Having zero-based budgeting in place can bring a variety of benefits for your company, such as greater analysis, more strategic decision-making, and deeper thinking. However, there are a few disadvantages that you need to consider before putting this type of budgeting into place. These disadvantages include the high cost of implementation, the time it takes to implement, and managerial conflict.
It’s more forward-looking than backward
Rather than starting with the budget from last year, Zero-Based Budgeting is a process that starts from scratch each year. This allows decision makers to view the business with a fresh eye. This also allows them to identify cost savings and better allocate planned spend.
One of the benefits of zero-based budgeting is that it promotes a culture of cost management. This can be seen when the company reallocates savings to fuel future growth.
Another benefit of zero-based budgeting is that it helps organizations focus on their highest priorities. This can help them reach their financial goals sooner.
Zero-based budgeting requires more attention to detail than many other budgeting processes. In fact, it can consume a significant amount of time and resources. This is particularly true when you consider the manual process involved. In addition, zero- based budgeting isn’t for everyone.
In addition to the benefits outlined above, zero-based budgeting can also help organizations increase their profitability. This is especially true if the process is applied to high-profit initiatives.
It promotes deeper analysis and more strategic decision making
Often ignored in conversations about financial transformation, …The Disadvantages of Zero-Based Budgeting Read More