Video 3 - Zero-Based-Budgeting

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Budgeting essentials and development

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Fundação Instituto de Administração

Budgeting essentials and development

28 classificações

The Budgeting Essentials and Development course focus on an integrative and practical view of concepts, methods, and techniques to develop a budget. After finishing this course, learners will be able to: - Develop the budget with a broad view of the corporate functions; - Integrate the strategic guidelines into the discussions of budgeting process; - Structure the budget planning and development in a logical sequence - Coordinate the project of budget planning with the different areas of the company - Actively promote assumptions discussions to improve the process of developing the budget - Apply financial concepts to support the budget planning process - Design a budget monitoring and control model to support the performance management - Evaluate the performance of the company by managing the results and the budget In this course, learners will have a deeper understanding of the budgeting process, its challenges, common issues, and approaches to mitigate the problems and improve the learning curve of budget planning. It is integrative by emphasizing the transition between the corporate strategy and the budget. It is practical by following a structured process of going through a framework that illustrates and demonstrates how to analyze, develop and control the budget.

Na lição

MODULE 6 - Planning Process – Approaches and evolution

Approaches and evolution: In this module, you will learn by reflecting about the different approaches to planning processes. We will walk with you through the aspects of efficiency and efficacy, connecting with budgeting. We will also debate traditional versus some trended methodological approaches, their benefits, and limitations. This Module closes our Course.

Video 1 - Introduction overview on beyond budgeting0:45

Video 2 - Flexible and Bracket Budgeting3:45

Video 3 - Zero-Based-Budgeting4:53

Video 4 - Rolling Forecast3:06

Video 5 - Activity-Based Budgeting3:38

Conheça os instrutores

Alberto Sansiviero Jr.
MBA
FIA Futures Studies Program
Samantha Mazzero
MSc, MBA, BS Math
FIA Profuturo – Futures Studies Program
Nelson Yoshida
Ph.D., MBA, B.Eng.
FIA Profuturo – Futures Studies Program
Roberto Dumas Damas
M.Sc., CFA
FIA Profuturo - Futures Studies Program
Fernando Fleury
Ph.D.
FIA Profuturo - Futures Studies Program

[MUSIC]

Hello there, welcome back.

We have a fascinating topic to talk about today.

As we have mentioned throughout course, there are many methodologies, techniques,

and approaches which help management to allocate resource and

define the financial targets to pursue.

One technique often employ in companies, using the previous year's budget

as the starting point, making adjustments in some percentage points.

But this approach doesn't fit for any business.

It might help for structrued companies in stable segments.

In some organization the budget and its control are not aware of structure,

when it exists, and demands a complete review of performance evaluation,

and cost structure of their development.

In situations like that using the prior year's budget will certainly be a mistake.

Considering the both case, something very new is affecting the environment

where the organization isn't certain,

or there is no efficient budgeting process and controls.

A whole new budget planning, as well as its control, is required.

Let's assume that company x is struggling to survive.

The management team has no clue about where and why they are losing money.

The manager just can't use the prior year budget and the controls are a mess.

After three months of terrible results, they decided to analyze all aspects,

futures, and expenses of the the business.

They look at the current year's results to evaluate where cost

can be adjusted and what can be done efficiently.

This analysis will be developed from scratch, zero base.

As a consequence of this analysis,

the high management will be able to judge if the budget request for

each department, or activity, are essential to the company's operations.

And its responsible manager must justify

the budget request in detail, avoiding the lack of control.

This example illustrates a zero-based budget process.

Zero-based budget, or ZBB, is nothing disruptive.

It's just a management approach, which looks to enhance its effectiveness and

efficiency.

And the management must justify the resources request during

the budgeting plan in detail, beginning with the zero balance.

But an effective ZBB is much more than building a budget from zero.

We can find some key features about the process and its implication nowadays.

Such as the decision to implement the ZBB usually comes from the CEO or

other key operating managers.

Decreasing costs of production, service, and operating.

It's more common to find the use of this approach in companies known for

their good management.

The benefits overcome the costs of implementation,

even considering that the process is complicated and

requires lots of effort to make it efficiently.

The ZBB is a budgeting approach which provides control and

sustainable alternative to cost management.

It is a priority structure of budgeting, which ranking and

evaluating all company's initiatives.

Reviewing and analyzing programs, proposal, and activities,

to increase the profitability, enhance efficiency, or lower costs.

The goal of this approach is to find excellent resources allocation.

This approach also look at activities target and how to accomplish them.

One warning point in this approach is to consider that the failure

in funding an activity could result in adverse consequences.

That is, the inability to produce or develop a particular product or

service could negatively affect the sales of related prducts or

services in the company's global products and line service.

Have you enjoyed this topic?

Now go to the reading to learn more about zero-based budgeting,

its process, and decision package.

If you want to go further, take a look at our sources to go deeper in the subject.

If you like, come back, see you soon.

[MUSIC]

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