Benefits consolidating business
That means fighting with entrenched interests that want to maintain their slice of the pie.With zero-based budgeting, new projects are placed on par with old projects and can compete for financing on a more or less equal basis.
Traditional "incremental" budgeting, by contrast, uses the previous year's budget as a starting point, and managers must explain only why they need more or less money this year than last.Early results from the 2007 Pulse survey (currently being conducted) show that 62% of companies with a BPM initiative currently underway are conducting it as part of a broader consolidation or standardization initiative.For larger companies, it is not uncommon to find 6 to 8 BPM applications and BI tools vendors in place supporting a wide range of disparate initiatives.Zero-based budgeting is time-consuming, but it can produce a wide range of benefits.The chief advantage of zero-based budgeting is that it promotes efficiency.Since each subsidiary also prepares its own standalone financial report, consolidated financial statements may seem to some to be an unnecessary extra step. An analysis of the importance of consolidated financial statements reveals these statements offer several benefits to investors, financial analysts and others who may be evaluating the health of the parent company.
In this article, we will review consolidated financial reports in more detail including the unique benefits they offer. Consolidated financial reports are prepared by any parent company that owns one or more subsidiaries.
By forcing managers to go back to square one and justify all their projects as if they were brand new, zero-based budgeting encourages them to seek the most efficient, most cost-effective solutions.
When a company that uses traditional budgeting wants to pursue a new initiative -- coming out with additional products or services, for example, or expanding into a new geographical location -- it must try to "find money" in the existing budget.
According to GAAP (Generally Accepted Accounting Principles), parent companies must prepare consolidated financial statements to report on the financial well-being of both the parent company and all of its subsidiaries.
These statements are often prepared with the use of financial consolidation software which takes financial figures from each individual subsidiary and combines them into one overall report.
The benefits come not only from cost reduction but more frequently from increased productivity and quality of service.