Difference between traditional budgeting and zero based budgeting:

Traditional Budgeting vs Zero- based budgeting. Following are the points of difference between traditional budgeting and zero based budgeting:

1. Traditional budgeting is accounting oriented. Main stress happens to be on previous level of expenditure. Zero-based budgeting makes a decision oriented approach. It is very rational in nature and requires all programmes, old and new, to compete for scarce resources.

2. In traditional budgeting, first reference is made to past level of spending and then demand for inflation and new programmes. In zero based budgeting a decision unit is broken into understandable decision packages, which are ranked according to importance to enable to top management to focus attention to only on decision packages, which enjoy priority to others.

3. In tradition budgeting, some managers deliberately inflate their budget request so that after the cuts they still get what they want. In zero-base budgeting, a rationale analysis of budget proposals is attempted. The managers, who unnecessarily try to inflate the budget request, are likely to be caught and exposed. Management accords its approval only to a carefully devised result-oriented package.

4. Traditional budgeting is not as clear and as responsive as zero base budgeting is.

5. In traditional budgeting. Its for top management to decide why a particular amount should be spent on a particular decision unit. In Zero-base budgeting, this responsibility is shifted from top management to the manager of decision unit.

6. Traditional budgeting makes a routine approach. Zero-base budgeting makes a very straightforward approach and immediately spotlights the decision packages enjoying priority over others.
Share This
Previous Post
Next Post