2. Definition – Zero Based Budget
- starts from a "zero base"
-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.
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3. Unique feature - ZBB
It tries to help
management answer the
question,
“Suppose we are to start our business
from scratch, on what activities would
we spent out money and to what
activities would we give the highest
priority?”
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4. ZBB - Outline
Peter A. Pyhrr is
the Godfather of
zero-base
budgeting
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15. Traditional Budgeting vs
Zero Base Budgeting
Basic difference Traditional Budgeting
Zero Base Budgeting
Emphasis
It is accounting oriented;
emphasis on “How Much”
It is more decision
oriented; emphasis on
“Why”
Approach
It is monitoring towards the
expenditures
It is towards the
achievement of objectives
Focus
To study the changes in the
expenditures
To study the cost benefit
analysis
Communication
It operates only Vertical
communication
It operates in both
directions horizontally and
vertically
Method
It is based on the
extrapolation i.e. from the
yester figures future
projections are carried out
Its decision package is
totally
based on the cost benefit
analysis.
18. Difficult to complete review of all
the expenditure within a limited
timeframe.
Costly and
complex method.
Disadvantages of
ZBB
Loss
(due of long
t
yea to plan erm pl
r)
a nn
ning
for e ing
very
Not possible for
depts like R&D etc,
with intangible
outputs.
19. Now, check for progress
of ZBB in India
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