Zero-based budgeting (ZBB) is a system of budgeting where the business owner, accountant or, in larger companies, the budget manager starts the budget from scratch each time and justifies each dollar spent based on the strategic goals of the company. This creates the opportunity for companies to capitalize on inefficiencies and to find creative ways to reduce costs. While more time consuming, ZBB better ensures that the resources used are going toward furthering the company’s stated goals.
The defining factor of ZBB is that each budget for the financial year in question is a blank slate. So, each expense in the budget must be justified and clearly linked to the stated strategic goal of the entity. Where do we see this style of zero-based budgeting most often? Most recently, food businesses. From United States, Clifton