Incremental Budgets, Flexible Budgets, and Zero Budgeting
How do incremental budgets differ from flexible budgets?
Incremental budgets use the previous budget as a starting point, making adjustments based on changes in business conditions. Flexible budgets are designed to adjust to different levels of activity, allowing for better cost control and performance evaluation.
What is zero-based budgeting and how does it work in the budgeting process?
Zero-based budgeting (ZBB) is a budgeting approach where each budget period starts from a zero base, requiring all expenses to be justified and evaluated from scratch, regardless of previous budget allocations. It involves reviewing and justifying all expenses and activities based on their needs, costs, benefits, and alignment with strategic objectives. ZBB requires businesses to build their budgets from the ground up, promoting cost consciousness and prioritization of resources.