Impact Assessment of Zero Budget Natural Farming in Andhra ...
Zero Based Budget
Transcript of Zero Based Budget
Presented by:- Anusha Hospete
Rajat KhannaAnubhav Sharma
Sahil Chopra
Definitions Method for preparing cash flow budgets and operating
plans which every year must start from scratch with no
pre-authorised funds
Budgets which are developed from zero base ie at the
beginning of budget process, all budget accounts
values are zero.
Technique of planning and decision making which reverse the process of traditional budgeting.
Every department function is reviewed comprehensively.
All expenditure must be approved Enhance the financial productivity of
resources Eliminate wasteful expenditure
Zero based Budgeting Traditional Budgeting
Each expenditure to be
justified
No present commitment
No Balance to be carried
forward
Activities Ranked according to
priority
Sanctioned based on previous
year expenditure
Justify increase over last year
Past sales and expenditure
trends are assumed to be
continued
Previous years balances are
carried forward
Advantages Disadvantages
Efficient allocation of
resources
Finding cost effective
techniques
Detects Inflated budgets
Eliminates wastefull and
obsolete operations
Increase communication
within organisation
Time consuming and
exhaustive
Forced to justify every details
of expenditure (R&D suffers)
Training is necessary for
managers
Honesty of mangers must be
reliable
DefinationMaintaining a minimum level of inventory as part of a goal to
reduce costs and increase profitability.
Stratergy used to reduce inventory; results in lower expenses
like warehousing, storage etc.
The term is sometimes used synonymously with
Just-In-Time inventory.
Popularly known as Just-in-Time Inventory
Levels of inventory almost Zero
Increase cash flow with low storage and
warehousing costs
Increase cash flow by raising speed and number
of inventory turns (rate of replenishment of total
stock per year)
Lean manufactures like Dell and Toyota have little inventory in the factory itself-approaching the ideal zero
In Supply-chain industry
Advantages Disadvantages
Lower costs of storage
and warehousing
Maximise cash flows
by reducing inventory
costs
Increase profitability
due to reduced costs
Increase cost of
transportation for bringing
stock again and again
Inventory carrying burden
lies with suppliers
No inventory for
emergencies
Zero Based Budgeting vastly overestimates man’s ability to calculate
Forces managers to establish a preference for effectiveness, efficiency, or equity as they try to rank decision packages. This make the ranking process difficult.
Implementation takes great deal of time, which limits staff’s ability to perform.
Manipulation of ranking is frequent
Previous year budgets make a base for present
year’s estimation.
Zero based budgeting makes funds for current
year limited as each department is made to
reduce costs.
Zero based Inventory or Just-in-Time Inventory
◦ Have been made easy by technology (In theory only)
◦ That even after technological application companies
haven’t even scratched the surface of zero inventory.
(Inventory management experts agree)
◦ Companies must change their manufacturing and
handling process to successfully apply this strategy, and
invest in new softwares to make real progress.
Zero based Inventory throw open suppliers and customers to supply shocks (Low or excess supply)
Very low stock levels means arrival of stock several times during the period (even Toyota uses two suppliers for same assembly lines)
Each Business depends upon each other, so if there is any problem with one all suffers
CONCLUSION
◦These theories are for practical use only.
◦Difficult to apply in organisation◦Many changes have to be made to
accommodate them◦Even after changes; no assurance of
profitability◦Break in supply in raw material leads
to less production◦Consumer satisfaction is not achieved