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Hello sir can you please explain me
Why Zero Based Budgeting is considered to suitable for Service Industries and Non-profit Organization?
Especially in a Service Sector industry.
As i have a little bit of idea why it might be suitable for N.P.O. But can’t figure it out why for a Service Sector IndustryZero based budgeting can be useful for all businesses, whether service or manufacturing industries and so I am wondering from where you are quoting this from.
Have you watched my free lectures on zero based budgeting?
Yes sir. I have watched your video.
BPP’s study text has mentioned
“ZBB can also be successfully applied to service industries and not-for-profit organisations such as local and central government, educational establishments and hospitals, and in any organisation where alternative levels of provision for each activity are possible, and costs and benefits are separately identifiable. ”
And in another part it has mentioned
“ZBB is particularly useful in public sector organisations where funding (income) is fixed, and the best possible service for the available budget needs to be achieved.”I’m a bit confused as to what exactly these statements mean.
ZBB involves looking at alternative ways of doing the work and then choosing the cheapest of the different ways, and this can be useful for any kind of organisation.
This is particularly useful for public sector organisations because they receive a fixed amount of money (funding) from the state and so need to spend it in the most efficient (cheapest way). A commercial organisation can increase their selling prices if their costs are higher, but a public sector organisation cannot increase its income in the same way.
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