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Zero based budgeting is a really good approach to planning and making decision which is the opposite of traditional budgeting. The term "zero-based budgeting" is sometimes used in personal finance to describe "zero-sum budgeting", the practice of budgeting every dollar of income received, andthen adjusting some part of the budget downward for every other part that needs to be adjusted upward.
What are the main characteristics of Zero base budget
In zero based budgeting all estimates are prepared from start and no previous data is available so all assumptions are made from scratch and all costs relations are made from scratch using standard costing methods.
Time consuming to set up - have to understand the activities that drives the budgetCostly - buying, implementing and maintaining an activity based systemManagers may be overwhelmed with information - may be demotivating, rather than looking at the bigger pictureMore effective methods such as, zero based budgeting and continuous budgeting
The main advantage of budgeting is that it will help you get a clear view over your finances. You will also be able to save money. However, budgeting can also bring a lot of extra stress and work.
Nhlanhla Yende
Zero-based budgeting is a method of budgeting where all the expenses have to be justified for each new period. This method starts with a zero base and all the functions in a company are analyzed for costs and needs.
Zero based budgeting is a really good approach to planning and making decision which is the opposite of traditional budgeting. The term "zero-based budgeting" is sometimes used in personal finance to describe "zero-sum budgeting", the practice of budgeting every dollar of income received, andthen adjusting some part of the budget downward for every other part that needs to be adjusted upward.
Zero-based Budgeting
What are the main characteristics of Zero base budget
Traditional budgeting is less precise because money that is left over is not accounted for. Zero based budgeting accounts for every single dollar, hence it is more accurate.
Suggest you look at the CIMA website for excellent resource material on budgeting www.cimaglobal.com go to resources and search from there
in 1964 by U.S Department of agriculture
ZBB governor of Georgia Peter Phyrr.
In zero based budgeting all estimates are prepared from start and no previous data is available so all assumptions are made from scratch and all costs relations are made from scratch using standard costing methods.
Time consuming to set up - have to understand the activities that drives the budgetCostly - buying, implementing and maintaining an activity based systemManagers may be overwhelmed with information - may be demotivating, rather than looking at the bigger pictureMore effective methods such as, zero based budgeting and continuous budgeting
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 production; their contributions are more easily justified than in departments such as client service and research and development.