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 ?
Progressive companies operate on zero-based budgeting, where votes are made on a priority basis without reference to previous allocations.
What are the developments related to restructuring the federal budget procedures and applying zero-based budgeting (ZBB)?
The village should move to zero-based budgeting to ensure the most efficient use of tax dollars.
We also delivered on cost reduction targets through our new zero-based budgeting process.
Another Republican has filed a bill requiring agenciesto utilize a practice known as zero-based budgeting. The bill's author is state Sen.
'The application of zero-based budgeting and the migration towards accrual accounting from cash accounting by 2021 as announced in the 2019 Budget, are also part of the government's wider institutional reform agenda, that will further raise the level of accountability and transparency in the government,' Lim said.
Another popular way to budget is 'zero-based budgeting.' Every peso of the budget will be fully accounted for in terms of specific expenses and savings.
MCB provides zero-based budgeting for a maintenance department by using live maintenance plans and strategies.
Using the all-in, zero-based budgeting approach, this bill will cost P369 billion in the first three years, P109 billion in the first year, and P1.981 trillion for 10 years.
Zero-based budgeting: Supports establishing zero-based budgeting, which would require state agencies to justify each dollar of spending through budget reviews.
Comptroller Kevin Conroy told LIBN the town would be introducing zero-based budgeting. "It effectively looks at the budgeting procedure more comprehensively," he said, adding that it calls for "a narrative" on "how you define" an expense.
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.