Ramesys Global
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- Mar 20, 2023
- 2 min read
Exposing the Myths (and Realities) of Zero-Based Budgeting - Part 4
This budgeting concept allows senior-leadership teams to put their money where their strategy is, aligning resources with business priorities and setting the example from the top.
In this series of blogs, we explore some misunderstandings and realties of ZBB as outlined by Shaun Callaghan, Kyle Hawke, and Carey Mignerey of McKinsey and Company.
Myth four: ZBB only focuses on SG&A
Reality: ZBB can be applied to any type of cost: capital expenditures; operating expenses; sales, general, and administrative costs; marketing costs; variable distribution; or cost of goods sold
The fundamental elements of a ZBB program—governance, accountability, visibility, aligned incentives, and a rigorous process—form a comprehensive cost-management tool kit. However, certain adjustments need to be made when using this tool kit in particular areas.
For example, when ZBB is applied to variable costs (such as cost of goods sold, variable distribution) the budget needs to be volume adjusted in monthly performance reports. When ZBB is applied to capital expenditures, costs are categorized by discrete investment choices rather than types of expenses, as they are with operating expenses.
Read the full article here: https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/five-myths-and-realities-about-zero-based-budgeting
Ramesys Global
Ramesys is an all-in-one budgeting, forecasting and reporting platform, purpose-built for the mining industry, that offers complete cost visibility across the entire organisation.
Our goal is to make it easier for mining companies to achieve a transparent understanding of their cost performance, develop a cost-conscious culture and create a single source of truth that helps key stakeholders make better decisions, faster.
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