All

activities are re-evaluated each time a budget is prepared. Justify the resources requested for all activities & projects, including on-going activities & projects. Starts with the assumption that the function does not exist and it is at ZERO cost. (contd..)

 Increment

in cost increment in benefit.

is

compared

with

 ZBB

is a revolutionary concept of planning the future activities and there is a sharp contradiction from conventional budgeting. It is a budgeting from the beginning without any reference to any base - past budget or actual happening.

A planning and budgeting process which requires each manager to justify his entire budget request in detail from scratch and shifts the burden of proof to each manager to justify why he/she should spend any money at all. The approach requires that all activities be analyzed in decision packages which are evaluated by systematic analysis & ranked in order of importance.

budgeting system in the organization. of qualitative measures for

Development

performance evaluation.

 Corporate

objective should be established and laid down in detail. Identification of decision units based on function or departments. Proper description, analysis and documentation of activities of each function/ department. Clearly stated targets and objectives from each function/ deptt. ignoring existing budget. (Contd..)

 Clearly

defined criterion for each performance evaluation of each activity. Converting each activity into decision package. In performance of an activity, alternative methods and costs are evolved. Each activity or decision package is evaluated and ranked by cost benefit analysis. (Contd..)

 Benefits

achieved at different levels of funding are analysed. Consequences of not funding the activity are analysed. Resources in budget are then allocated according to the resources available and the evaluation & ranking of competing packages. Available resources are directed towards alternatives in order of priority to ensure optimum results.

every rupee of expenditure requires justification Emphasis on WHY instead of how much. Choices on the basis of what each unit can offer for a specific cost. Linking of corporate goal with individual unit objectives. Possibility of quick budget adjustments. Alternative ways are considered. Participation of all levels in decision making.

 Inefficient

& obsolete ops. are identified &

removed. Adds psychological impetus to employees to avoid wasteful expenditure. Helps in close monitoring of cost behavior patterns in order to decide the effect of alternative course of action. Documentation required enables a coordinated in depth knowledge of an organizations operations to be available to all management. (Contd..)

 More

efficient allocation of scares resources. Promotes operational efficiency instead of incremental approach. Participation of all levels of management ensures successful execution of budgetary system due to increased responsibility level.

 Enormous

increase in paper work leading to increased cost, time consumption, etc. Emphasis on short-term benefits. May encourage wrong idea that all decisions are required to be taken in the budget. Not applicable where objectives can not be quantified. (Contd..)

 Difficult

to determine decision units & decision packages. Lots of training required at managerial level. Difficult to rank all alternative decision packages due to conceptual difficulty, different type of activities and large number of packages, etc.