What is a Rolling Horizon Budget?

A rolling horizon budget periodically adds more forecast periods so that a 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.

Advantages of a Rolling Horizon Budget

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.

Disadvantages of a Rolling Horizon Budget

However, it can take a substantial amount of time to maintain this budget model, since it is constantly being revised. This can lead to some unwillingness to adjust the budget details each month, leading to perfunctory updates to the model that do not necessarily reflect the latest information. A further concern is that the focus of the budgeting team is only on making near-term updates to the budgeting model, rather than engaging in longer-term strategic analyses that might be of greater benefit to the organization.