The significance of budgeting in a non-profit organization

The significance of budgeting in a non- returns geological formationIntroductionBudgeting is enormously significant in a non-profit do organization. A profit enterprise centralizes on maximum the profits and sh arholder value, whereas, a non-profit organization is focus on their goals. wanting(p) of financial flexibility always appear in a non-for-profit association as they ar not undertake an exchange transaction, they just provide social service and their funds is rely on the donation. in that location testament be a disaster for them if the demands for the social service are increased because their resources may be not enough to parcel out with and it is hard to predict the demand from year to year. Hence, they leave alone emphasis on manage resources, most non-profit making organizations are using zero point establish budgeting rather than incremental budgeting, because it presents any decision package in detail so that zero based budgeting can serves as a tool for systematicall(a)y examining and perhaps abandoning any unproductive projects(Drury,2008,P.375).Zero-based budgeting is a method of planning and decision making which seek to overcome the deficiencies in traditional budgeting. In traditional budgeting, the organization will take the breathing operations as a base to prepare a new budgeting (what has been already spent is automatically allowed). The base will alter for the changes that forecast to happen in the next rate of flow and plus changes for the inflation. By contrast, zero-based budgeting begins with zero bases in every period as if the activities were beginning like the first time.This method requires all bus demonstrate the suggest budgets in complete detail such as how many an(prenominal) doer are needed, what material will purchase, what voicelessies will occur when implement the activities and so on and illustrate wherefore these budgets the organization should be spend on. Then the oversight ought to prioritiz e all budget bases on the immenseness of the needs, it can merge all old and new budgets into one ranking that permit top instruction to contrast and estimate the needs of each budget and make funding assignation.Zero-based budgeting helps managers to classify the activities which should continue, which should withdraw and which should distil on. Furthermore, zero-based budgeting can compare different departments which can help the management more easily to ranking each activity.About the CompanyThe Samaritan Befrienders Hong Kong (SBHK) is a non-profit making organization. During 1960, it was established and using the name of Suicide Prevention Society. It was no other similar organization established in Asian, they are the fist one. They renamed the organization as The Samaritan Befrienders Hong Kong in 1963. During 70s, SBHK offered services by two languages which are Cantonese and English. SBHK is non-religious in nature. Their missions are on humanitarian basis, to befriend , people that are facing difficulties or are forlorn and disheartened, and then help them to rebuild their confidence. In addition, they will address seminars, talks, education programme to publicize and further the spirit of their service in the society. Furthermore, they will help mho East Asia and near region to set up organizations with a character and mission similar to them.How zero based budgeting could be used at the organization?The objective of the activityThe objectives of self-destruction crisis intervention digest are to provide 24 hours core services to those have high and moderate suicide intention people. Also, they will offer intensive counseling, arrange different types of therapeutic and support volunteer teams. Furthermore, they will take the experience to public and via the training, media and advisory service to develop the awareness of knowledge that how to identify and handle the suicide problems.What extent are objective carry throughdWe can see that f rom the annual reports that the objective achieve is booming, their organization is sour more big each year, and the figures of using the service is increase every year which means that their social movement is success, because many suicide people formula for them to asking a help, it may decrease the number of suicide.How is the proceeding measuredThere are some measure methods to evaluate the exploit. For instance, the overall statistics of services which can visual aspect how many people have used the service during the year, we can see that the main(prenominal) user throng is by phone call, it almost have around 70% of total services. The other main measuring is the figures about suicide in Hong Kong. Because their aim is to reduce suicide in Hong Kong, the figures can illustrate that how many people committed suicide each year. It is easy to see that if the figures are decreased within the year, the activities were successful and vice versa.Alternative ways to meet ob jectiveThey also have other way to achieve the objective which is life education centre. The works of life education is organize the education programmes such as workshops, talks, win-up groups, volunteers training course, publications and suicide prevention resources library to reduce and prevent suicide and broadcast the centre of life cherishment to public.Also, there are some other organizations that have work on the same objective, for example, foreign Association for Suicide Prevention, Befrienders International and etc.Most cost effective alternativeThis is a non-profit making organization, the funding is limited, and therefore cost effective is very important. The most cost effective method is to regain more volunteer workers which are free workers, it can save much money.Impact of discontinuing the activityIf discontinuing this activity, it will be some problems appear. Some people may have already use this service for a long time, but suddenly closing the activity will make them loss the support, then may suicide again. Moreover, discontinuing the activity will lead the existing user change to other organization to look for help, but it may make other organization overload, therefore, they can not help all people, it will result in increase the suicide numbers.The types of activities in this non-profit making organization that is best suited to a zero-based budgeting approach.Decision PackagesThere is several decision packages that are now undertake in this activity seeks to derive the funding. We are taking two of them to discuss.We can see that the case counseling service will be the best, because it is more matches with the activity objective and more directly reach the goal which is offering intensive counseling. The entropy package has achieved the goal too, but it is indirectly reach the goal, and it may take a long period to achieve the objective. Therefore, the decision packages ranking is that Case counseling service is the first one a nd Professional talks/Workshops/forum is the second.The advantages that a zero-based budgeting system may offer to the organization that over an incremental systemThe main advantage of the zero based budgeting over an incremental system is that it combine budgeting and planning into one cultivate which is focused on analysis of needs, objectives and priorities. In incremental system, the organization tends to use existing budget as a base, then adjust for changes that they predict happen in the next period. But, zero based budgeting requires manager justify all budgets in detail which can help the top management efficient diffusion of funds by organization needs, objectives and priorities.Furthermore, it can watch over inflated budgets and eliminate wasteful and outdated activities because those activities are not cost-effective operation and it will not be allocated funds. This can encourage manager to detect a cost-effective ways to amend the operations, not like incremental bu dgeting system that previous activities are automatically allowed. Also, it increase subordinate staff responsibility and initiative for decision-making since not only the manager involves in decision process but also include the lower take staff which can better coordination and communication in the association. In additional, zero based budgeting capable to discover the chances for outsourcing and helpful to measure achievement of results for service departments rather than incremental system.The problems that might be faced by the introduction of zero-based budgetingThe main problems of zero-based budgeting is that deal with vast amount of work and time consuming as it need to collect and analysis a lot of information and demand managers must distinctly realize the operation at different level for prepare budgeting which will increase the training cost. Apart from time consuming, the other problems arise to management is that it is actually difficult to judging and prioritize d ecision package since they have to read numerous packages source, if compress the entropy down to a acceptable size the significant information may be removed, and have to follow the internal politics, sometimes, they might use personal sense to estimate therefore it is not truly objective.Moreover, the organization may face dishonesty managers who might overstate the results or understate the expenditures. In addition, it is costly to fit because of this budgeting is really complexity and it may focus on short destination benefits rather than long term planning. There are more managers participate in the operation as a result of difficult to communicate and manage.ConclusionsZero based budgeting requires a huge resource and staff to run and prepare the budgeting because of the work load is vast. But this method creates a positive outcome such as better management and allocation of resource. The management cans appraise the operation from the viewpoint of in depth study of produ ctivity, output, and cost and so forth. It encourages manager at all levels in the organization to participate in the budgeting progress. Zero based budgeting is focus on efficient of allocation resource and it depends on the manager capacity of persuasion which has to persuade the other management to support.At the end, although zero based budgeting has a lot of benefit when it implement, in this organization. But they do not have that much resource to apply full set of zero based budgeting since they are non-profit organization and the resource is limited, hence, the optimum suggestion is that they can exercise part of incremental budgeting and part of zero based budgeting or just partial implementation of zero based budgeting to solve the resource allocation problems.