What Is the Meaning of Interim Budget?

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An interim budget is a temporary financial document that helps a business or public agency get through a period that's shorter than a typical budget cycle, which is normally one year. Depending on why a business needs an interim budget, this document might be a projection of income and expenses for the shortened period or a total spending amount for a particular department. The term "interim budget" is also used when governments have a transition in administrations.

Types of Interim Budgets

Interim budgets might project the total financial picture of a business or one area of the company, or it might focus only on expenses. A comprehensive interim budget, such as a three-month budget, would include all or most of the company’s expected revenue and expenses. This budget type might only include operating expenses and income, not categories such as investment income or annual income taxes. It might be used to control a department’s spending and contain only expenses. For example, a marketing department might be given $50,000 to spend for the next 60 days until the company can gauge marketplace reaction to a new product line or while the company waits to hire a new marketing director.

Examples of Interim Budgets

When a department head or division director leaves a company, it might take several months to replace him. The new executive is likely to have new ideas, and a business might not want to handcuff her with a long-term budget. An interim budget allows the department or division to continue operating during the transition. If two companies merge, interim budgets allow them to continue operating until the new company is formed and has a formal annual budget. A company going through a bankruptcy proceeding might create an interim budget while it’s developing its reorganization or dissolution plan.