{"id":108412,"date":"2020-11-07T17:22:08","date_gmt":"2020-11-08T00:22:08","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=108412"},"modified":"2020-11-07T17:22:08","modified_gmt":"2020-11-08T00:22:08","slug":"zero-based-budgeting-and-covid19","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2020\/11\/07\/zero-based-budgeting-and-covid19\/","title":{"rendered":"Zero Based Budgeting and Covid19"},"content":{"rendered":"

Rohan Abeygunawardena ACMA, CGMA Financial & Management Consultant<\/em><\/span><\/h2>\n\n\n

The Covid19\nepidemic has disrupted the economies of almost all the countries in the world\nincluding Sri Lanka.<\/p>\n\n\n\n

The finance\nchiefs of both public and private sector should take a fresh look at the\nactivities and projects under their purview when preparing budgets. The Zero\nBased concept of budgeting that we have forgotten over the years is the best\ntool that can be used under this scenario.<\/p>\n\n\n\n

Definition\nof Zero Based Budgeting (ZBB);<\/p>\n\n\n\n

ZBB is\na management tool which provides a systematic method for evaluating all\noperations and programmes, current or new, allows for budget reductions and\nexpansions in a rational manner and allows re-allocation of resources from low\nto high priority programmes.\u201d<\/strong><\/p>\n\n\n\n

The United\nStates Department of Agriculture introduced this system in 1964, but it was not\nfound to be quite successful and, hence, abandoned.<\/p>\n\n\n\n

Pytor, A.\nPyhrr, a staff control manager of Texas Instrument Corporation (USA), studied\nand developed this concept and created an awareness among the financial mangers\nthrough his writings. That was in early seventies. Since then many private\nsector organizations in the USA adopted this concept in their budgetary control\nmechanism. <\/p>\n\n\n\n

When Jimmy\nCarter became the governor of the State of Georgia successfully used the\ntechnique in the state budgetary control process saving millions of dollars.\nWhen he became the president of the USA, the concept was introduced to the\nFederal Government, in 1977. As a result many countries looked at this positively\nand adopted the concept. Even in Sri Lanka the General Treasury attempted to\nintroduce the ZBB in 2002. Then Director General of Department of Public\nEnterprises Mr.V. Kanagasabapathy took a keen interest in introducing the\ntechnique to the public enterprises. <\/p>\n\n\n\n

The basic\nidea is that each year\u2019s budget should start from a zero base, rather than from\nthe prior year\u2019s spending. To facilitate this the process, start with identifying\nall expenditure components and then following points are to be considered under\neach component;<\/p>\n\n\n\n

(i)\nIs it absolutely necessary? (Justification)<\/p>\n\n\n\n

(ii)\nWhat should be the qualitative features of current activities? Can we improve\nthem?<\/p>\n\n\n\n

(iii)\nWill production\/services be continued according to the existing system?<\/p>\n\n\n\n

(iv)\n What is the cost of production\/service\nunder current conditions?<\/p>\n\n\n\n

ZBB is not\na cost control method. But it is to create a mentality where people throughout\nthe organisation think about value, not just cost. Of course, the end result\nwould be identification of wasteful expenditure and eliminate them when you\nfind an answer to \u2018\u2019Why should I spend?\u201d<\/p>\n\n\n\n

Ultimately\nthe concept can change the culture of the organization when it will help\neveryone to think like an investor.<\/p>\n\n\n\n

According\nto Wall-Street Journal many companies in the USA are turning to ZBB to take a\nmore detailed look at their companies\u2019 spending to enable them to face the\npresent economic downturn, better. <\/p>\n\n\n\n

Therefore I\nfeel Public sector as well as private sector organizations should seriously\nthink of switching over to ZBB when preparing respective budgets including\nNational Budget. <\/p>\n\n\n\n

Rohan Abeygunawardena ACMA, CGMA<\/p>\n\n\n\n

Financial & Management Consultant<\/p>\n","protected":false},"excerpt":{"rendered":"

Rohan Abeygunawardena ACMA, CGMA Financial & Management Consultant The Covid19 epidemic has disrupted the economies of almost all the countries in the world including Sri Lanka. The finance chiefs of both public and private sector should take a fresh look at the activities and projects under their purview when preparing budgets. The Zero Based concept […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[102],"tags":[],"class_list":["post-108412","post","type-post","status-publish","format-standard","hentry","category-economy"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/108412","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=108412"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/108412\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=108412"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=108412"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=108412"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}