A continuous budget is another name for a rolling budget, a budget that is kept up to date by adding a new month or quarter at the end each time the earliest one is completed. A company with a 12-month continuous budget therefore always has a full year of plans ahead of it. The main entry includes a worked example and the advantages and drawbacks.
Why it is called continuous
The word "continuous" stresses that budgeting never stops at a fixed year end. In a traditional annual budget the planning horizon shrinks as the fiscal year passes, so by the last quarter managers can see only a few months ahead. A continuous budget keeps the horizon the same length and asks managers to revisit their estimates regularly, using the latest results and forecasts.
Management accounting textbooks use continuous budget, rolling budget and sometimes perpetual budget for the same practice. Whichever name is used, the approach needs more time and staff effort, because forecasts must be revised every period, and it can make performance targets harder to pin down if they move each quarter.
A continuous budget can be combined with other techniques. It may be built as a flexible budget that adjusts for the actual level of activity, and it is often contrasted with a static budget, which is set once for a single expected level of activity and not changed.