Essay about Zero Based Budgets

Words: 2138
Pages: 9
Open Document
Zero-based budgeting starts from a "zero base" and every function within an organization is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period, regardless of whether the budget is higher or lower than the previous one.
Because of its detail-oriented nature, zero-based budgeting may be a rolling process done over several years, with only a few functional areas reviewed at a time by managers or group leadership.
Zero-based budgeting can lower costs by avoiding blanket increases or decreases to a prior period's budget. It is, however, a time-consuming process that takes much longer than traditional, cost-based budgeting. The practice also favors areas that achieve direct revenues or …show more content…
2.Justifying every line item can be problematic for departments with intangible outputs. 3.Requires specific training, due to increased complexity vs. incremental budgeting. 4.In a large organization, the amount of information backing up the budgeting process may be overwhelming.
The zero-based budgeting system puts the burden of proof on the manager, and demands that each manager justify the entire budget in detail and prove why he or she should spend the organization's money in the manner proposed. A "decision package" must be developed by each manager for every project or activity, which includes an analysis of cost, purpose, alternative courses of action, measures of performance, consequences of not performing the activity, and the benefits.
This approach is different than traditional budgeting techniques due to the analysis of alternatives. Managers must identify alternative methods of performing each activity first, such as evaluating the costs and benefits of making a project or outsourcing it, or centralizing versus decentralizing operations. In addition, managers must identify different levels for performing each alternative method of the proposed activity. This means establishing a minimum level of spending, often 75 percent of the current operating level, and then developing separate decision packages that include the costs and benefits of additional
Show More

Related Documents: Essay about Zero Based Budgets

Accounting: Budget and Key Factor Essay

determination of this key factor so important in the budgetary process? Answer: MEMO To: Marketing Manager Date: 23rd September, 2013 From: Management Accountant Subject: Key Factors for 2014 Budget Key Factor: This is the factor that will set a limit on all the activities in the budget. Normally key factor is sales volume, in a circumstance where there is shortage of skilled staff, then, the availability of skilled labour could be a key factor. It is important to determine the key factor…

Words 818 - Pages 4

zero-based budgeting Essay

Zero-Based Budgeting MHA 612 Dr. Kathy Wood October 14th, 2013 Zero-Based Budgeting Introduction As the zero-based budget consultant for Windsor Memorial Hospital I will make recommendations to the Board of Directors on how to create a solid plan to reduce costs and increase productivity. This will be a team based solution. In order to sustain the plan for years to come, it will require continued effort and a commitment from all current and future employees. Zero-based budgeting…

Words 1140 - Pages 5

Planning A Budget Dip Essay

Planning a Budget Davis Service Group is a large public limited company employing around 17,000 people. Its shares are quoted on the London Stock Exchange.The business is based on service contracts to source, clean and maintain industrial textiles, such as protective clothing and linens. This is across four key sectors: workwear, healthcare, hotels and restaurants, and general facilities, such as washroom linen Budgets are forward financial plans. They show financial targets over a given period of…

Words 1550 - Pages 7

The Federal Budget Process

attempts have been made to reform the federal budget process. Three presidents, namely; Nixon, Carter and George W. Bush introduced their reforms. Nixon administration attempted a strategy called Management by objective (MBO), Carter administration brought the Zero-base budgeting (ZBB), and lastly the George W. Bush administration instituted Performance Assessment Rating Tool (PART). All these strategies were introduced to secure larger control over budget preparation. During President Nixon’s administration…

Words 633 - Pages 3

Resource Allocation Essay

project requires, into a budget that has been determined by subtracting the non-direct labour costs from a client-imposed maximum fee. Projects undertaken for fees based on this method require careful planning and control. The PM must understand that he or she is starting with an assumed fee, and it is critical that the scope of work be developed to match this fee — not the reverse. The major advantage of downward budgeting is that it does establish a project budget that will meet all the firm's…

Words 4191 - Pages 17

Essay on Critical Comparison Between Budgeting Methodologies of for Profit Educational Institutions and Public University

Name: Alan Stockdale b. Telephone Number: c. Email: ii. Degree Path (PMP): Finance iii. Co-investigators: iv. Experimental start date: 1. INTRODUCTION / REVIEW OF LITERATURE 1.1 Introduction Budget as the monetary plan for a specific period of time in the future of an organisation has been considered more and more important by corporate governance. Many budgeting methodologies have been invented and widely implemented by different organisations…

Words 2851 - Pages 12

Essay on Budget and Budget Effective Budgeting

Class Notes for February 5th Budget Definition A budget is a plan for getting and spending money to reach specific goals by a certain time. A budget is a plan. Four Rules for Budgets and Plans Rule #1 – A budget is a plan for spending money to reach specific goals within a certain time period. Rule #2 – Any budget is only as good as the time, effort, and information people put into it. Good budgets foster collaboration and exchange of information among all levels of the team.(From informal and…

Words 1162 - Pages 5

Essay on Final Cub Cadet

●Market Overview ●Target Market ●IMC Objective ●Positioning ●Campaign Theme ●IMC Tools Plan ●Budget ●Expectations Market Overview ●Lawn mowers and Garden tractors o Outdoor equipment with one or more revolving blades used to cut grass or other plants to an even length ●Competitors o Direct: John Deere, Toro, Murray, Electrolux Home Products o Substitute/Indirect: professional lawn care services o Budget: e.g. family vacation SWOT Target Market ● Gen X & Younger boomers o Age 35-50 o Male o…

Words 521 - Pages 3

Personal Budget Essay

Personal Budget Exercise – Excel Creating a spreadsheet track personal business expenses is an excellent use of Microsoft Excel. For this exercise, you will create a spreadsheet to enter a personal budget and track actual expenses for the year. You may choose to use real data or create a fictitious budget using a monthly income amount of $2,500. Here are suggested budget categories if you are not using a real budget. At a minimum, you must have 9 budget categories: Housing (mortgage or rent) Utilities…

Words 1048 - Pages 5

Case Study 1 Essay examples

projected balances. Ratios, present values, and rates of return should all be considered before making large financial decisions. When presented with multiple investment opportunities comparison of calculations based on projected cash flows enables an investor to make well educated decisions based on predicted financial returns. The Net Present Value (NPV) is a method of analyzing and appraising the earning potential of investments. The NPV is the difference between cash flow coming in and going out…

Words 665 - Pages 3