Profit Blog

Jarmo Manninen & Muutosdraiveri Oy


Is rolling budgeting better than annual budgeting?

22. huhtikuuta 2025

Rolling budgeting is a budgeting method in which the budget is updated regularly, such as monthly or quarterly. This means that the budget is not static, i.e., annual, but is constantly reviewed and updated to reflect changing circumstances and forecasts. The advantages of rolling budgeting are often cited as:

1. Flexibility: The budget is updated regularly, which allows for quick response to changes and the exploitation of new opportunities.

2. Timeliness: Because the budget is reviewed frequently, it always remains up-to-date and better reflects current circumstances.

3. Better predictability: Regular updates help improve the accuracy of forecasts and reduce uncertainty.

4. Improved decision-making: An up-to-date budget provides a better basis for decision-making and strategic planning.


I completely disagree with the above-mentioned benefits of rolling budgeting. Here are my reasons for disagreeing with each of the above-mentioned benefits:

1. Flexibility: Budget targets should not be flexible, but all of the company's operations should be flexible so that the budget targets are met. Budgeting by financial period does not prevent you from reacting quickly to changing needs. New opportunities can also be utilized in budgeting by financial period.

2. Timeliness: The budget should not be changed according to the results of the results. If budget targets are always changing, the efficiency of the company's resources and the capacity utilization rate do not have to be high.

3. Better predictability: Predictability does not improve by constantly changing the forecast. Constantly changing forecasts shows that the basis for the forecasts is wrong.

4. Improved decision-making: Decision-making is not improved by constantly changing the budget. In fiscal year-specific budgeting, the results achieved must be compared with the budget targets at regular intervals, e.g. in two-week periods or monthly, and any deviations must be reported. The reporting of the company's financial management results must be at such a level that the root causes of deviations can be identified from the reporting and the right corrective measures can be taken based on them.


Rolling budgeting requires much more resources for administration and technology than fiscal year-specific budgeting, which unnecessarily increases financial management costs.

As you have probably noticed from the text above, I am definitely a supporter of fiscal year-specific budgeting.

I encourage you to share this blog post of mine on social media. If you have any suggestions for the topics of the next blog posts, I will gladly accept them.

I hope that you were interested in this matter and that you can continue to be involved.


I have written four books on creating the conditions for the company's financial management, and they are available in well-stocked bookstores and online bookstores in Finland, for example from BoD (Books On Demand) at:





 

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