Business Definition Of Zero Based Budgeting

Zero based budgeting is the method of developing a budget from scratch or zero base by examining every cost and expense to see if they are essential to the company s operations without regard to prior years activities.

Business definition of zero based budgeting. That means looking at individual cost categories across all business units. What is zero based budgeting. Zbb differs from the traditional approach to budgeting where historical spend patterns are used as the basis for future budgets. Zero based budgeting zbb is a method of budgeting in which all expenses must be justified for each new period.

Zbb is a budgeting process where on a very granular level you go through a company s spending and determine what resources various business units require. Zero based budgeting can offer a big advantage to business owners who do an annual detailed review of all expenses and to focus on the expenses that support their business goals for inclusion in. The idea is to divide organization programs into packages and then to calculate costs for each package from the ground up zero. Zero based budgeting zbb is a budgeting process that asks managers to build a budget from the ground up starting from zero.

This budgeting method stands in contrast with traditional budgeting which relies on past budgets and only justifies changes to historical budgets. The process of zero based budgeting starts from a zero base and every function. Zero based budgeting is a method of budgeting that starts each department s budget at zero and requires each line of a business s expenses to be justified.