Zero base budgeting is one of the renowned managerial tool, developed in the year 1962 in America by the Former President Jimmy Carter. The name suggests, it is commencing from the scratch, which never incorporates the methodology of the other types of budgeting in determining the estimates. The Zero base budgeting considers the current year as a new year for the preparation of the budget but the yester period is not considered for consideration. The future activities are forecasted through the zero base budgeting in accordance with the future activities.
Peter A Pyher “A planning and budgeting process which requires each manager to justify his entire budget request in detail from scratch (Hence zero base) and shifts the burden of proof to each manger to justify why he should spend money at all. The approach requires that all activities be analysed in “decision packages” which are evaluated by systematic analysis and ranked in order of importance”
This type of budgeting requires the manager to reason out the aim of spending, but in the case of traditional budgeting is unlike, which are never emphasize the reasons of spending in terms of expenses.
Traditional Budgeting vs Zero Base Budgeting
Steps involved Zero Base Budgeting
Benefits of Zero Base Budgeting
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