The Ultimate Guide to Zero-Based Budgeting
Zero-based budgeting has been around for decades, but it’s still not widely used. That’s unfortunate because zero-based budgeting is a simple process that can be very effective in helping companies identify and reduce costs while improving cash flow and better aligning resources with priorities.
Zero-based budgeting (ZBB) allows you to reallocate funds across projects based on present needs, not historical trends or cost allocations. ZBB allows you to maximize dollars spent on strategic efforts while eliminating waste and increasing the efficiency of your organization.
What is zero-based budgeting?
Zero-based budgeting is a process of reallocating funds from existing projects. It involves starting from scratch each year, ensuring that all resources are used as effectively as possible.
In other words, zero-based budgeting involves setting aside all past expenses and starting over with the new year’s budget. This allows you to analyze each line item on your income statement and balance sheet in light of changing circumstances and business objectives–allowing you to make better decisions about what projects should be funded or cut off altogether.
Why might it be a good idea for your organization?
There are many reasons why zero-based budgeting may be a good idea for your organization.
- Reduce costs by eliminating waste.
- Improve cash flow by aligning resources with priorities.
- Improve customer service by allocating resources appropriately.
- Reduce the time it takes to prepare budgets (and ultimately improve financial performance).
What are the benefits of zero-based budgeting?
One of the biggest benefits of zero-based budgeting is that it reduces …
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