Kaizen is a Japanese word means good changing with continuous improvement. It is about small changes for the better over time rather than big changes and fast improvements. Kaizen budgeting covers the concept of continual improvement and applies it to budgets and budget predicting. Budget forecaster use Kaizen strategy to reduce cost of the product in the company. This helps management to find a new method of minimizing the expenses and reduce its budget so that same capital can be use in other important projects. This will definitely increases sales and profit of the organization.
Kaizen budgeting is differ from traditional budgeting in different way. Kaizen budgeting is budgeting which pay more attention on continuous improvement from a product perspective whereas traditional budget is the way of preparation of budget with taking last year’s budget as the base. The current year budget is prepared with making changes in last year budget by adjusting expenses based on market status, rate of inflation, customer demand etc. Kaizen budgeting let manager focuses on minimizing the expenses where as traditional budgeting encourage managers to spent all the budget before the year end, even if it is spent on silly expenses and risky investment. In kaizen budgeting there is an involvement of all staff like managers, accountant and supervisor to make a budget. On other hand, the decision is done by only top level management in traditional budgeting. In addition, the implementation of traditional budget is easy but the kaizen budgeting is difficult because it needs strong communication between staff.
How could Yosemit Ltd incorporate elements of Kaizen budgeting into its current budgeting process? Would recommend they do so and whay or why no?