Question

which among these is plausible:
1. Zero based budgeting
2. Activity based budgeting
3. Rolling budget.

Answer 1

All three modes of budgeting have their pros and cons and depend on the situation a company is in and also the industry. The plausible primary advantages of each are

Zero Based: Lean Management

Activity Based: Efficiency

Rolling: Flexibility

1) Zero Based Budgeting is a mode of budgeting when all expenses are justified before a new period. An organization analyses all its needs and costs. Thus when a business wants to tighten up on schedule i.e. cut losses or streamline involve lean modes of cost, they would want to use this mode. Example a company is calling for closer scrutiny of operations and logistics department expenses would lease or outsource processes which are incurring higher cost on Y-on_Y basis

2) Activity-based budgeting is a mode when a system researches and analyses the costs for a company. Every avenue that incurs cost is scrutinized to identify areas of efficiency improvements.

This allows for higher control over the budgeting process. Planning for costs and revenues occurs at specific levels that allow useful details regarding projections. However, this is more expensive to implement as compared to other budgeting techniques.

3) Rolling budget is a mode where budgeting is done on a real-time ongoing basis with learning taken retrospectively. It has various pros over other modes like flexibility, responsiveness and higher monitoring but again is expensive and time-consuming.