Zero-Based Budgeting - ZBB
Zero-based budgeting is great if you’re the CEO, but maybe not so great if you’re a department head. Zero-based budgeting means starting from zero every year: each department head must justify every line item on their budget.
Many business function a more relaxed, old-fashioned way, using last year’s budget. If any increases (or decreases) are proposed by department heads to the man up top, then there’s talking and negotiating. This isn’t the case for zero-based budgeting, where talking and negotiating happen every year with everything.
The good news? It can help companies be more efficient, making sure they’re using limited resources wisely with limited waste. The bad news? It takes time, which takes money. It also can take money away from places that have less-tangible value (think: the HR department vs. the sales department; who do you think will have an easier time justifying their expenses?).
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Finance: What is a Budget?43 Views
Finance a la shmoop what is a budget? that's that thing you throw right out [Woman throws budget out the window]
the window just before you start doing all your Christmas shopping
right but generally it's a plan that lets you see where your money will be
spent if you have a personal budget well you'll be able to decide ahead of time [Personal budget example]
how much money you'll spend on clothes, food, megaphones to annoy and anger your
neighbors and you know whatever floats your boat if you own a company well
you'll probably have much more complicated budget for things like
advertising and lawyer fees either way the plan helps you make sure that you
have enough moolah for everything you need and maybe some leftover for stuff
you want.....Joan wants to control her money so she decides to set up a budget for [Joan setting up a budget on a laptop]
next month she makes a thousand bucks from her summer job and well here's what
her budget looks like.....
Now Joan knows exactly where every penny is gonna go she's not [Joan driving a car]
gonna be caught off guard by any surprise expenses she's not gonna spend
$200 on safecracking equipment and then realize she doesn't have enough left [Joan stood beside a vault of gold bars]
to pay her phone bill although if she does get hit with some unexpected
expenses well hopefully yeah she can just pawn some of those exotic vases she
took from the Peterson place [Joan holding a vase]