Incremental Budgeting: What Is It, Why Is It Important and How Do You Create An Incremental Budget?

What Is Incremental Budgeting?

Incremental budgeting is commonly used because it’s one of the most conservative approaches in corporate budgeting. You make small adjustments by adding to or subtracting from your budget items. (There are a few other budgeting approaches you can take, such as zero-based budgeting, top-down budgeting and bottom-up budgeting.)

What is the Importance of Incremental Budgeting?

Incremental budgeting is simple, consistent and stable. Your budget owners make minor adjustments to their budget items based on their assumptions, which come from objective information.

While each budget item may be subject to less scrutiny—compared to zero-based budgeting— it doesn’t necessarily mean budget owners have spent less time on analysis for their adjustments. And while it’s possible that it happens, they should still make the same effort in their analysis before providing their new numbers.

Plan your capital expenses with this free Capital Expense Budget Template for Excel and your operating expenses with this free Operating Expense Budget Template for Excel.