Types of Budgeting - Essay Example

The paper "Types of Budgeting" is a great example of an essay on finance and accounting. One significant difference between rational and incremental budgeting models is the comparative level of difficulty. The rational budgeting model is a lengthier, more costly procedure although it offers businesses more alternatives in terms of working in manifold areas with little financial resources (Cropf, 2008). On the other hand, the incremental budgeting model is suitable for little change since the most recent budget and there are extra financial resources to spend. New business objectives, episodes of financial difficulty, and creative approaches are hard to put up using the incremental budgeting model.
One advantage of the rational budgeting model is savings, whereby every agency and task financed can account for every dollar spent easily (Cropf, 2008). A disadvantage of rational budgeting is possible, lengthy bureaucratic procedures that can be overwhelming. Rational budgeting models are used often by public agencies and involve complex protocols where even the agencies themselves are not certain they will be financed at all. An advantage of the incremental budgeting model is stability. Incremental budgeting is a stable procedure where the project’s individual share of the entire budget will not increase or decrease drastically (Cropf, 2008). A disadvantage of incremental budgeting is unnecessary funding. Since this model serves to stabilize sections or elements of a project, incremental budgeting processes end up financing these elements simply because they were underfunded in the past. As a result, efficiency is not a factor.
An improvement I would make to the rational budgeting model is to reduce political processes and increase the involvement of special groups that decide the parts of a project worth financing (Cropf, 2008). For the incremental budgeting model, I would allow agencies or sections of a project to account for their previous uses of the budget in order to determine the current or future allocations.