Zero Based Budgeting for Your Start-Up Business Natchitoches LA

What is zero-based budgeting? Zero-based budgeting is the budgeting process where every single item has to re-justify itself in order to get approved. It’s a no-nonsense approach to cutting costs, improving cash flow, and generating more profits for your home-based business.

LSBDC at Southern University Baton Rouge
(225) 922-0998
4826 Jamestown Ave Suite 1
Baton Rouge, LA
 
LSBDC at Louisiana State University
(225) 578-4842
8000 GSRI Avenue, LBTC Bldg 3000
Baton Rouge, LA
 
LSBDC at University of Louisiana at Lafayette
(337) 262-5344
220 E. St. Mary Boulevard
Lafayette, LA
 
LSBDC at University of Louisiana at Monroe
(318) 342-1224
700 University Avenue, Admin. 2-123
Monroe, LA
 
LSBDC at Louisiana State University-Shreveport
(318) 797-5144
1 University Place
Shreveport, LA
 
Louisiana SBDC
(318) 342-5506
700 University Avenue, Admin 2-101
Monroe, LA
 
LSBDC at Southeastern Louisiana University
(985) 549-3831
1514 Martens Drive
Hammond, LA
 
LSBDC Greater New Orleans Region
(504) 831-3730
3330 N. Causeway Blvd, Suite 422
Metarie, LA
 
LSBDC at McNeese State University
(337) 475-5529
Burton Business Center, Room 133
Lake Charles, LA
 
LSBDC at Northwestern State University
(318) 484-2123
3600 Jackson St. Ext., Suite 114C
Alexandria, LA
 

Zero Based Budgeting for Your Start-Up Business

Provided By: 

Justify Every Cost Item, to Generate More Cash Flow and Profits
By Richard J. Maturi

The harsh reality of today’s declining economy, shrinking markets, and rising costs, makes it time to take a hard look at zero-based budgeting. What is zero-based budgeting? Zero-based budgeting is the budgeting process where every single item has to re-justify itself in order to get approved. It’s a no-nonsense approach to cutting costs, improving cash flow, and generating more profits for your home-based business.

In order to be successful, zero-based budgeting relies on a clear concept of your firm’s long-term objectives, specific short-term goals, and available financial resources. Each expenditure analysis should include an analysis of cost, purpose, expected benefits, alternative courses of action, and measures of performance and review. The exercise strengthens your firm’s planning and decision-making by concentrating on what expenditures improve your operations and move your business toward achieving its goals.

Rethinking and Building a Budget
Zero-based budgeting forces owners to “rethink” their business operations and build a budget from the ground up; taking into account new input, the current market situation and other factors not considered or known during the previous budget generation process. In essence, you focus on the things that are essential to making your business as profitable as it can be. It forces you to find more cost effective ways to conduct your business. It may also create outsourcing opportunities that reduce costs. Zero-based budgeting is also known as priority-based budgeting since it concentrates on giving priority to the activities that further your firm’s goals.

Concentrating on What’s Essential
In other words, you don’t look at last year’s budget and factor in an inflation estimate. With zero-based budgeting, you forget your previous assumptions and concentrate on what is essential to your cash flow, profits, and ability to run a successful business. For example, last year’s budget may have factored in X amount of dollars for print advertising based on current ad rates. With zero-based budgeting, you analyze what type of advertising is required to reach your potential audience/customer base. You may determine that an email campaign is more cost effective and fruitful than print advertising.

In other words nothing is taken for granted…you need to justify each and every expenditure and what benefits will be derived from that expenditure. The process forces you to analyze and compare various spending options. Numerous benefits derive from employing the zero-based budgeting process. It helps eliminate built-in cost increases, improve cost containment, remove inefficiencies, and increase discipline in budget creation.

Inflated budget items are uncovered since no expenditure is approved without an analysis of how that expenditure improves the operation of the business and its profitab...

Click here to read more from Home Business Magazine

© Copyright 2013 Home Business Magazine. All Rights Reserved. Privacy Policy | Terms and Conditions
Infoswell Media