The rolling horizon budget

A rolling horizon budget periodically adds more forecast periods so that a full one-year budget is always presented. As each budget period is reached, management formulates a new budget period that is added to the far end of the budget, thereby maintaining a one-year budget. For example, once January is completed, a new January budget period is added for the following year, so that the new budget covers February of the current year through January of the next year.

A rolling horizon budget has two advantages. First, the business always has a full-year budget that it can present to outsiders, such as lenders and creditors. Second, management is continually reviewing the budget model, so that adjustments are being made on a regular basis.

However, it can take a substantial amount of time to maintain the budget model, since it is constantly being revised. This can lead to a certain amount of unwillingness to adjust the budget details each month, leading to perfunctory updates to the model that do not necessarily reflect the latest information.