Incremental Budgeting Incremental budgeting implies a simple budgeting exercise where the future activity levels and budget targets are
set by adding an agreed upon‘percentage of progress to the previous year’s figures
Therefore,
Incremental budgeting exemplifies a system where the future is seen as the mere projection of the past exemplifies
an internal-looking paradigm, which ignores the competitive forces and conditions
outside the organization52
Cont… The most notable weakness is that it tends to repeat inefficiencies and wastages incurred during the previous year of operations IB is mostly applied in public sector organizations Budgeting in public sector organizations is mostly exercised as a mode of justifying resource allocation from
central funding institutions, and previous
year figures are often used53
Thus, progress and development are often represented by mere increments in previous-year figures Many business organizations also choose to adopt the seemingly inferior mode of incremental budgeting especially due to resource and information constraints to engage in sophisticated planning exercise IB is also adopted by business organizations in estimating budgeted figures
for discretionary expenditures(R&D), which bear little resemblance to the budgeted operational activities (sales and production)
54
