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.

• Zero-based budgeting is a technique used by companies, but this type of budgeting can be used by individuals and families.

• Budgets are created around the monetary needs for each upcoming period, like a month.

• Traditional budgeting and zero-based budgeting are two methods used to track expenditures.

• Zero-based budgeting helps managers tackle lower costs in a company.

0 seconds of 1 minute, 21 secondsVolume 75%

1:21

In business, ZBB allows top-level strategic goals to be implemented into the budgeting process by tying them to specific functional areas of the organization, where costs can be first grouped and then measured against previous results and current expectations.

Because of its detail-oriented nature, zero-based budgeting may be a rolling process done over several years, with a few functional areas reviewed at a time by managers or group leaders. Zero-based budgeting can help lower costs by avoiding blanket increases or decreases to a prior period's budget. It is, however, a time-consuming process that takes much longer than traditional, cost-based budgeting.

The practice also favors areas that achieve direct revenues or production, as their contributions are more easily justifiable than in departments such as client service and research and development.

Zero-based budgeting, primarily used in business, can be used by individuals and families, too.

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.

• Zero-based budgeting is a technique used by companies, but this type of budgeting can be used by individuals and families.

• Budgets are created around the monetary needs for each upcoming period, like a month.

• Traditional budgeting and zero-based budgeting are two methods used to track expenditures.

• Zero-based budgeting helps managers tackle lower costs in a company.

0 seconds of 1 minute, 21 secondsVolume 75%

1:21

In business, ZBB allows top-level strategic goals to be implemented into the budgeting process by tying them to specific functional areas of the organization, where costs can be first grouped and then measured against previous results and current expectations.

Because of its detail-oriented nature, zero-based budgeting may be a rolling process done over several years, with a few functional areas reviewed at a time by managers or group leaders. Zero-based budgeting can help lower costs by avoiding blanket increases or decreases to a prior period's budget. It is, however, a time-consuming process that takes much longer than traditional, cost-based budgeting.

The practice also favors areas that achieve direct revenues or production, as their contributions are more easily justifiable than in departments such as client service and research and development.

Zero-based budgeting, primarily used in business, can be used by individuals and families, too.