Definition of Rolling Budget
A rolling budget often refers to a company’s operating budget which presents the future monthly budgets for the next 12 months. A rolling budget is also known as a continuous budget, perpetual budget, or rolling horizon budget.
Examples of a Rolling Budget
Assume that a company’s accounting year ends on each December 31. Prior to the start of the year 2024, the company prepares its annual budget which is detailed by month for January through December 2024. This budget could become a rolling budget if after January 2024 the company drops the budget for January 2024 and adds the budget for January 2025. This rolling budget now covers the 12 months from February 1, 2024 through January 31, 2025. At the end of February 2024, the rolling budget will drop February 2024 and will add February 2025. At this point the rolling budget will cover the 12 months of March 2024 through February 2025.
The benefit of a rolling budget is that the company’s management will always have a budget that looks forward for one full year.
A rolling budget could use 3-month periods or quarters instead of months. In addition, a company may have a 5-year rolling budget for capital expenditures. In this case a full year will be added to replace the year that has just ended. This 5-year rolling budget means that management will always have a forward looking 5-year capital expenditures plan.
