What are the Key Benefits of Using Activity Based Budgeting (abb) in Businesses?

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What are the Key Benefits of Using Activity Based Budgeting (abb) in Businesses?

The dream of every business owner is to gain competitive advantage over other businesses. In order to achieve this, the business must ensure that their products are of the best quality to attract more customers while retaining the existing ones. Activity based budgeting (abb) is the method that the managers use to analyze various operations within the business to assist in improving the business by eliminating unnecessary operations. This allows enough time to deal with those that can bring more profit to the business. This makes ABB method very beneficial to businesses that employ it. Here are some of those benefits;

Helps to eliminate unnecessary steps in products processing

Doing a thorough analysis on the business and the processes involved in production of goods and services allows the business owners identify less important steps. These steps are eliminated to lower the cost of production and save more money that can be used to improve the products or produce new services and products.

ABB helps a business gain a competitive edge in the market

Business that has low cost of production is able to sell its goods and services at lower costs than those without. As mentioned earlier, ABB method allows the managers to identify the costly steps that a business can do without. This in return lowers the cost of producing the required products which means that such a business can sell its goods at lower costs to gain competitive advantage over their competitors.

Enables the owners to use the money saved to produce new goods and improve the existing ones

The money that is saved by skipping less helpful steps in businesses can be used to produce products while improving the existing ones. This in return will help attract more customers and retain the existing customers by giving them better services.

ABB enhances teamwork among the employees in different departments

For any business to succeed there must be a lot of cooperation among the workers. This is because production of various products is done by different departments which rely on each other for completion of these products. ABB Method thus ensures that necessary measures are put across to allow the departments to work together for the benefit of the organization at large.

ABB enhances relationship between employees and the customers

This method is devised to help the employees recognize that customers are the most important persons in any business. They are therefore under obligation to serve the customers with respect and fulfill their demands as required to ensure that the business retain them for as long as possible while attracting other new customers to the business.

In conclusion, it is important to mention that ABB method though new in the world of business; it is more useful method of analyzing the business than the traditional methods. This is seen from the benefits that are associated with the use of such a method in businesses to allow them grow and develop while surviving competition pressures.

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