There are three main types of budgeting:

Traditional budgeting.

Zero-based budgeting.

Activity-based budgeting.

Each has its own strengths and weaknesses, and the right type of budgeting for your business will depend on your specific needs.

Types of budgeting explained

Traditional budgeting

Traditional budgeting is the most common type of budgeting. It involves estimating your income and

expenses for the upcoming year and creating a plan based on that estimate. This type of budgeting is good for businesses that have a steady income and predictable expenses.

Zero-based budgeting

Zero-based budgeting starts with a blank slate each month or year. You allocate a certain amount of money to each category of expense, regardless of whether you spent that much the previous month or not.

This type of budgeting is good for businesses that are trying to rein in their spending or that have unpredictable income and expenses.

Activity-based budgeting

Activity-based budgeting assigns a budget to each individual activity in your business. This type of budgeting is good for businesses that have a lot of different types of expenses or that want to break down their spending by department.

No matter what type of budgeting you choose, using a budgeting tool can make the process easier. There are a number of budgeting tools available, both online and offline, that can help you track your spending and stay on budget. Cheap budgeting tools include pen and paper.