Incremental budgeting
Incremental budgeting sets each year's budget by adjusting the prior period's figures for expected changes such as inflation or growth. It is quick to prepare but risks perpetuating past inefficiencies and waste.
FrameworkBudgeting
See it move
A department's budget starts from last year's approved figure of €400,000. Management adds a 3% inflation uplift of €12,000 and €28,000 for newly approved headcount, arriving at next year's budget of €440,000. Because the starting base is never questioned, any inefficiency baked into that €400,000 simply rolls forward, uplifted, and gets funded again.
Check yourself
A department head receives next year's cost budget calculated as this year's approved spending plus 4 per cent to cover expected cost inflation. This budgeting approach is best described as: