Zero based budgeting

What is zero-based budgeting?

When a company takes the zero-based budgeting approach this means that each year it resets its budget to zero and calculates its budget over a 12-month cycle from scratch. As a result, all company expenses have to be accounted for each year, and every function of each department has to be accounted for financially.

If this sounds familiar it’s probably because it’s the budgeting system utilized by most families around the world, it keeps things simple and makes it easier to identify unnecessary expenditures. However, its relative simplicity means that it is unsuitable for large-scaled companies.

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