Implementing Zero-Based Budgeting at Windsor Memorial Hospital

This report provides an in-depth analysis of zero-based budgeting (ZBB) and its potential implementation at Windsor Memorial Hospital. It begins with an introduction to ZBB, defining it as a budgeting method where all expenses must be justified for each new period, starting from a zero base. The report outlines the five crucial steps for successful ZBB implementation: starting from scratch, evaluating all cost areas, justifying all budget elements, streamlining procedures, and executing the plan effectively. The advantages of ZBB, including enhanced accuracy, increased efficiency, and reduced wasteful spending, are discussed. The report recommends that Windsor Hospital adopt ZBB to improve its financial management, leading to more accurate budgeting, efficient resource allocation, and cost reduction by eliminating unproductive activities. The report concludes with references to supporting literature and online resources.

ZERO BASED
BUDGETING

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 efficiently managing its operations and to have proper
control over its costs(Asogwa and Etim, 2017).
THESIS
Zero based budgeting is planned to be 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 what activities are to be performed and what will be the
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procedure for performing it. Hospital will have to automate as well as standardize 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 without considering 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
for hospital. Hospital will be able to make more accurate budgets as it will have an
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.
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REFERENCES
Books and Journals
Asogwa, I.E. and Etim, O.E., [2017]. Traditional Budgeting in Today's Business
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. and Votaw, E.S., Bank of America Corp, [2016]. Position-based budget
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
Zero Based Budgeting, 2019. [Online]. Available through :
<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.)
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