All 34 The Budgeting Process questions
More in The Budgeting Process
What is a budget manual? What is the principal budget factor (limiting factor)? What is budgetary slack and why does it matter? What is the typical sequence of steps in preparing a budget? What is incremental budgeting? What assumptions must be agreed before budgeting starts? What is a responsibility center and what types exist? How do you set challenging but achievable budget targets? What is the budget timetable and why is it important? How does benchmarking support budgeting?
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Budgeting & Forecasting › The Budgeting Process

What are the criticisms and limitations of traditional budgeting?

Intermediate

Answer

Traditional budgets are criticized for being time-consuming and costly to prepare, quickly outdated in volatile conditions, encouraging incrementalism and slack, promoting 'use it or lose it' spending, focusing on cost control over value, and fostering gaming and short-termism. These criticisms drive alternatives like rolling forecasts, ZBB, and beyond budgeting.
Real-world example By year-end the fixed budget is obsolete after market conditions shifted, illustrating a key limitation.

Common follow-ups: What is 'use it or lose it' behavior? | What alternatives address these limits?

Rolling Forecasts Zero-Based Budgeting The Budgeting Process
All 34 The Budgeting Process questions