A zero-based budget is a budgeting method in which all expenses must be justified and approved from scratch, or “zero,” rather than simply adjusting the previous year’s budget. With a zero-based budget, each department or activity within an organization must justify all expenses based on the current priorities and needs of the organization, regardless of whether the expense was included in the previous year’s budget.
In other words, a zero-based budget requires managers to start each budget cycle by evaluating all expenses as if they were new, rather than assuming that expenses that were approved in the previous year are automatically approved for the new year. This approach can help organizations identify and eliminate unnecessary or outdated expenses, prioritize resources more effectively, and promote greater accountability and transparency in financial decision-making.
Zero-based budgets are often used by organizations seeking to reduce costs, increase efficiency, and align resources with strategic goals. While zero-based budgeting can be more time-consuming and complex than other budgeting methods, it can result in more effective and efficient use of resources, leading to better financial performance and greater organizational success. learn more about Admission Management.