Zero-Based Budgeting is a broad-reaching cost transformation
effort that takes a “blank sheet of paper” approach to resource
planning. It differs from traditional budgeting processes by examining
all expenses for each new period, not just incremental
expenditures in obvious areas. Zero-Based Budgeting forces
managers to scrutinize all spending and requires justifying every
expense item that should be kept. It allows companies to radically
redesign their cost structures and boost competitiveness.
Zero-Based Budgeting analyzes which activities should be performed
at what levels and frequency and examines how they
could be better performed—potentially through streamlining,
standardization, Outsourcing, offshoring or automation. The
process is helpful for aligning resource allocations with strategic
goals, although it can be time-consuming and diffi cult to quantify
the returns on some expenditures, such as basic research.