Today, I want to talk to you about an important way companies manage their money called Zero-Based Budgeting. It's a practice that has become popular among big companies and investors.
1: More and More Companies Are Using It A study found that many of the world's largest companies have been adopting Zero-Based Budgeting. Big names like Kraft Heinz Co., Mondelez International Inc., and Unilever PLC are among them.
2: Doing Things Differently Zero-Based Budgeting is different from how companies usually budget. Instead of starting with the previous budget and making small changes, they start from scratch each time. Every expense has to be justified, even if it's something they've spent money on before.
3: The Good Side Zero-Based Budgeting has some advantages. It makes managers really think about how they spend every dollar. It also helps companies control costs and prevent money from being wasted on things they don't need anymore.
4: Flexible Budgets One of the good things about Zero-Based Budgeting is that budgets can be adjusted easily. Managers can decide how much money each area of the company needs based on how much revenue they bring in.
5: Being More Responsible With Zero-Based Budgeting, managers have to explain every expense. This makes everyone in the company more accountable for their spending. It also helps them see which parts of the company are making money.
6: Some Challenges to Know But there are some downsides to Zero-Based Budgeting too. It can encourage managers to think only about short-term profits and not long-term investments. This might mean important things like research or worker training don't get enough money.
7: Takes Time and Energy Using Zero-Based Budgeting takes a lot of time and effort. Instead of just changing a few things in the budget, managers have to review and justify everything. Some people argue that the benefits might not be worth all the extra work.
8: Managers Can Play Tricks Sometimes, clever managers can use Zero-Based Budgeting to get more money for their own departments. This can create a competitive atmosphere and make people feel like their jobs are not secure.
9: Finding the Right Balance To make Zero-Based Budgeting work well, it's important to find a balance. Companies need to think about both short-term profits and long-term investments. It's important to consider the bigger goals of the company.
10: Wrapping Up In conclusion, Zero-Based Budgeting is a different way of managing money that challenges traditional methods. It can help companies make better decisions about spending and control costs. But it also has some risks, like focusing too much on short-term gains or creating a competitive environment. By finding the right balance, companies can make the most of this approach and achieve financial success.
Thank you for your attention.