Zero-Based Budgeting
Zero-Based Budgeting
Zero-Based Budgeting
Minimum requirements which are essential to get the job done and activities
necessary to meet legal or safety obligations will naturally receive high priority. It will
be found that the ranking process focuses management’s attention on discretionary or
optional activities.
Because of the large number of packages prepared throughout the organization the
ranking process can become onerous and time consuming for senior management. One
way of reducing this problem is for lower level managers to rank the packages for their
own budget center and for these rankings to be consolidated, with others, at the next
level up in the hierarchy. Alternatively, these could be ranked within the department and
need not be referred higher.
iii. Allocation of resources:
When the overall budgeted expenditure level is decided upon the packages
would be accepted in the ranked priority sequence of up to the agreed
expenditure level.
Where the ranking of lower cost packages has been delegated to
departments, the proportion of the expenditure budget remaining after
more expensive packages have been ranked would be allocated to
individual department. The departments would then rank their own small
packages up to their allocated expenditure level.