Implementing Zero-Based Budgeting

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Table of Contents

Introduction
Implementation of Zero-Based Budgeting
Benefits of Zero-Based Budgeting
Critics of Zero-Based Budgeting
Conclusion
Recommendations
References

Introduction

Windsor memorial hospital is a multifaceted organization that offers health care services to its clients. The hospital is committed to promoting patient centered health care service. Additionally, it serves clients, families and residents of Windsor County. The hospital is made up of dynamic groups namely directors, board members, physicians and senior administrators, among others. The hospital administers various services to its clients. These services require funding and hence the need for budgeting. Budgeting based on previous allocation has been utilized for the past decades. However, it has led to inefficiencies at the hospital. Implementing zero-based budgeting would suit the hospital since it minimizes constraints associated with fiscal planning (Kavanagh, 2011, pp. 4-35).

Implementation of Zero-Based Budgeting

Due to the rising constraints in budgeting, most companies have adopted zero-based budgeting as a way of minimizing such constraints. Budget allocations have faced resource constraints due to the rising cost of equipments and other needs. Hospitals are at the helm of budgeting constraints because of the dynamic environment in which they work. For instance, new technologies are adopted for better provision of health services. These technologies need implementation and hence budgetary allocation. Sticking to the previous methods of budgetary allocation would lead to increased financial constrains which would in turn lead to missed targets.

Moreover, budgeting based on previous allocation is likely to promote misuse of funds. Additionally, it can cause over budgeting as well as under budgeting. Implementation of zero based budgeting at Windsor would therefore transform its fiscal policies to focus on the hospitals’ fiscal needs. Besides it would reduce reliance on previous allocations which are prone to errors due to changes in events and rise in cost of materials.

Zero-based budgeting involves setting of all fiscal plans to zero at the onset of the next fiscal year. This gives all departments an opportunity to explore their needs for the coming year before tabling it for funding. In this regard, resources are allocated based on merit. Moreover, it disregards previous allocation criteria. Windsor memorial hospital would gain significantly with zero based budgeting. Its implementation in the hospital would help monitor the flow of resources to various departments as well as their use (WRH, 2008, p. 1).

Benefits of Zero-Based Budgeting

Zero based budgeting commands several advantages. Apart from identifying wasteful and unnecessary expenditures in the hospital, it also eliminates them. This is important in streamlining utilization of resources within the hospital. Key among departments is research and development which requires varying resource allocations based on the project being researched. Additionally, zero-based budgeting helps the hospital’s economic situation because it works to enhance efficiency. Besides, zero based budgeting assists the hospital to prioritize with its resources appropriately. In essence, the hospital would gain significantly from these advantages since it needs to prioritize in its allocation criteria.

The process also has the advantage of enhancing accountability as well as credibility in the hospital. This would help to achieve some of the goals of the hospital which are based on attaining both credibility and accountability. Similarly, the process helps to minimize occasions where units of the hospital spend on indistinguishable areas. Therefore, it can be shown that zero based budgeting would be valuable to the hospital in its endeavor to reduce financial constrains (Cichoki, Kerr, Clare & Koegel, 2012, p. 1).

Critics of Zero-Based Budgeting

Zero based budgeting has also come with its issues. Those who disapprove its use cite the amount of paperwork involved, which they consider unmanageable. They also cite the difficulty in conducting analysis and review of expenditure within a given period. Similarly, they argue that zero based budgeting can bring about inter departmental rivalry in case the savings of one department is transferred to another. However, it is necessary to note that savings from one department can be left to it based on their next budgetary needs. Moreover, very little is usually left when correct approximations are made. Additionally, they cited lack of adequate personnel with skills in zero based budgeting. However, this can be bridged with training on the same (Srivastava, 2011, p. 1).

Conclusion

From the arguments above, it can be observed that implementation of zero based budgeting would be beneficial to Windsor memorial hospital. It can also be noted that the advantages associated with zero based budgeting are overwhelmingly significant as compared to the disadvantages associated with it. Moreover, most of the disadvantages associated with zero-based budgeting are avoidable or can be minimized. For instance, the amount of paperwork required can be reduced through adoption of technology. Similarly, rivalry between departments can be minimized once implementation is in full force. In essence, some of the disadvantages will disappear with time as implementation continues. Therefore, Windsor memorial hospital would gain significantly if zero based budgeting is implemented.

Recommendations

Windsor memorial hospital should set stage for implementation of zero based budgeting as this would reduce wasteful and unnecessary expenditures on budgetary allocations. The organization should also ensure that enough personnel are trained in order to conduct a successful implementation of zero based budgeting. Moreover, the organization should embrace technology to enhance implementation. This would be important in reducing the amount of paperwork involved. Additionally, the organization should ensure close monitoring of implementation process to achieve success.

References

Cichoki, P., Kerr, M., Clare, G., & Koegel, C. (2012). Radical redesign through zero-based budgeting. Web.

Kavanagh, S. (2011). Zero Base Budgeting: modern Experiences and Current perspectives. Web.

Srivastava, A. (2011). Zero based budgeting – For greater fiscal efficiency. Web.

WRH (2008). Zero Based Budgeting:Report of the Executive Committee. Web.

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