critically compare and contrast the benefits and drawbacks of the zero-base budget setting technique. Conclude as to which circumstances would make this the most appropriate method of budgeting to use

Using supporting evidence from a range of academic sources, including text books and journal articles, critically compare and contrast the benefits and drawbacks of the zero-base budget setting technique. Conclude as to which circumstances would make this the most appropriate method of budgeting to use.

Introduction

Zero-Based budgeting is a budgeting technique that relies on the assumption that task would start from zero capital and everything have to be planned from the beginning. This kind of budgeting enables the management to adopt different strategic objectives in the whole budgeting process by connecting them to various functional areas within the business. It allows the management to determine the alternative methodology in using their scarce resources through the use of a systematic review. The budgeting technique has various benefits; it is effective when allocating resources because it considers the needs and benefits of various operations (Kavanagh 2011, p.86). It also drives the management to identify cost-effective methods to improve various operations. On the other hand, the disadvantages of the technique are; it is time-consuming, needs a workforce, needs knowledge, and awareness of details. The paper will compare and contrast the benefits and drawbacks of Zero-based budgeting techniques.

The benefits of Zero-Based Budgeting technique

The first benefit of zero-based budgeting technique promotes operational efficiency because it is not based on an incremental approach. When compared to the common techniques of budgeting that involves making important changes to the past budget, it makes every budget department to re-evaluate every aspect of cash flow and record their operating costs (Miller 2018, p.46). It reduces cost and also provides a distinct picture of the costs against the anticipated achievement. Moreover, it is efficient because it does not involve the items on the previous budget which might be confusing especially in firms with a lot of tasks.

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