
Justify every expense for the upcoming year through zero-based budgeting. Analyze each function, evaluate alternatives, and align resources with current objectives.
Compare zero based budgeting with traditional budgeting by resetting past expenses to zero, evaluating options, and selecting costs and activities needed to achieve targets; communicate a complete action plan.
Explore how zero based budgeting improves accuracy and efficiency by allocating resources based on current needs, prioritizing value-adding activities, and enhancing ownership and cross-department communication.
Highlight the high costs and many months required for zero based budgeting, including extensive analysis and an enormous team of experts. Expect favoritism and skewed interests to influence decisions.
Explore zero based budgeting as applied to government and NGOs, evaluating programs annually, testing 20 percent and 40 percent cuts, and guiding private sector responses to a volatile environment.
Identify decision units and analyze them through decision packages to rank options, develop and revise the zero based budgeting by considering core and non-core activities.
Explore a phased transition from traditional budgets to zero-based budgeting, prioritizing areas like marketing and labor for application. Use root-cause analysis, cost-benefit evaluation, and scenario planning to inform the budget.
Apply zero based budgeting by aligning mindset and strategy, evaluating activities, and using scenario planning and Excel tools to monitor KPIs and reforecast for continuous optimization.
Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified for each new period. The process of zero-based budgeting starts from a "zero base," and every function within an organization is analyzed for its needs and costs. The budgets are then built around what is needed for the upcoming period, regardless of whether each budget is higher or lower than the previous one.
Traditional budgeting calls for incremental increases over previous budgets, such as a 2% increase in spending, as opposed to a justification of both old and new expenses, as called for with zero-based budgeting.
Traditional budgeting also only analyzes only new expenditures, while ZBB starts from zero and calls for a justification of old, recurring expenses in addition to new expenditures. Zero-based budgeting aims to put the onus on managers to justify expenses and aims to drive value for an organization by optimizing costs and not just revenue.
As per the latest Survey by Delloitte zero-based budgeting users appear to be moderately more successful at meeting their cost targets. Sixty-three percent of respondents, globally, who did not conduct ZBB did not meet their cost targets, while the same is true for 58 percent of those that did use ZBB. Although ZBB users in the US reported higher cost program failure rates than non-ZBB users (65 percent vs. 57 percent), in all other regions the failure rate for ZBB users was lower than for non-ZBB users (57 percent failure rate vs. 68 percent in Latin America; 52 percent vs. 56 percent in Europe; and 60 percent vs. 71 percent in the Asia Pacific).
In this course we will explore practical aspects of Zero Based Budgeting.