Activity Based Budgeting
Activity Based Budgeting (ABB) is a budgeting methodology that allocates financial resources based on the activities required to achieve organizational goals, rather than traditional line-item or incremental budgeting. It links budget allocations directly to the cost drivers and outputs of activities, providing a more accurate and transparent view of how funds are used to support operations and strategic objectives. This approach helps organizations align spending with performance metrics and improve cost management by focusing on the value and efficiency of activities.
Developers should learn Activity Based Budgeting when working in roles that involve financial planning, project management, or resource allocation in tech organizations, as it enhances decision-making by tying budgets to specific activities like software development, testing, or maintenance. It is particularly useful in agile or DevOps environments where iterative processes require flexible and outcome-oriented budgeting to optimize costs and track ROI on technology investments. For example, it can help justify spending on cloud infrastructure or development tools by linking them to project deliverables and business outcomes.