What is a Long-Range Budget?

A long-range budget is a financial plan that extends for more than one year into the future. This type of budget typically covers a five-year period and is focused on the strategic direction of the business. The orientation of this budget is toward new product planning, capital investments, acquisitions, and risk management. Since changes in competition levels and the business cycle make it difficult to plan this far into the future, the long-range budget typically aggregates much of the information found in an annual budget into a smaller number of line items.

Management rarely compiles long-range budgets when a business is located in a new market, since the market is changing too rapidly to make such planning worthwhile. It is more common in established industries.