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  Zero based budgeting

Zero based budgeting:

Traditional method of budgeting have been found to be insufficient for the reason that, the preceding year’s cost level is taken as the base for present year’s budget. The traditional techniques have not totally addressed the trouble of efficiency in the matter of allotment of funds for different divisions. There is therefore a requirement for a new method of budgeting that devices and employs a meaningful base for the budgeting.

Zero Based Budgeting is one such method of budgeting. In zero based budgeting, each and every year is considered as a new year therefore providing a connecting link among the prior year and the present year. The past performance and programs are not taken into account. Budget is viewed as totally a fresh and entire fiscal initiative that is, from zero bases.

Zero based budgeting computes and prioritizes the programs of action at various levels. Each and every department has to validate its budget from its perspectives; computing feasible alternatives, before final execution and selection, the funds will be allocated for the chosen programs.

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