Public Sector Budgeting
Incrementalism or incremental budgeting is the budget system that uses the previous year’s budget to set the next year’s budget with incremental changes instead of large financial changes. Many businesses currently use incremental budget systems. When the incremental budge system is used businesses have to have a spend it or lose it mentality to make it work. The system is created from the previous resources allowing only for minor changes as allowed by the budget. Many sites such as Tutor2u suggest that this type of budgeting system is not used. This is based on that fact that you cannot account for unforeseen circumstances which may affect the budget.
Even ordinary people use incremental budgeting. Let’s say that Jack and Jill are wanting to plan another vacation. Last year they when they went they spent approximately $3,000.00. This year they are planning on going to the same location. Jack and Jill want to try some new experiences so between the both of them they plan to budget around $3,500.00 to account for the new experiences. The only down side to their budget plan is what if their vehicle breaks down or they have an injury incurring medical expenses. On top of that the couple did not account for the increase in travel expenses such as; fuel, hotels, , food and other general increases which might have occurred. The same concept applies to the many different companies using this system.
The advantages of using an incremental budget system range from many different things ranging from saving time, sticking to a budget, knowing how much you have for the entire year, and easier to manage versus other budgeting systems. The incremental budget system is more stable because change comes over time and sometimes the changes can be somewhat hard to notice or vary noticeable depending on the amount of the increase or decrease. This system is recommended then companies want to incorporate a small change without alarming others, because the changes in funding can be
Even ordinary people use incremental budgeting. Let’s say that Jack and Jill are wanting to plan another vacation. Last year they when they went they spent approximately $3,000.00. This year they are planning on going to the same location. Jack and Jill want to try some new experiences so between the both of them they plan to budget around $3,500.00 to account for the new experiences. The only down side to their budget plan is what if their vehicle breaks down or they have an injury incurring medical expenses. On top of that the couple did not account for the increase in travel expenses such as; fuel, hotels, , food and other general increases which might have occurred. The same concept applies to the many different companies using this system.
The advantages of using an incremental budget system range from many different things ranging from saving time, sticking to a budget, knowing how much you have for the entire year, and easier to manage versus other budgeting systems. The incremental budget system is more stable because change comes over time and sometimes the changes can be somewhat hard to notice or vary noticeable depending on the amount of the increase or decrease. This system is recommended then companies want to incorporate a small change without alarming others, because the changes in funding can be
References: "Advantages and Disadvantages of Using Incrementalism in Public Budget Preparation." Thinking Made Easy. Web. 17 July 2011. . "Advantages and Disadvantages of Using Incrementalism in Public Budget Preparation." Thinking Made Easy. Web. 17 July 2011. . Douthat, Ross. “The Advantages of Incrementalism. “NY Times: Opinion Page. New York Times, 21 Jan. 2010. Web. 17 July 2011.