Zero Based Budgeting


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Zero Based Budgeting

A system of budgeting where each department or division of a company must justify all expenditures and allocations rather than simply increases over the previous fiscal year. That is, the budget is made with every department starting at zero dollars to spend, and each department must demonstrate need for what it wants to receive. Zero-based budgeting is advantageous because it is more detail-oriented than other forms of budgeting; among other things, it makes it easier to detect and eliminate over-inflated budgets. On the other hand, zero-based budgeting is more difficult and time consuming to put together and often has a bias toward departments that directly produce revenue instead of departments like R&D.
References in periodicals archive ?
From 2011, the UAE follows zero based budgeting in which all expenses is justified for each new budget period.
One best practice that has been accepted in several organizations across the Air Force that leverages the tenets of KM is the development and implementation of a Zero Based Budgeting (ZBB) tool.
Knowledge Management applied through Zero Based Budgeting helped one Air Force command save over $10M in one year, and LSS helped a small aircraft manufacturer prevent over $200,000 in loses each year.
And Vasos said the company would adopt "zero based budgeting" from the fiscal year starting February 1, referencing a budgeting strategy in which all expenses for an upcoming period must be justified, starting from a "zero base" and built around what is needed, regardless of whether the allocation is higher or lower than in the previous budget.
Adjusted EBITDA for the first quarter 2011 was USD121.1m compared to USD106.2m in the same 2010 quarter, up 14% driven by lower general and administrative expenses after the restructuring and the implementation of a zero based budgeting programme worldwide.
Gajrawala attributes this to higher contributions from ABI's much-vaunted Zero Based Budgeting and procurement savings.
"We believe there is upside to cost savings guidance from Zero Based Budgeting (ZBB) on top of G&A savings within Blue Ocean, as well as procurement savings.
Gajrawala noted that Zero Based Budgeting for the old A-B business is in place from January 1st.
The objective of Zero Based Budgeting is to "reset the clock" each year.
Zero Based Budgeting (ZBB) can be a highly effective way to "shake things up".
State policymakers regularly consider budget reform measures such as performance based budgeting and zero based budgeting. Do you anticipate that any state will be successful in making meaningful and substantial improvements in its budget process?
Is ABC likely to become another zero based budgeting" flash in the business community?