Incremental budgeting is a financial planning method where the previous year's budget is used as a base. Adjustments are made by adding or subtracting a small percentage to account for changes in costs or activities. This approach is straightforward and easy to implement, making it popular among many organizations. However, incremental budgeting can lead to inefficiencies, as it may perpetuate outdated spending patterns. It often fails to consider the actual needs of the organization, potentially resulting in misallocated resources. Therefore, while it simplifies the budgeting process, it may not always align with strategic goals or current circumstances.