Zero-Based Budgeting - ZBB

Zero-based budgeting is great if you’re the CEO, but maybe not so great if you’re a department head. Zero-based budgeting means starting from zero every year: each department head must justify every line item on their budget.

Many business function a more relaxed, old-fashioned way, using last year’s budget. If any increases (or decreases) are proposed by department heads to the man up top, then there’s talking and negotiating. This isn’t the case for zero-based budgeting, where talking and negotiating happen every year with everything.

The good news? It can help companies be more efficient, making sure they’re using limited resources wisely with limited waste. The bad news? It takes time, which takes money. It also can take money away from places that have less-tangible value (think: the HR department vs. the sales department; who do you think will have an easier time justifying their expenses?).