Resources conserved can be easily reallocated to other priorities
Zero-based budgeting! A method of budgeting or a technique that sets all budgets to nil at the beginning of the financial year or a period. It requires government departments to justify all their expenditures, not just those exceeding the budget. Money is allocated to the departments and not just based on previous year’s budget (plus or minus some percentage).
This method is detailed, and provides a comprehensive analysis of objectives and needs. That essentially implies that it is not only a budget, it is also a tool to plan and strategise. But to implement such a detailed and immaculate plan, requires managers to evaluate cost effectiveness of their operations, threadbare. Also, management participation in planning & budgeting is expanded to all levels of the organisation. The Union Government’s first acceptance of Zero-based budgeting was for the Department of Science and Technology through its Memorandum of December 1983. Later in 2006, Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, emphasized that in the 11th Plan, moves must be made to shift towards Zero-based budgeting.
Zero-based budgeting! A method of budgeting or a technique that sets all budgets to nil at the beginning of the financial year or a period. It requires government departments to justify all their expenditures, not just those exceeding the budget. Money is allocated to the departments and not just based on previous year’s budget (plus or minus some percentage).
This method is detailed, and provides a comprehensive analysis of objectives and needs. That essentially implies that it is not only a budget, it is also a tool to plan and strategise. But to implement such a detailed and immaculate plan, requires managers to evaluate cost effectiveness of their operations, threadbare. Also, management participation in planning & budgeting is expanded to all levels of the organisation. The Union Government’s first acceptance of Zero-based budgeting was for the Department of Science and Technology through its Memorandum of December 1983. Later in 2006, Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, emphasized that in the 11th Plan, moves must be made to shift towards Zero-based budgeting.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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