Table of Contents INTRODUCTION...........................................................................................................................1 REFERENCES................................................................................................................................2
INTRODUCTION Zero based budgeting is a budgeting methodology where all expenses are required to be justified for every new period. It derived its name of zero budgeting as it starts with zero base. Organisation usually analyse its needs & costs for each and every function. This essay will cover what zero based is all about in an organisation. It will analyse how Windsor Memorial Hospital can implement zero based budget for efficientlymanaging its operations and to have proper control over its costs(Asogwa and Etim, 2017). THESIS Zero based budgeting is planned tobe implemented in Windsor Hospital. Zero based budgeting is defined as a budgeting method in which every expense should be approved and justified for every new period. It was developed in 1970 by Peter Phyrr. The concept deals with attracting with zero base for every function that is to be performed within an organisation by analysing its costs. It does not consider what was previous budget for any activity .it was developed for facilitating incorporation of strategic objectives in budgeting in line with specific functional areas in an organisation. In this system professional analyses costs and measures them against prior outcomes and present expectations. This helps them to have proper allocation of funds(Trenovski and Nikolov, 2015). For implementing zero based budgeting hospital will be required to take necessary steps. Five steps are required to be undertaken for successful implementation of zero based budgeting. 1.Start – For starting hospital will be required to start at zero on the ground level. Hospital will be required to frame new budgets annually from scratch. Company will be required to prepare its new budgets without using previous year's original baseline. 2.Evaluate – hospital will be required to evaluate all areas of costs for preparation of budgets so that it can make budgets keeping in mind every cost area. It is also important for elimination of unproductive activities and services and manage its cost accordingly. 3.Justify – Consultant will be required to justify and consider all elements that are included in budget. They will be required to identify specific areas which are cost effective for company. It is also essential that all elements are relevant for budgets, and will drive company towards saving its cost(Grigg and Votaw, 2016). 4.Streamline – another step in zero based budgeting is streamlining . This is required to be performed for determining whatactivities are to be performed and what will be the 1
procedure for performing it. Hospital will have to automate as well asstandardize its procedures and processes wherever it is possible. 5.Executing – last step is effectively executing all which is planned above. Comprehensive planing and proper execution process should be adopted by hospital.Hospital should communicate proper plans along wit roles and responsibilities which will be required to perform by individuals(Hijal-Moghrabi, 2019). Advantages of Budgeting Accuracy– Companies that adopt zero based budgeting helps to monitor every department in an organisation to ensure that every segment is getting required amount of monetary funds. It will help hospital to allocate funds appropriately over different activities and departments. Efficiency– in this hospital is required to focus on current needs of hospitals and prepare budgets accordingly withoutconsidering past budgets of hospital.It helps company to prepare its budget with more efficiency. Reduction of wasteful spending- it will help hospital to remove redundant spendings that are no t productive. It is importantly for company to identify all activities that are not relevant and productive for organisation. It helps to reduce its unnecessary its cost(Ryu, 2015.). CONCLUSION AND RECOMMENDATIONS From the above it is recommended that Windsor Hospital should adopt ZBB as a approach for managing its operations. This budgeting method deals with starting from zero as base that help company to analyse its requirement for activities every time it is preparing budget forhospital.Hospitalwillbeabletomakemoreaccuratebudgetsasitwillhavean understanding which activity requires what amount of money for operating successfully. It deals with analysing and evaluating activities which are not productive and are consuming costs of hospital. Eliminating these cost will reduce cost and to allocate its resource at more productive activities. It also helps in communicating and coordinating all activities and allocate its resources efficiently. Therefore, it is recommended that hospital should adopt Zero based budgeting for itself for increasing efficiency, effectiveness and accuracy. 2
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REFERENCES Books and Journals Asogwa,I.E.andEtim,O.E.,[2017].TraditionalBudgetinginToday'sBusiness Environment.Journal of Applied Finance and Banking,7(3), p.111. Trenovski, B. and Nikolov, M., [2015]. Cost-benefit analysis of performance based budgeting implementation.CEA Journal of economics,10(2). Grigg,D.M.andVotaw,E.S.,BankofAmericaCorp,[2016].Position-basedbudget communication apparatus for use in position-based budgeting systems. U.S. Patent Application 14/629,364. Hijal-Moghrabi, I., [2019]. Why is it so hard to rationalize the budgetary process? A behavioral analysis of performance-based budgeting.Public Organization Review,19(3), pp.387- 406. Ryu, J.E., [2015].The Public Budgeting and Finance Primer: Key Concepts in Fiscal Choice. Routledge. Online ZeroBasedBudgeting,2019.[Online].Availablethrough: <https://www.investopedia.com/terms/z/zbb.asp>. (Asogwa and Etim, 2017) (Trenovski and Nikolov, 2015) (Grigg and Votaw, 2016) (Hijal-Moghrabi, 2019) (Ryu, 2015.) 3