What are the advantages and disadvantages of zero base budget?
budgeting of zero base base is a process in which a business or government agency creates a budget with specific limits every year. This differs from incremental budgeting, in which the budget is used in previous years and the CAP limits are added. The zero budget begins with each category at zero and provides the limit of expenditure based on the necessary expenditure of a business or government agency. Advantages include increased restrictions, reduced demands and open budget discussions. The disadvantages may be an extended time to plan budgets or incorrect solving problems with the spectacle. Waste often calls budget slack, increasing the limit of budget expenditure for certain categories. Managers can “improve” their budget performance by not reaching this expenditure limit. This happens because the manager does not intend to spend the amount of money listed in the budget, creating a false feeling of performance. Zero base budgets increase the limitation of this behavior, thereforeE managers will have to provide documented expenses for each area.
Reducing demands is another advantage of zero basic budgeting. Many government agencies have an annual increase of demanding programs that require a corresponding budget increase. This may result in excessive expenditure with several analyzes to determine whether the requirements program works efficiently. Every year, the program analysis for the budget process to determine how much money the program must remain over water for the budget process. Only a legitimate increase will be considered when determining the current budget limits.
The two previous benefits lead to the advantage of the third zero basic budget advantages: an open discussion. When individuals in a society or government have to actively discuss limitations or annua -oufyklouzkle limits, discussions and debates. This allows all the word in the budget process, including lower -level employees. MoreOpen discussion can also lead to the budget improvement and reduce expenditure on the implementation of new ideas.
specific disadvantages of the zero basic budget budget process include a large amount of budgeting time and lengthy solutions to simple problems. Permit an open discussion of the budget process can also lead to everyone's difference. This can lead to arguments and debates that reduce the budget. Hooking about PET projects is one of the examples of open discussion problems in the budget process.
It may also be a problem to create the main budget process for simple problems. Not all business problems will require a budget and simple proportion decisions can lead to a budget discussion. This extends and reduces the focus on finding simple Solution for the problem.