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18:51 NTA UGC NET 2019 By:- Assistant Professor(Ms.)Ashima Negi Candidate For Doctorate ( Ph.D.) UGC NET-Management. CA(I), MBA Finance, BBA, PGDM-Materials Management, NCFM, TQM & ISO 9000, Qs 9000 & Assurance, CCIBL
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18:51 LTE Zero-Based Budgeting vs. Traditional Budgeting Traditional budgeting calls for incremental increases over previous budgets, such as a 2% increase in spending, as opposed to a justification of both old and new expenses, as called for with zero- based budgeting. Traditional budgeting analyzes only new expenditures, while ZBB starts from zero and calls for a justification of old, recurring expenses in addition to new expenditures. Zero-based budgeting aims to put the onus on managers to justify expenses, and aims to drive value for an organization by optimizing costs and not just revenue.
18:51 Advantages & Disadvantages Accuracy: This type of budgeting help companies to look over every department to make sure they are getting the correct amount of money 1. Efficiency: It helps judge actual need by focusing on current numbers instead of past budgets. 2. 3. Reduction in wasteful spending: It can remove redundant spending by reexamining potentially unnecessary expenditures. Coordination and Communication: It allows for better communication within departments by involving employees in decision-making and budget prioritization 4. Bureaucracy: Creating ZBB within a company can take enormous amounts of time, effort, and analysis that would require extra staff. This could cause the process to be counter productive in cutting costs Corruption: In using ZBB, managers could attempt to skew numbers to make expenditures into vital activities, thus creating a "need" for them. This would cause companies to continue wasting money on things they don't need a. b. Intangible Justifications: This type of budgeting requires departments to justify their budget, which can be difficult on many levels. Departments such as advertising and marketing have to justify expenses they may or may not use in the next year due to the fluctuation of the market. This could cost them profits in the future due to not being able to justify a certain amount. c. d. Managerial Time: ZBB comes at the cost of time and extra training for managers. This means extra time every vear to do the budget, make adjustments, and receive the proper training to understand how to do ZBB Slower Response Time: Due to the amount of time and training is required to do ZBB, managerial staff could be less likely to revise the budget in response to a changing market. This means that it will take longer for a company to move money into departments that need it the most at the time. ZBB could potentially leave gaps in a company because the budget might not react to departments' sudden needs. e.
18:51 Components of a public sector ZBB analysis . In an overview of zero-based budgeting, there are a total of three elements that make up the concept: . Decision Unit Determination This is the building process of the formulation of a budget structure. Decision Package Formulation . When compiling and packaging a budget request, this mechanism is utilized. . Ranking This process requires the most attention as it requires a company's manager(s) to prioritize out of a group of decision packages that are laid out to them . In general there are three components that make up public sector ZBB: Identify three alternate funding levels for each decision unit (Traditionally, this has been a zero-base level, a current funding level and an enhanced service level.); . Determine the impact of these funding levels on program (decision unit) operations using program performance metrics; and . Rank the program "decision packages" for the three funding levels.