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.

zero-based budgeting

a management accounting technique that seeks to re-examine and challenge the assumptions underlying a firm's costs. Zero-based BUDGETING involves preparing from scratch a budget for each company department, starting from the basic premise that each department's budget is zero, then justifying every activity and its associated expenditure before including it in the budget. This contrasts with conventional budgeting, where departmental budgets are often based on last year's budget suitably updated. The purpose of this process is to identify and remove inefficient or obsolete activities within the firm.
References in periodicals archive ?
By implementing the principles of the zero-based budgeting system, the Ministry aims to recalculate the costs of activities and programmes of federal government entities to reach the actual cost of the required services without over-spending.
By implementing a zero-based budgeting system, the ministry aims to recalculate the costs of activities of federal government entities to reach the actual cost of the required services without over-spending.
It also endorses zero-based budgeting, in which all expenses must be justified for each new period, and activity-based budgeting, in which activities that incur costs are recorded and their relationships defined and analyzed.
Additionally, we instituted a zero-based budgeting process, significantly lowering overhead costs.
The 5-S supply chain savings and zero-based budgeting programmes are delivering faster than planned, and the integration of Foods and Refreshment into a single business unit is, equally, progressing well.
Enter ZBx, or the zero-based mindset, a new, more comprehensive take on zero-based budgeting (ZBB).
In zero-based budgeting, the slate is wiped clean and budgets are created to reflect the client retention and growth goals, comprising action plans with measurable objectives of the practice groups, industry teams, client service teams and individual attorneys.
With help from Bank of Latvia experts, the ministry also plans to use some pilot projects to introduce the principle of zero-based budgeting.
Since he arrived at ASU-Newport, Adair said, he has developed a comprehensive master plan and a new zero-based budgeting model that has led to significant cost savings, including $500,000 the first year.
Under zero-based budgeting (ZBB), expenses must be justified for each new budget period based on demonstrable needs and costs, as contrasted with the common practice of using the past year's budget as your starting point and then adjusting up or down.
Employ actual zero-based budgeting, which should result in reduced costs.
According to the statement issued by the committee, subsidies given to government-owned companies should be lifted as well as zero-based budgeting was recommended for application, in which all expenses must be justified for each new period, and every function within the organization is analyzed for its needs and costs.