A traditional budgeting system is the one which uses the incremental approach. It involves the process which starts with the budget of the previous year followed by the budget assumptions for the next year. For example, let us consider the case where the previous year’s budget for a company was $3.6 million. In order to maintain the similar level of service in the coming year, the company can request for an incentive of 4 %. The justification for the increased expenditure will then lie in the increase in the expenditure of the increased price of the inputs, including the labor and the materials (Ryan & Bill, 2007).The justification of the increase in the expenditure includes the overall increase in the input costs including the cost of the labor and material. This kind of approach related to the increment of the services may not include the careful evaluation of the level of the services which are offered.
This kind of approach which includes the process related to the increment the government strive towards spending the budget of the entire year. This is done, so as to ensure, that there is no surplus budget towards the end of the year (Merchant, 1985). Let us consider another example, where the government department there is a possibility to have a surplus product of around $150000 towards the end of the fiscal year. In such a case to spend the extra money, the employers are given a travel allowance. This is just the wastage of the money and resources and calls for the major setback of the traditional method of budgeting.