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ACCA Strategic Professional · Advanced Performance Management · Budgetary planning and control

Dalton Retail's board wants its budget to be updated every month by adding a new month at the end, so that managers always look twelve months ahead. Management also wants the budget to reflect the latest information on trading conditions. Which is the main benefit of this rolling budget approach?

The main benefit is that a rolling budget stays relevant and keeps a constant twelve-month planning horizon. Each update incorporates the latest information on trading conditions. It does not remove forecasting and normally takes more effort, not less, than a single annual budget.

  1. AIt removes the need to forecast sales
  2. BIt keeps the budget relevant and extends the planning horizon continuallyCorrect
  3. CIt guarantees managers will meet targets because they are set by head office
  4. DIt reduces the time spent on budgeting compared with an annual budget

Explanation

A rolling budget is continually updated, keeping plans relevant to current conditions and maintaining a constant planning horizon. It does not remove forecasting, and it usually increases rather than reduces the time and cost of budgeting. It says nothing about who sets targets.

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