small businesses who may not know what their budget is going to look like a year from now. The business could grow dramatically. Committing to a rolling budget is a way of getting yourself to review the budget every single month so that it's not just a piece of paper, but an accurate measure of where the business is going.
Of course, rolling budgets have their disadvantages, too. They may be harder to share with stakeholders who are used to seeing a more traditional budget. And you must be careful to have some measures in absolute time, as well, so that you know how your business is doing within each fiscal year. But it's worth talking about the possibility with your small business accounting specialist or reviewing other ways to make your yearly budget more flexible.Share