Page 8 - Budgeting

Where to Start?

With a Cash Flow

Zero-based Incremental

 Each line in budget is set to zero  Begin with current year’s core
each year , assuming no program is budget and make incremental

necessary and no money spent. changes.

 Orderly evaluation of all revenues  Assumption is programs and depts.
and expenses. are preapproved.

 Motivates managers to eliminate  Only increases and decreases in
inefficient expenses. resources allocated.

 Useful when firm is changing  Review focuses on incremental
strategic direction. changes and may ignore
inefficiencies in core budget.
 Becomes less useful when same

justifications are used each year.  Less focus on rigid calculation

 Aim is for quantitative measurability.