What are the Benefits of Zero-Based Budgeting?

[Suba]

Zero-Based Budgeting (ZBB) is a budget method that starts from zero, so there is no need to evaluate the previous budget, so that funds are allocated based on needs and efficiency. Thus, costs are only allocated to the new period based on the actual costs that will be incurred. ZBB is often applied by event organizers, government agencies and start-up companies. Here are some of the benefits of ZBB:
1. Increase efficiency
2. Reduce waste or save costs
3. Bottom-level management can participate
4. Determine priorities

 

[Augusta]

This one encourages managers to focus on current needs rather than relying on past budgets, preventing the misallocation of resources that can happen over time

 

[SilverLance]

Since ZBB requires that every department justify its budget from the ground up, it encourages teams to think critically about their spending.

 

[Augusta]

it promotes resource optimization by focusing on aligning spending with strategic goals and priorities.

 

[SilverLance]

Companies can critically assess each expense and justify its necessity for the upcoming period rather than simply rolling over previous budgets.

 

[Augusta]

it does help to identify and eliminate redundant or unproductive activities, further improving efficiency and cost-effectiveness.

 

[SilverLance]

ZBB promotes a culture of cost discipline and continuous improvement, though it can be resource-intensive to implement.