Operating Budgeting Paper Sec/370

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Operating Budgets Paper Arin Lawson February 23, 2015 SEC/370 “A budget tells us what we can't afford, but it doesn't keep us from buying it” William Feather Operating budgeting helps to establish and achieve the costs and revenue to run your business. When having a budget plan it helps you follow a plan to control your day to day income for your business. There are two poplar budgeting strategy’s that are used by many companies; Incremental budgeting and Zero-based budgeting. There are also pros and cons to these budgeting strategies. Incremental budgeting is when you take last year’s budget and add more or less to it depending on what you’re looking to do with your budget for the year. Some companies like this budget because if you’re meeting your budget every year it will stay the same. If you don’t use your budget it will reduce the next year. Some people…show more content…
You never start off with last period’s budget you start at zero and add every cost that will acquire during this new period. Zero-based budgeting is more for a company that just started their business. ZBB is about channelizing resources to arrange areas. You also want to rationalize the cost and purpose in every budget phase. The real goal is to increase staff motivation. There are pros and cons of zero-based budgeting. A pro is that ZBB improves the service area as well develops cost-effective approaches. Another pro is it controls the power approach by challenging reasoning for shares. Financial provisions and deliberations are significant and purposeful. There are four cons that zero-based budgeting has. First, too many decision sets may be required for a very big organization. Next, you may not be able to explain every expense may not be possible or practical. Another con is preparation time and expense of the financial plan is amplified. Last con is sometimes zero-based budgeting sounds too drastic and so consensus is hard to

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