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What is Zero Base Budgeting (NBB)?
The zero base budgeting (NBB) is an instrument of planning Overheadthat is intended to ensure compliance with the operational budget. It is also known as zero-base budgeting (ZBB) and serves the following purposes:
Detection of weak points in areas of the company
Achieving increased cost awareness among superiors and employees
Enforcement of staff changes in the event of non-compliance.
Zero-base budgeting is about the rationalization potential of the overhead cost areas. Grown organizational structures should be purged with it. All activities of the divisions are called into question. The individual steps are:
- Formulation of company goals by the company management.
- Formation of decision-making units, e.g. B. Divisions and teams with corresponding cost centers.
- Definition of performance levels, e.g. B. Quality and quantity of work results for each decision-making unit.
- Formulation of alternatives for each stage, e.g. B. to save costs per cost center.
- Selection of the cheapest alternative, ie certain decision packages are favored.
- Creation of a ranking of the alternatives, ie also the rejected activities.
- Budget cut, ie distribution of the available funds among certain decision packages.
- Approval of the selected decision packages, e.g. B. with the participation of controlling.
- Implementation of the defined measures in budgets by controlling.
Zero-base budgeting is time-consuming and costly.