MSEM 6137 The Nature of Crime and Criminology

MSEM 6137 The Nature of Crime and Criminology

MSEM 6137 The Nature of Crime and Criminology
Zero Based Budgeting for Your Start-Up Business

By Richard J. Maturi

(Source: http://www.homebusinessmag.com/money/accounting-and-bookkeeping/zero-based-budgeting-your-start-business)

This article describes about the Zero Based Budgeting (ZBB) and its advantages and disadvantages to the business. (1) ZBB is an approach which plans the budget in such a way that every line item of budget needs to be approved and analyzed in such a way that it explains the expenditure and justify it. (2) In this approach if expenditure on certain item or department cannot be justified than that expenditure is removed from the list. (3) This type of budget makes the owners to rethink the business operation and build a budget plan from the scratch, by not considering the previous year budget or previous factors.

Main advantage of ZBB is that it concentrates only on what is essential and removes the unnecessary costs. Inflation estimates of previous year assumptions are not considered in this approach while emphasis is given on the essential things of cash flows and profit. This approach focuses on expenditure activities rather than the department or type of activity. On the one hand this approach reduces the expenditure and increases the profit; on the other hand it takes too much time to plan the budget items from the scratch. It removes the item which cannot be monetized and thus does not consider their possible effects on the business. As this approach is very time consuming, this time of budgeting cannot be done frequently as compared to activity based budgeting.

So, this approach should be used for making a broad budget, while updating to this can be done with the activity based budgeting.

MSEM 6137 The Nature of Crime and Criminology MSEM 6137 The Nature of Crime and Criminology

MSEM 6137 The Nature of Crime and Criminology