Zero Based Budgeting

[sameer]

hi,
how can we implement zero based budgeting and what are its concequences...?how it is better then any other budgeting system...?
do'nt refer any book......xplain in few linezzz...THANX:confused::eek:

[dragoon_alex]

It's widely used by service companies, but lots of budgetting work need to do.

[bluewednesday]

As I remember (it was a while ago, so please someone correct me if I'm wrong), you start from zero and only add the budget once its been justified.

It therefore doesn't allow a budget for anything unnecessary which may have been custom to do but not actually add anything to the value.

It takes the 'budgetary slack' out of a budget.

[Asif]

bluefriday is absolutely correct !

[Payal]

Just to add another description....usually in the budgeting process you look at the expected changes during the year and then budget for the current year. in this process u provide a budgeted spend for all items that u had in the previous year by say increasing 5-10% for example. so there is a base on which you work on while in zero based budgeting u start from scratch, u start on a clean sheet. for each and every item u question if it is absolutely necessary and then if it is justifiable you provide a budget for it. this avoids the budget slack . it gives a better budget as compared to just going by the previous budgets but it is a lot more time consuming.