Continental Hotel Budget Planner

This report explains the significance of Zero Based Budgeting (ZBB) by comparing it with the traditional approach followed by business concerns. It also highlights the advantages of ZBB and how it differs from the traditional method. The report includes a forecasted cash flow statement for the upcoming year of an hotel business and a practical approach to implementing ZBB in an entity. Subject: Budgeting, Course Code: NA, Course Name: NA, College/University: NA

CONTINENTAL
HOTEL BUDGET
PLANNER

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Forecasted cash flow statement for the upcoming year of an hotel business:....................3
(EXCEL ATTACHED)..........................................................................................................3
2. Zero Based Budgeting Report:...........................................................................................3
(A) Definition of Zero based budgeting along with evaluation of process involved in it:.....3
(B) Benefits of Zero based budgeting when compare to traditional method:........................5
(C) Introduction of ZBB in entity in Practical Aspects:.........................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Zero based budgeting is an approach in which all the expenses are must be validating for the
defined period. The concept of zero based budgeting was firstly introduced in a year 1960. The
process involved in zero based budgeting starts with zero base and the function performed in the
entity is visualized for its requirement and cost. It is the method to find all of your money to
expenses, savings and debt instruments (Barrett and Greene, 2020). Its introduce with the goal of
cooperate with the demerits of traditional budgeting system. In simple terms zero based
budgeting is the form of budgeting in which each cost element for the period is clearly defined,
in terms of cost benefits. Zero based budgeting can be created in excel too starting from entering
the income or expensed in excel workbook, then input the expected budget, then start making
changes in the budget until the final budget will becomes zero and then the final step is to
monitor the actual income or expensed accordingly. In this report the significance of zero-based
budgeting has been explained by comparing the same with traditional approach the business
concern follows. Also, this report highlights about the advantage of ZBB to the organisation so
that business processes can be improved.
MAIN BODY
1. Forecasted cash flow statement for the upcoming year of an hotel business:
(EXCEL ATTACHED)
2. Zero Based Budgeting Report:
(A) Definition of Zero based budgeting along with evaluation of process involved in it:
Zero-based Budgeting (ZBB) is defined as a method of budgeting which requires each cost
element to be specifically justified, though the activities to which the budget relates are not being
undertaken for the first time. The cost of each activity has to be justified and without
justification, the budget allowance is zero.
Zero based budgeting differs from the conventional system of budgeting because it mainly
starts from scratch or zero and not on the basis of trends or historical levels of expenditure. In
the customary budgeting system, the last year’s figures are accepted as they are, or cut back or
increases are granted. Zero based budgeting on the other hand, starts with the premise that the

budget for next period is zero so long the demand for a function, process, project or activity is
not justified for each rupee from the first rupee spent (Broome, Bowersox, and Relf, 2018).
ZBB is an activity-based budgeting system where budgets are prepared for each activity rather
than functional department. Justification in the form of cost benefits for the activity is required
to be given. The activities are then evaluated and prioritized by the management on the
basis of factors like synchronisation with organisational objectives, availability of funds,
regulatory requirement etc.
ZBB is suitable for both corporate and non-corporate entities. In case of non- corporate entities
like Government department, local bodies, not for profit organisations, where these entities
need to justify the benefits of expenditures on social programmes like mid-day meal,
installation of street lights, provision of drinking water etc.
In case of corporate entities, ZBB is best suited for discretionary costs like research and
development cost, training programmes, advertisement etc. (Cepiku, 2020).
synchronisation with organisational objectives, availability of funds, regulatory requirement
etc.
The process involved in zero based budgeting are as under: -
 Identification and description of Decision packages: Decision packages are the
programmer or activities for which decision is required to be taken. The programmer or
activities are described for technical specifications, financial impact in the form of cost
benefit analysis and other issues like environmental, regulatory, social etc.
 Evaluation of Decision packages: Once Decision packages are identified and described,
it is evaluated against factors like synchronization with organizational objectives,
availability of funds, regulatory requirement etc.
 Ranking (Prioritization) of the Decision packages: After evaluation of the decision
packages, it is ranked on the basis priority of the activities. Because of this prioritization
feature ZBB is also known as Priority-based Budgeting.
 Allocation of resources: After ranking of the decision packages, resources are
allocated for decision packages. Budgets are prepared like it is done first time

without taking reference to previous budgets.
(B) Benefits of Zero based budgeting when compare to traditional method:
Characteristics of Zero Based Budgeting:
 It’s mainly focus and give efforts on both “how much” a unit will incur and 'why' its
incurred.
 Decisions in zero based budgeting are based on how much unit can be offer at the given
cost (Joannidès de Lautour, 2018).
 Objectives of each individual unit are similar with the corporate objectives.
 Possibility of instant adjustments in the budget if it's required.
 In an organization, all the levels can participate in decision making process.
Process of Zero Based Budgeting.
1. Allocating and defining of decision packages.
In zero based budgeting, decision packages define particular activities,
so firstly allocate and rank the activities against other activities with the help of scarce
resource and make decisions on that.
2. Evaluating the decision packages:
After defining and allocating, decision packages evaluated and cooperate with the
organizational objectives with the regular requirement and availability of money.
3. Give priority to the decision packages:
In decision packages provide rank on the basis of its activity. Priority give only those
activities who helps in preparing the budget without considering the previous year budget
(Joel, Abba, and BabaGana, 2018).
4. Identification of resources:
once the ranking is done of the activities, now the resources are allotted to the decision
packages, which helps in the process of making the budget, as it is done for the very
beginning, without take any help of previous year’s budget.
Merits of Zero Based Budgeting:
1. Work in Efficient Manner:
a. Zero based budgeting helps a company to find and allocate the resources in a

b. consistent manner. They don’t look at the previous budget numbers instead of
looking at the actual numbers.
2. Work Accuracy: In this zero based budgeting it shows accuracy and helps in decreases of
cost and it gives an actual image of costs against the desired performance.
3. Provide Better Communication and Coordination within the Departments: Zero-based
budgeting helps in good coordination and communication among the departments and
motivate the employees by take part in decision making (Khajavi, Etemadi Jouryabi, and
Etemadi Jouryabi, 2018).
Demerits of Zero Based Budgeting:
1. High Manpower Turnover: In this zero based budgeting under this method budget is
ready and prepared by the availability of a large number of employees. Most of the
departments not have enough manpower and time.
2. Time Consuming: zero based budgeting is a very time consuming approach this approach
time consuming for some departments.
3. Lack of Expertise: In zero based budgeting due to lack of expertise in company. Its
difficult situation from the company to handle and organize cost because its needed
proper information and explanation of every cost and its needed high training for the
managers.
The Difference between zero based budgeting and traditional Budgeting:
 The traditional budgeting system is oriented towards accounting and the main problem
arises on the level of expenditure. Further it is very balanced in nature and they require
all line-ups new as well as old to compete from the unusual means.
 In traditional system of budgeting, some of the personnel’s may inflate their request so
that after the reduction they can get what they want. In Zero based budgeting a rationale
analysis of budget proposals is attempted and those management personnel who try to
inflate the request with respect to budget are caught red handed and they are exposed
accordingly (Khan, 2019).
 In traditional system of budgeting the higher authority will decide on whether the
particular amount of expenditure has been incurred on the particular unit so that decision
can be taken accordingly.

 The approach followed by zero based budgeting method is very straight forward whereas
a very routing approach has been carried out by traditional approach and immediately
attentions the decision packages enjoying precedence over others.
 Traditional budgeting method is not gives the clear perspectives and responsive as zero
base budgeting is management focused their attention towards the decision packages
which enjoy priority over others.
(C) Introduction of ZBB in entity in Practical Aspects:
The Zero based budgeting can be implemented by the business concern by implementing a
careful and planned approach by following the order given below: -
 In order to implement ZBB it mandatory to redesign their existing traditional processes
completely and further it is important to make a complete research regarding the business
idea so that process involved in business can be improvise accordingly.
 It is mandatory for the business concern to search out regarding those techniques that
helps them in finding out the new solutions for their business processes which helps the
budget holders that can consider them and use it in their business processes (Musso and
Weare, 2020).
 It is necessary for the corporate to know about their drivers so that so that work
effectiveness and efficiency can be improved. Such drivers can be accounts receivable
and account payable of the corporation which must be attached with invoices and
supporting documents that is regulated by the accounts departments.
 It is important for the management team to consider advise from the professionals on
regular interval of time so that the mistakes they usually make will not be repeated and
the input they gain from such experiences helps in building the fundamental change in the
corporate (Schilling and Tomal, 2019).
 It is important aspect for entity that training must involves understanding of new
approach and entity’s system must be capable enough to support ZBB as the empowering
technology which bring the process more instinctive and involves les concentrated
training.
 ZBB also ensures that the management and their manager always think amount every
dollar they have spent during the period of budget as it focusses on justification of all the

operating expenses and also contributes the suggestion which will increase the revenue of
the business concern.
 In order to implement it practically at every scale of business process the entity can
compulsorily review their business process in different division and with various
programs and must prepare their estimation using the concept of ZBB so that avoidable
expenses can be sorted and removed from the structure of entity that will ultimately save
the resources and can be invested effectively somewhere else (Popesko, 2018).
CONCLUSION
From the above statement the decision can be drawn that ZBB is the unique technique that helps
in building or improvising the business concern business process by renovating the budget
structure which newer techniques as compare to traditional method. This report shows the brief
description about the ZBB along with its advantage to organisation and how differs from the
traditional method. Further the above report highlights certain points that how a corporation can
implement such techniques practically so that their business along with processes can be
improved. Further a comparative analysis has been conducted between zero based budgeting and
traditional method so that deviations can be analysed in both the methods accordingly. This
report also includes the forecasted cash budget an hotel industry can make on the basis on
estimation of estimation of revenue and expenses and such report regarding the estimation has
been submitted to top management of the entity so that decision can be taken accordingly. This
cash flow forecast provides the estimation that support the income statement of entity for the
next year and accordingly the expenses will be made.

REFERENCES
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through business development initiatives. Journal of Professional Nursing, 34(2),
pp.97-102.
Cepiku, D., 2020. Performance management in a networked organization: the
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Joannidès de Lautour, V., 2018. Beyond Budgeting. In Strategic Management Accounting,
Volume I (pp. 217-270). Palgrave Macmillan, Cham.
Joel, S.O., Abba, B.L. and BabaGana, A., 2018. Enhancing effective resource utilisation in
Nigerian public universities through new public management strategy. Public policy
and administration research, 8(9), pp.17-23.
Khajavi, S., Etemadi Jouryabi, M. and Etemadi Jouryabi, M.M., 2018. Investigating the Effect of
Management Accounting Information on Organizational Performance of Public
Hospitals in Gilan Province. Journal of Health Accounting, 6(2), pp.65-86.
Khan, A., 2019. Fundamentals of Public Budgeting and Finance. Springer Nature.
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