Zero-based budgeting

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Introduction of Zero-based budgeting

Zero-based budgeting tries to overcome the limitations of incremental budgets. The method was not used last year’s budget, this method required that planed expensive for existing activities should begin from base zero. The managers needed to explain all budgeted expensive was not follow the change from the last year. Also used zero-based budgeting, the method always focal point on activities or programmes, the method was not followed feature of traditional budgeting, the method used functional department under on line-item. Programmes ordinarily relate to non-profit making or public sector organization . (Colin Drury., (2012), pp.381.).

Introduction of Po Leung Kuk

Po Leung Kuk established November 8, 1878, beginning work was prevent the abduction, protect helpless women and children, mediate family and marital conflict. In pace with Hong Kong keep going change, Po Leung Kuk was extent social service organizations, they was provide different multiple high-quality service for public.

Engineered cost, Discretionary costs and Committed costs in organization

Po Leung Kuk in order to provide more service to public, organize will improve the elderly home facilities in order to have great environment for old people, also, organize will build more medical and dental room to increase the medical care, which are engineered cost in organization.

In the discretionary costs, Po Leung Kuk usually purchases wheelchair, rehabilitation equipment for old people, organize also purchases book to give student reading, organize can hold the sponsor plan from public, which also can decrease expenses in organization.

Moreover, In the committed costs, the social keep going to change, and the old people continue increase in social, the organize need to change the service target, the organize will set up auxiliary medical service, the organize will hire more profession doctor and nurse to provide perfect medial service for old people.

Zero-based budgeting applied to organization

The zero based budgeting based on Po Leung Kuk, the decision units were education affairs and social services.

Po Leung Kuk education affairs service provide different multiple high-quality service for public, for example, kindergartens, primary school, secondary school, college, night school, education service centers, special school and dormitories.

The education affairs service decision package were scholarships, grant and education funds, school and word competition and reading program. First, the scholarships, grants and education funds, they in order to increase education quality, the organization provided different education funds for student, the organization also collected resources from external.

Moreover, the joint schools and word competition could let student were multiple development and discuss in the competition. Also, the organization will hold every joint schools and word competition, for example, ball game and writing competition, this could let student had health lift in school.

Also, the reading program attracted most public to support, organize used donation fee to purchased book, improved library facility and promoted reading actives, which encouraged student read different books and provide great environment for study reading.

The social services decision packages were children and youth service, rehabilitation services and elderly services. First, the children and youth service provided multiple support and assistant to help children and youth people exert talent, overcome difficult and eatable positive life. And the service provided fund to young people, they could used the fund to finish their dream.

Moreover, the service helped disability people and provided multiple rehabilitation services and provided residential service, day activity centre, integrated vocational services, para-medical and other services. The service also provided elderly services, the service give old people live elderly home and provided assistant service to old people.

The ranking of decision packages goes in the order of decreasing benefit. The manager must identify important products or services in company. The highest priority assigned to expect increase of service and product in the future. (accounting-financial-tax), (n.d.).

In the Po Leung Kuk, the organization usually used near half donation in education service in the previous year. (Po Leung Kuk), (n.d.).The old people keep increase in the future, the demand of elderly service also will increase. So the first rankings of packages are elderly service, for example, medical and integrated health services, elderly homes and elderly community care. In view old people keep going increase, the organize should use the budget to hold more service and hire more professional doctor and nurse to visit old people, for example, the organization can use the budget to provide more day care services for old people and can provide more medical and integrated health services in the future.

The second ranking of packages are rehabilitation services, the organize use the budget can provide more training and assistant for disable person , which service can increase care ability and increase life skill for disable person. Though the service can let more people to understand disable person and can give more confidence for disable person to work in social.

Finally, the third rankings of packages are youth service, with the social keep going to change, the child and young people face different problem, for example, the young people lack of work experience and educational, they will become less competitive group. The organize can use the budget to help this people, the organize can build more event and class to explore their potential and increase their job skill. And organize can hold some programmer with business, let the young people can practice to get more job experience, let young people to make confident and set up positive value.

The scholarships, grants and education funds, joint schools and word competition and the reading program is not including rankings of packages. Because this had been more fund from public, the service could use the fund and donate to hold many event for their student. Beside, the service had been enough facility to provide student, so the three services are not include ranking of package.


Advantage of Zero-based budgeting

The manager can use zero based budgeting to evaluate the best performance of different package, such as, the Po Leung Kuk were different service provide to public, through the ranking of package, the manager can understand which service are benefit and will focus the service performance in the future. (AccountingTools), (n.d.).

Also, through the zero based budgeting can increase teamwork in the organization, for example, through planning programming, and budgeting with different step to finish zero based budgeting, which must need teamwork and communication with different department to finish the goal together. (AccountingTools), (n.d.).

Moreover, the zero based budget more reasonable than traditional budget. In the Po Leung Kuk were different service provide to public, the organize used fund and budget to education service in previous year, but the social keep going to change, the social are also different problem, for example, more teenager face lack of education problem and unemployment, so the organize must keep going to change the service target. Through the zero based budget, the manager need not to follow how to used budget in previous year, the organize can flexible change the budget to different service. (AccountingTools), (n.d.).

Disadvantage of Zero-based budgeting

The manager use more time to set up zero-based budge, this will use more time to planning, programming, and budgeting to set up the zero-based budgeting. In the Po Leung Kuk were different service provide to public, the manager must use more time to set up the zero based budgeting system. (AccountingTools), (n.d.). Also, the Zero-based budgeting may increase expenses in the future, in the Po Leung Kuk are big size organization, they are different department and service, if the zero-based budgeting run in organization, the manager must use more time to notice the budget whether effect in the each service. Which may let manager can not finish their original job, organize may hire additional people to finish their jobs, so the zero-based budget may increase the expenses. (AccountingTools), (n.d.).

Beside, the manager use more time to review the date and information to plan the zero-based budgeting, the date and information may insufficient let manager make wrong decision ranking, which will affect the budget arrange to service and may not have benefit in the future. (Colin Drury., (2012), pp.382.).

Moreover, the budget may used for service in long-term, if long-term nature, this may make large cash expenses and will issue problem, for example, if the manager decision ranking is education service in Po Leung Kuk, the budget is not enough for the service, this will make additional expense, so the manager may plan short-term budget planning. (accounting-financial-tax), (n.d.).


The zero-based budgeting is useful in organization, because the social keep going change, the organize need not follow to used budget in previous year, the service target also keep going to change, so the zero-based budgeting suitable for organization, Also the budget program can let manager to understand which service performances are best in the organization.

However, through the planning, programming, and budgeting, the zero-based budgeting use more time and people to set up. And the budget program only set up short term budget planning.


Colin, Drury., (2012). Management and cost accounting. eight ed. United Kingdom: Cengage Learning EMEA.

Po Leung Kuk, (n.d.). History. Available from: [accessed 9.11.2014]

Investing Answers, (n.d.). Zero-Based Budgeting. Available from: [accessed 9.11.2014]

Accounting Tools, (n.d.). Advantages and Disadvantages of ZBB. Available from: [accessed 14.11.2014]

Accounting, financial and tax, (n.d.). Project (Program) Budgets from: [accessed 15.11.2014]

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