Incremental Budgeting: When and Why to Use It

Incremental budgeting is a type of budgeting in which you only add a small incremental percentage to the budget of the previous period. This type of budgeting is not for everyone, but there are sometimes when it can come in handy. Here are a few things to consider about when you should use incremental budgeting.

Gradual Change

One of the benefits of incremental budgeting is that it allows gradual change for the business. If you value gradual change instead of trying to change everything quickly, this type of budget is ideal. Many times, if your business tries to change too fast, it can become unstable and lose sight of what it does best.

Easy to Implement

If you are looking for a budget that is very simple to implement, incremental budgeting might be for you. You do not have to send your department managers to any special type of training in order to utilize this budgeting system. It is easy to learn and the process can be completed within a very short period of time.

Value Equality

You should also think about this budget if you want all of your departments to feel like equals. With this budget, everyone gets a minimal increase in budget which eliminates rivalries.