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 ?
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".
If they don't then people will catch on that Zero Based Budgeting amounted to lip service.
Zero Based Budgeting requires a much more rigorous understanding of expenditures and what drives them, and many managers are simply not prepared for this.
State policymakers regularly consider budget reform measures such as performance based budgeting and zero based budgeting.