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Zero Based Budgeting

Zero Based Budgeting

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Published by Sumit Karkamkar

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Published by: Sumit Karkamkar on May 03, 2012
Copyright:Attribution Non-commercial


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Stages 5.Difference 3.History 4.Definition 2.Disadvantages 7.Advantages 6.Contents: 1.Applications .

.Definition Zero based budgeting (ZBB) is a method of budgeting whereby all activities are revaluated each time the budget is formulated and every item of expenditure in the budget is fully justified. ZBB involves starting from scratch or zero.

Difference between Traditional & Zero Based Budgeting Traditional Approach ZBB .

• Later it was implemented in the state of Georgia by Jimmy carter. • In 1970’s Jimmy carter used ZBB in the Federal Budgeting Control Systems. . the governor of Georgia.History • Peter Pyhrr who designed its logical framework and implemented it successfully in the private industry in 1969 while working as a staff control manager in Texas Instruments USA.

2. i. Defining scope of ZBB. Allocating Resources – Most important activities funded first. Developing Decision Package. – Decide which parts of Organization to be assessed. Ranking the decision packages – Evaluate & rank in order of importance.Stages of ZBB 1. 3. . ii. Identify the resources – a) Input Resources b) Individuals iii. Objective matching.

Useful in government sector. . Identifies opportunities for outsourcing. Increases communication & co-ordination within the organization. Eliminate wastage & obsolete operations.Advantages Efficient allocation of resources. Detects inflated budgets.

Disadvantages Time Consuming. Specific training required. Problematic in case of intangible outputs. Complexity in calculation. .

Percentage of Respondents Using Major Budget Reforms Before and After the Depths of the 2008 Recession .

Used by governments & not by profit sectors of the economy.Applications Used very rarely in practice. .


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