Activity-Based Budgeting

Activity-Based Budgeting (ABB) ditches traditional methods that focus on historical spending. Instead, it analyzes the activities that drive costs within a company. It identifies the cost drivers (e.g., number of units produced, number of customers served) and allocates a budget based on those activities. This allows for more accurate budgeting and helps pinpoint areas for cost savings and improved efficiency. It’s like targeting your budget to what makes your business tick.